The Supreme Court got this one right. But, big picture, it is absolutely nuts that this was decided in December 2014 rather than back in 2011.
Recall that after the quakes, Christchurch Council hiked the building code requirements. Repairing earthquake damage then often meant bettering the condition of the building over its pre-quake condition. Insurers had not provided insurance against Councils mandating costly things and so did not want to be on the hook for it. And so off to court.
Finally, the Supreme Court has ruled, rightly, that insurers aren't liable for Council's changing the building code. But it's taken until now. The real problem here is that we've had over three years of legal uncertainty slowing the rebuild.
Why oh Why didn't the government fund a few test cases on this in 2011 to get declaratory judgements that would allow works to proceed more quickly? This is the kind of thing that CERA should have been jumping to do.