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EQC & Insurance Newsletter #13

here is the link to the Grant Shand EQC and Insurance Newsletter#13

Prattley loses Supreme Court Appeal

The Supreme Court on 6 December 2016 in Prattley Enterprises Ltd v Vero [2016] NZSC 158 dismissed an appeal by Prattley against the refusal of the Court of Appeal to set aside an insurance  settlement agreement and order Vero to pay it a further $2.7M for damage to Worcester Towers in the Canterbury earthquakes.  Vero insured the building on an indemnity, and not reinstatement basis for $1,605,000.  The property was damaged in September, December and February earthquakes.  It was demolished in September 2011.  Prattley and Vero entered into a claim settlement agreement on 23 August 2011 where Vero agreed to pay Prattley $1.481M in full and final settlment.  In the […]

Tower- Financial issues- Sue now and collect $$ soon

Here is a link to Tower’s 29 November 2016 announcement to the market about its $21.5M loss for the year to 30 September 2016 and its intent to try to separate out its Canterbury earthquake liabilities into a Ru off company.  It says that it has 564 claims unsettled in Canterbury for which it has made a gross provision of $149M.  It says of this 564 there are 311 that are complex and challenging.  The provision works out at $264,000 per claim.  Seems a bit low to me.  It is also uncertain who and how the Run off company will be funded.  Tower proposes informing shareholders of the plan details […]

EQC- Earthquake numbers

EQC expects 50,000 claims from the Kaikoura earthquake(s).  It has received about 10,000 so far.  EQC received more than 460,000 claims for 166,000 buildings in Canterbury.  EQC says it has about 5000 failed remedial work claims to deal with.  EQC says that it has 3647 land claims to settle in Canterbury.  It says it has resolved 49,000 land claims so far.  Resolved to EQC means EQC has paid what it think it owes.  The Crown has not received any payments from EQC for land damage to red zone land acquired by the Crown.

Post earthquake(s) property settlements

Below is a memo from the Property Law Section of the NZ Law Society about property settlements post earthquake(s). Post-Quake Property Settlement Considerations Recent events have not only changed the physical landscape, but also that of conveyancing and settlements. The purpose of this memo is to raise awareness of some of the factors that must now be considered when advising clients and determining the most appropriate course of action to take. While it is impossible to address every scenario, the matters raised below should allow an application of general principles to most situations. 1.  Insurance Issues Many of you will be aware that insurers have placed embargoes on any new […]

High Court Earthquake List – 2016 Report

Here is the 2016 Report on the Christchurch Earthquake Litigation List by the Chief High Court Judge.  Points of note are:  302 new proceedings since 30 September 2015;  This includes 53 cases involving alleged defective or inadequate repairs;  More Judges to be allocated to earthquake cases;  In the year 125 cases were settled and discontinued and only 2 required a full hearing and judgment;  There are 400 active cases of which 55 are set down for trial and 345 are in the case management process;  More Judge time will allocated to early judicial settlement conferences;  Only 1 case awaits disposal in the Court of Appeal.  

Limitation – EQC and Insurance Update

We are fast approaching 6 years since the 22 February 2011 earthquake.  This is to remind people of limitation issues that were highlighted prior to the 6 year anniversary of the 4 September 2010 earthquake.  IAG said that it would not extend any limitation period for claims by body corporates or commercial claims.  Other insurers have also not provided a global extension for commercial claims.  So to be safe these ought to be filed in a Court by 21 February 2017.  AA, Tower, FMG, MAS and Vero have agreed not to plead a limitation defence to any claims filed before 4 September 2017.  Southern Response will not rely on a […]

Western Pacific Insurance- brokers

It is coming up to 6 years since Western Pacific Insurance Ltd (“in liq”) was placed into liquidation by its shareholders on 1 April 2011.  Time is fast running out to sue insurance brokers who placed insurance cover with Western Pacific in circumstances where there were solvency issues.  We are aware of about 6 court proceedings against brokers arising out of Western Pacific from unsatisfied earthquake claims.  We are also aware that brokers have notified their insurers of a likelihood of many more claims from the earthquakes.  The six period for suing the broker(s) is running out.

Costs from EQC and Southern Response

In Ramage v EQC & Southern Response [2016] NZHC 2327 the High Court considered an award of costs against Southern Response after it settled a claim at a mediation, but with costs not agreed.  EQC prior the Court hearing had agreed to pay costs of $32,677.51.  The judgment is notable at para [27] for the statement that success against EQC is determined by whether EQC concedes the claim is over cap.  If so, then EQC should be liable for costs of at least 50%.  Southern Response was found to have acted unreasonably by not disclosing complete DRA’s.  It also acted unreasonably by agreeing with EQC’s position that the claim was under […]

High Court Earthquake List Stats

On 13 October 2016 the current controllers of the High Court Earthquake list presented information about its operation.  Here are some interesting stats.  Court filings by year: 2010-1; 2011- 3; 2012- 52; 2013- 196; 2014- 135; 2015-66; 2016-283.  Percentage of cases disposed of by year: 2010-100%; 2011- 100%; 2012-98%; 2013- 89%; 2014- 66%; 2015-23%; 2016-1%.  52% of cases settled with less than 1 month before the trial date.  The 2016 spike is caused by the pre limitation period expiry for the 4 September 2010 earthquake.   We expect a similar spike in early 2017.  

EQC has a win on costs

The Court of Appeal in Yarrall & anor v EQC [2016] NZCA 517 dismissed an appeal against a costs judgment where the High Court had ordered the homeowner to pay EQC costs of $23,482 plus disbursements of $121.40.  The homeowners sued EQC challenging the apportionment of damage between the quakes.  Before the homeowners commenced the proceedings in August 2013 the insurer had accepted the EQC apportionment and had agreed to replace the house.  The dispute proceeded through the High Court earthquake list process until in May 2014 the homeowners accepted that the proceeding would serve no practical purpose.  On 23 May 2014 the homeowners filed a notice of discontinuance.  EQC […]

Earthquake Prone Buildings

Identifying and Managing Earthquake-prone Buildings Regulations have been approved for new earthquake-prone building legislation and these have been released for consultation. MBIE is consulting on the regulations, together with a methodology that will set the new approach for identifying and managing earthquake-prone buildings.  The methodology will outline the criteria for engineering assessments, and it is designed to enable councils to make informed decisions about whether buildings are earthquake-prone.  The Minister’s release can be found here, and a link to the regulations and consultation documents is here. If you have any comments or feedback on the proposed regulations or methodology, please forward them to the Property Law Section Manager Katrina.thomas@lawsociety.org.nz by 1 December 2016.

Judicial modernisation

beehive.govt.nz – Bill updates 108-year courts legislation Amy Adams 11 October, 2016 Bill updates 108-year courts legislation Parliament has passed legislation tonight that updates and modernises the century-old law underpinning New Zealand courts. Twenty-three Bills divided from the Bill formerly known as the Judicature Modernisation Bill were passed into law with widespread support. “At more than 1000 pages, the legislation was one of the biggest law-making tasks ever undertaken by Parliament,” says Justice and Courts Minister Amy Adams. “New Zealand has a strong and independent justice system that serves us well, but its legislation needs to be more accessible and better supported by modern technology,” says Ms Adams. “The changes […]

Judical modernisation – Interest & DC limit to $350,000

The Judicial Modernisation Bill has now been subdivided into subsidiary bills – one of which is the Interest on Money Claims Bill and another that deals with the District Court.  It has now passed through the House committee stage with only its third reading and Royal Assent to go.  Good for claimants and bad for EQC it now provides that a defendant is liable to pay interest where the defendant pays money to settle the claim after proceedings commenced, but before any judgment.  Previously the High Court had refused to order EQC to pay interest under the Judicature Act.  The District Court bill increases the limit of the District Court […]

MBIE Cash Settlement Booklet

Here is the link to the MBIE Cash Settlement booklet recently released via an OIA request.  It was prepared by MBIE and CERA with input from EQC, CCC and Worksafe.  It is an excellent handbook for homeowners and contains accurate advice as to what to do when considering a cash settlement.  It makes many useful suggestions as to information to ask of the EQC/Insurer before settling and also what ought to be included in the cash settlement calculation.  Still a useful resource.

EQC Limitation Video

Here is a link to a video of me produced by EQC fix it about EQC and the impending limitation period expiry.

High Court orders costs against EQC and Southern Response

Yet again the High Court (Davidson J) has ordered EQC and Southern Response to pay costs to homeowners where both paid money after being sued in excess of what each had offered before being sued late 2013.  In Zygadlo v EQC & Southern Response [2016] NZHC 1699 the High Court ordered EQC to pay $12,210.27 in costs and SR $45,291.56.  EQC paid $159,626.71 in August 2015 and SR paid a further $340,000 in March 2016 to remediate the house damage.  EQC asked the Court to order that the homeowners pay it $21,350.47 because they had changed expert witnesses and delayed the proceeding.  They also said that the Court could not make a costs […]

Summary Judgment application fails against insurers

In Emmons Developments NZ Ltd v Mitsui Sumitomo Insurance Co Ltd & anor [2016] 1244 the High Court (Matthews AJ) discussed a summary judgment application by the owner of Rydges, a carpark and the Grant Thornton Building in Christchurch  for costs of demolition, building protection and fees from Mitsui and Vero subsequent to the earthquakes in 2010/2011.  It noted that Emson applied for summary judgment in early 2016, but then withdrew the application after the insurers filed/served opposition documents.  The Court decided that Emson should never have applied for summary judgment and awarded costs and disbursements against it of about $20K

AMI & Lumley liable for Selwyn fire damage in 2013

In NZ Fire Service Commission & ors v Legg & ors [2016] NZHC 1492 the High Court (Nation J) considered a claim by the NZ Fire Service Commission and the Selwyn District Council to recover costs incurred in fighting a substantial fire in January 2013 that emanated from a burn heap of vegetation from the owners of the property (Leggs) and the landscaping business operated at the property (Evolving Landscapes Ltd).  Leggs sought indemnity for the claim from AMI and Evolving sought indemnity for the claim from Lumley.  The evidence was that that fire started in the burn heap that the Leggs/Evolving had ignited in mid December 2012 that they believed […]

Failed repair/rebuild cases.

High Court – Claims about failed remedial work by EQC or insurers are not part of the High Court Earthquake List. They are dealt with separately in a similar manner to which leaky home cases are/were dealt with. This is because such claims usual involve more parties than just the EQC/Insurer (builder, engineer, architect etc). Apparently the Court will shortly issue guidance for the progress of claims.

Earthquake fixes and contaminated land (HAIL)

For homeowners looking to remediate earthquake damage there may be extra costs caused by contamination of the land where foundation solutions involve the disturbance or removal of soil.  These can include, but are not limited to, the costs associated with engaging an environmental expert, undertaking further investigation and removing the contaminated soil.  The cost to remove and dispose of contaminated soil can be in excess of $100,000.  You can find more information about contaminated land at www.mfe.govt.nz/land. The Ministry for the Environment has identified a number of industrial, agricultural and horticultural activities that are known to use hazardous substances which could potentially contaminate land. These activities are known as HAIL […]

EQC & Failed Repairs

EQC has repaired thousands of houses inadequately.  Any money spent by EQC on these repairs is wasted and ought not count when assessing whether EQC has paid “cap” under the EQC Act.  In some cases the repairs by EQC were so bad that they have increased the amount that it costs to fix the house.  EQC is liable for that amount also.  So when dealing with EQC about failed repairs it is essential to establish what has been done and what needs to be done to properly remediate the house.  We suggest involving your insurer in the process as you do not want to be short paid by EQC.

Southern Response & Missing DRA’s

People that settled with Southern Response based on an Arrow Detailed Repair/Rebuild Analysis (“DRA”) may have claims against Southern Response under the Fair Trading Act where the settlement sum was based on a DRA, but Southern Response did not disclose that it had other DRA’s with a greater sum that included extra components/allowances that were part of a rebuild cost.  Concerned insureds need to act quickly by reason of limitation issues.  Check whether the DRA settled on had allowances for fees and contingency etc.

EQC & Southern Response ordered to pay costs

In Driessen v EQC & Southern Response [2016] NZHC 1048 the High Court (Davidson J) on 19 May 2016 has ordered EQC and Southern Response to pay costs and disbursements to a homeowner where EQC and Southern Response settled the claims after being sued for amounts greater than they had offered to pay prior to being sued.  Prior to being sued in November 2013 EQC assessed the damage at $58,504.  Southern Response assessed its liability at $20,000 for DFPP.  Ultimately EQC paid $153,422 in November 2015 and Southern Response paid $358,232 in March 2016 (weekend before trial).  The Court ordered EQC to pay $20,120.08 and Southern Response $50,030.30.  The judgment […]

EQC Group Action

The EQC Action Group has settled its dispute with EQC.  Here is a link to the website that has the settlement terms.  There is a joint statement that sets out what is agreed. Insurance under the Act insures the house for replacement value, which includes the cost to reinstate a house to substantially the same condition as when new and the cost of complying with any applicable laws; EQC’s liability includes the costs to fix undamaged parts where that is affected by remediation of damaged parts; If  a house has suffered earthquake damage that includes the floor being out of level: The fact that the floor level is within the […]

Cera disestablished

below is from the CERA website CERA has been disestablished This page directs you to the agencies to contact for information and assistance on the regeneration of greater Christchurch, along with some useful contacts. The Canterbury Earthquake Recovery Authority (CERA) was established as a government department on 29 March 2011 to lead and coordinate the Government’s response and recovery efforts following the earthquakes of 2010 and 2011 in Canterbury. CERA was disestablished on 18 April 2016 as the Government transitions from leading the recovery, to establishing long-term, locally-led recovery and regeneration arrangements. Some of CERA’s functions have wound down, and other responsibilities are now carried out by these central and […]

EQC and Repairs

Here is a link to the Radio NZ website story about problems with EQC repairs.  It includes 2 interviews and mentions Grant Shand as being involved getting EQC to pay cap for a homeowner.

High Court Earthquake List

Here is the link to the spreadsheet of cases in the High Court Earthquake list as at 31 March 2016.  

Lumley/IAG

As of 1 April 2016 the various Lumley general insurance claim teams merge into the IAG model.    

Vero settlement agreement valid

On March 2016 the Court of Appeal in Prattley Enterprises Ltd v Vero Insurance New Zealand Ltd [2016] NZCA 67 dismissed an appeal by an insured against the High Court’s refusal to set aside a settlement agreement on the grounds of mistake.  It also comments on the inappropriateness of a Risk Worldwide person (George Keys) purporting to give “expert’ evidence when that person had a financial interest in the outcome of the claim.  Prattley claimed that it was mistaken in relation to a settlement agreement it entered into with Vero about damage to Worcester Towers at Cathedral Junction.  In August 2011 Prattley settled all claims with Vero for $1,050,000.  That […]

EQC and Drainage Claims

EQC announces plan to settle drainage claims 7 Mar 2016 The Earthquake Commission (EQC) is rolling out an assessment programme for sewer and stormwater pipes suspected of having earthquake damage, starting this month (March). EQC’s General Manager of Customer & Claims, Trish Keith, says it currently has about 2,500 drainage claims but expects this could increase to about 6,000 with most claims being settled with cash payment. “EQC’s focus has been getting houses repaired and people back in their homes. But we are now in a position where we can address the issues with drainage,” Mrs Keith says. “It has been some time since some drains were inspected. To ensure […]

Southern Response- Govt Review

Here is a link to the report by the Parliament Finance and Expenditure Committee in its annual review of the 2014/15 performance and current operations of Southern Response Earthquake Services Limited.  This is the first review of Southern Response.  The report raises concerns about the ability of Southern Response to settle all claims within the amount allocated by the Government and the payment by Southern Response of bonuses to staff based on their claim settlement record.  Southern Response so far has paid $3.3M to staff as bonuses.  The Committee was concerned about the possibility that policy holders were not receiving their correct entitlement to enable the staff to receive a bonus. […]

Unsettled earthquake insurance claims

Here is a link to a piece by Cam Preston about the current state of insurance claim settlements.  His view is contrary to that of the Insurance Council on its website here which says that its members are on track to settle the vast majority of claims in 2016.  IAG and Southern Response that together have over two thirds of the claims still have 5069 unsettled claims.  Currently there are only 209 active proceedings on the High Court Earthquake list.

Southern Response Avoids Class Action

By the judgment 24 February 2016 in Southern Response Unresolved Claims Group v Southern Response Earthquake Services Ltd [2016] NZHC 2345 the High Court (Mander J) declined the Group’s application for leave to bring the proceeding as a representative action in the name of  its nominated representative, Cam Preston.  The Group is an unincorporated body of 46 people with unresolved claims with SR.  The claims are in various stages with some still “under cap”.  The judgment refers to there being 2587 unresolved SR claims.  The Group Claimants appeared to have differing issues with SR, so the Court was unable to identify issues common to the entire group that is a […]

ABC Australia – “Lateline” on Christchurch Earthquake and delays

Here is a link to the ABC Australia show “Lateline” and its piece from 16 February 2016 about the delays in the rebuilding of Christchurch.  It contains interesting comments about IAG and its performance.  Below are 2 quotes from IAG that are interesting.   RENEE WALKER, IAG: We work with our customers. It’s always a negotiation, so they’ll be presented with a cash settlement offer and then is a negotiation. We’re not in the practice of forcing cash settlement. So there is always a conversation. RENEE WALKER: We think and we maintain that we are settling our claims at a reasonable rate. And we would like to work with our […]

Justice Kos Speech about Christchurch Earthquakes

Here is the link to a speech by Justice Kos at a Judges’ Conference in Brisbane recently.  It is about the Christchurch earthquakes and the judicial response to the earthquakes.  It goes through  the major cases and comments on the judicial processes implemented to deal with the cases.

High Court delays- earthquake cases

Some earthquake court cases have been in the Court system since 2013.  They have dragged through the joint expert process that the Court used to see as essential, but in practice achieved very little towards resolving claims.  Now that the cases have completed the interlocutory phases they are being allocated hearing dates.  Amazingly cases of 5 days hearing time are now being allocated hearing dates in March 2017.  That is appalling.  So much for the quick resolution of earthquake cases.

Assignments

People that have bought properties after the earthquakes are likely to have taken an assignment in relation to EQC and insurance policies.  This may involve an assignment of the claim, the proceeds, the rights and/or the policy.  Each is a different property right.  This is likely to be recorded in the property sale and purchase agreement and a deed of assignment.  There has been no issue with EQC recognising the right of the new owner to receive what may have been due to the previous owner.  Some insurers have taken the position that the policy cannot be assigned without their consent.  Also that the purchaser cannot acquire reinstatement rights or […]

Cross leases and insurance obligations

We continue to come across home owners who do not understand the extent of their obligations under a cross lease in relation to insurance for earthquake damage. The cross lease will usually contain a term obligating an insured to spend any insurance money received on reinstating the damage.  So an insured that takes a cash settlement could be sued later by other owners if they do not spend the money on reinstating.  All owners can agree to vary the cross lease if needed to delete this requirement. If an owner repairs or rebuilds, but builds it different to what was there then the insured will need the consent of the […]

Earthquake 14 February 2015

Here is a link to EQC’s advice about what to do after the earthquake on 14 February 2016.   You have 3 months to make a claim.  The 3 month period cannot be extended.  It is better to be safe than sorry.

Insurance Council- Earthquake claim limitation

Here is the press release from the insurance council to the effect that CNZ members AA Insurance, FMG, the IAG brands, MAS, Tower and Vero have agreed not to plead a defence under the Limitation Act 1950 or the Limitation Act 2010 for any residential claim relating to the Canterbury Earthquakes where proceedings are filed in the Courts before 4 September 2017.  This does not affect claims against EQC or Southern Response.   To save arguments and issues I still recommend that owners sue insurers by 4 September 2016.

EQC- limitation earthquake claims

Here is the link to the press release from the EQC website about how it will apply the limitation period(s) under the Limitation Act.  To be safe I recommend that owners sue before 4 September 2016.  Better to be safe than sorry.

High Court Earthquake List

here is the link to the High Court Earthquake list as at 11 December 2015.    

Limitation Act – Time running out

Here is a link to a Press story about the 6 year limitation period under the Limitation Act and its effect on claims for earthquake damage.  To be safe anyone with an unsettled claim against EQC or their insurance company should sue by 3 September 2016. Once the limitation period expires that is the end.

EQC and its legal costs

This morning National Radio (Morning Report) broadcast an interview I did with Conan Young about the amount paid by EQC for legal costs in relation to Christchurch earthquake claims.  In information released under the OIA EQC disclosed that the legal costs have been $23.6M.  In 2014 the legal costs were $7.4M.  These numbers do not include amounts paid by EQC for legal costs of homeowners.  The interview was broken into 2 parts.  Here is the link to part 1 and here is the link to part 2.

High Court Earthquake List stats

The Christchurch High currently operates a special list to deal with earthquake cases.  Here are some stats from a recent Law Society presentation. 437 earthquake related proceedings filed 210 cases disposed of by discontinuance or judgment 176 cases discontinued with 71 discontinued after being set down for trial and 35 of those discontinued within 1 month of the trial date 34 cases disposed of by judgment using a total of 125 court days 227 active cases with 61 set down for trial and 166 in case management

6 year limitation- sue or no money

Under the Limitation Act insured homeowners only have 6 years from the date of the damaging earthquake(s) within which to sue EQC and insurance companies for compensation.  If homeowners do not sue then the claim(s) for money are no longer enforceable.  So EQC and insurers will escape without paying.  For houses and land damaged in the earthquake(s) on 4 September 2010 court proceedings must be filed  by 3 September 2016.  That date is fast approaching.  Once the limitation period has expired that is the end.  It cannot be extended.  Sue now.

EQC land claims

As well as covering buildings EQC also covers damage to residential land.  Homeowners need to progress these claims now.  These claims expire if the homeowner does not sue EQC within 6 years of the land damage.  The primary claim is for the cost to restore/remediate the land.  Do not believe EQC when it tells you that it only needs to pay a difference in value of the land between now and before the earthquakes. EQCover for land is limited to land that is within the property boundary – and includes: the land under the home and outbuildings (eg, shed or garage) the land within eight metres of the home and […]

Bad building video

here is a link to a story and video about bad building work – particularly of foundations.

Lladro claim fails against AA Insurance

In Newberry v AA Insurance Ltd [2015] NZHC 2457  the High Court (Nation J) on 8 October 2015 considered a claim by Brian Newberry about 30 Lladro figurines damaged in the Christchurch earthquakes that had a replacement value of $210,065.  The problem for Mr Newberry was that his insurance policy had a limit for “works of art” of $5000 per item with a total of $20,000, unless the items were separately specified in the insurance policy schedule.  Unfortunately, he did not specify the Lladro as “works of art”.  The insurance policy defined “works of art” as – Pictures, paintings, prints, sculptures, ornaments, tapestries, antiques (other than furniture), hand woven mats or […]

NZ Law Awards 2015

Grant Shand Barristers and Solicitors is again a finalist for the Insurance Law Firm of the Year Award at the New Zealand Law Awards.  Here is the list of finalists.  Grant Shand is the only finalist that does not act for insurance companies.  The New Zealand Law Awards will be held on Thursday 19 November 2015 at the Pullman Hotel Auckland.    

High Court Earthquake List

Here is the link to the most recent published earthquake list.  Interestingly all cases about failed earthquake remedial work by insurance companies or EQC will not be put on the list.  One of the earthquake list Judges; Justice Kos, is now a Judge on the Court of Appeal, so will be replaced.

Kelly v EQC & Southern Response – no appeal

The appeal period for any appeal from the judgment in C & S Kelly Properties Ltd v EQC & Southern Response Earthquake Services Ltd [2015] NZHC 1690 has expired with no party lodging an appeal.  There has been no agreement about the costs payable by EQC and Southern Response so the Court will now have to determine that issue.  Notwithstanding the recent MBIE report to the effect that 30 out of 32 hand selected properties that were jacked and packed by EQC were non-compliant with the building code apparently EQC still maintains that it can jack and pack this property.

Failed work for EQC

Here is a link to a Stuff article on the comments by builders involved in doing building work for EQC and Fletchers.  Beneath the article are comments corroborating the content of the article that EQC and Fletchers are not blameless for the defective building work.  Both EQC and Fletchers ought to be legally liable for any defective building work.  I am aware that both have previously been sued for defective work.  I would not rely on either to remediate defective work and homeowners have no obligation to allow EQC or Fletchers to try to remedy defective work.

IAG exceeds reinsurance limit for February 2011

Here is a link to an article on stuff that IAG has exceeded its $4 Billion reinsurance limit for the February 2011 earthquake.  Apparently IAG expects to settle claims for damage in the other earthquakes at less than the reinsurance limit.

MBIE Report on EQC Faulty Repairs

Below is an extract from the MBIE website about its report on faulty building repairs.  The report identified significant failings with the “jack and pack” method.  Here is the link. Report into Canterbury residential repairs released 19 August 2015 The Ministry of Business, Innovation and Employment (MBIE) has released a report into the Building Code compliance of earthquake repairs to Canterbury homes. The report follows an independent survey of 101 homes randomly selected from more than 2,700 addresses provided by EQC, Housing New Zealand, Southern Response and IAG. The survey also included a small sample of houses where homeowners had opted out of an insurer-led home repair programme. The organisations […]

Failed remedial work continued

Stuff and the Press recently published the article here about the likely liability of Fletchers and insurers for defective earthquake remedial work.  It is unfortunate that those involved in the article did not accurately state the law.  Where an insurer chooses to do, or have paid for, remedial work under the insurance policy then it is liable for the quality of that work as if it was the builder.  There are a few Court proceedings already against insurers for defective building work.  Fletchers as the project manager owes obligations to the home owner to perform its role with reasonable skill and care.  That includes ensuring that the work complies with the […]

EQC failed remedial work

Here is the link to the post on the EQC website about failed remedial work.  The houses the subject of the investigation will be the tip of the iceberg.  I do not recommend that homeowners rely on EQC to accurately scope and remediate the failings.  Better to engage an independent expert.

Earthquake Insurance Statistics

Five Years On: How Insurance Claims Arising from the 2010-11 Earthquakes Have Been Dealt With New Zealand’s proximity to the geologically active Pacific Ring of Fire leads to 20,000 recorded earthquakes each year. Most earthquakes are minor but annually around 200 are strong enough to be felt. Between September 2010 and June 2011, Canterbury was hit by three major earthquakes. While such natural events are not uncommon in the country, the intensity of those earthquakes, and the fact that they occurred so close together, caused considerable damage to the region, destroying buildings, roads and infrastructure. It affected 460,000 people, and damaged 150,000 homes; 20% of which (30,000) were seriously damaged. […]

Another Cathedral Judgment

In a judgment 5 August 2015 in Church Property Trustees v Attorney General & Anor [2015] NZHC 1843 the High Court (Dunningham J) discussed the consequences of the breach of trust by the CPT in spending $4.7M of the insurance proceeds for the Cathedral on the cardboard cathedral in Latimer Square.  CPT had recently transferred funds to cover the payment, so there was no need for any orders against it.  The Court decided that the payment for Cathedral contents was not required to be used for the Cathedral only.  It also decided that the CPT was not in breach of its obligations by failing to insure the Cathedral for replacement cost.

New red zone offer

Cera has published its later red zone offer.  Details are below. Residential Red Zone Offer Recovery Plan The Residential Red Zone Offer Recovery Plan has now been approved and released The Residential Red Zone Offer Recovery Plan [PDF 716KB, 32 Pages] The media release announcing The Residential Red Zone Offer Recovery Plan » The Recovery Plan confirms the following Crown offers: For all vacant red zone land: a new Crown offer at 100% of the 2007/08 rateable land value. For all insured commercial red zone properties: a new Crown offer at 100% of the 2007/08 rateable land value and 100% of the 2007/08 rateable improvements value for the insured improvements, […]

Kelly/EQC/Southern Response- Court says Earthquake Caused Damage- not wind/flax bush

 Introduction On 22 July 2015 the High Court (Mander J) released the 107 page judgment in C & S Kelly Properties Ltd v EQC & Southern Response Earthquake Services Ltd [2015] NZHC 1690. This was the case where the primary issue was whether the damage to the foundations (floor differential 88mm) was caused by the earthquake(s).  EQC & Southern Response said that the earthquake(s) did not damage the foundations and the differential was caused by the wind, a flax bush and/or had existed since the house was built. Summary Mander J decided that Kelly had proved that the floor level differential was earthquake damage, so EQC and SR lost.  The […]

Avonside Holdings- Southern Response Loses Again

By the judgment 22 July 2015 in Southern Response Earthquake Services Ltd v Avonside Holdings Ltd [2015] NZSC 110 the Supreme Court dismissed the appeal by Southern Response against the Court of Appeal decision of 1 October 2014. It confirmed that in calculating the rebuild cost of a house under the Southern Response insurance policy for the buy another house option, 1c.ii, a reasonable estimate for professional fees and contingencies should be included in the sums payable, as if the house is actually being rebuilt. Both Courts were unpersuaded by the Southern Response argument that because the house was not actually going to be rebuilt there were no risks and […]

Floor levels

Here is a link to a story from Radio NZ about the hearing on Christchurch plan proposals, particularly about required floor levels.  Here is the  link to the website for the Independent Hearings Panel and here is the link to the actual panel decision.

Multiple events and proof of loss/damage

The Courts have confirmed the ability of insureds to recover for separate damage to insured buildings in separate quakes even where the total recovery then exceeds the sum insured under the policy.  This has caused issues about proving the extent of the damage in each earthquake and remedial scope/costs.  In Vero Insurance New Limited v Morrison & anor [2015] NZCA 246, 16 June 2015 the Court of Appeal considered the use of a model based on ground shaking as a method of allocating damage and repair costs.  The industrial/commercial building at 23 Heathcote Street, Woolston was insured by Vero Insurance for $4,004,300 per event.  It was damaged in the Canterbury […]

MAS v East – Need to incur the cost(s) of rebuild/repair

In Medical Assurance Society of NZ Ltd v East & ors [2015] NZCA 250, 17 June 2015 the Court of Appeal allowed the appeal by MAS against a High Court (Whata J) decision on the timing of payment of replacement cost and dismissed it on the standard of the work. The owners’ house was damaged in the February 2011 earthquake.  The concrete slab had a floor level differential of 44mm and areas of the slab had a slope greater than .5%.  The owners proposed underpinning the slab and MAS proposed relevelling by LMG.  The owners engaged Risk Worldwide.  They sought a judgment for remediation costs of $3.096M (rebuild).  Risk Worldwide was […]

Class actions – EQC & Southern Response

Class actions against EQC and Southern Response have been the subject of media attention in the past 3 years.  This has intensified recently with the proposed class action against Southern Response.  Here is the link to Grant Cameron’s page.  Here is the Southern Response page about the proposed class action.  There is no specific mechanism, or rule(s), by which there can be a “class action” in NZ.  Rules proposed in 2008 have never been implemented.  Recently the Court(s) have shown a willingness to permit representative actions under r4.24 of the High Court Rules.  This has enabled the “Feltex” and “Bank fees” proceedings.  The “Feltex” proceedings failed in the High Court […]

CERA new red zone proposal

CERA has released its draft red zone recovery plan.  Here is a link to it. Taking into account the five key criteria the Chief Executive’s preliminary views on the quantum of the new Crown offers were as follows: • For all vacant red zone land: a new Crown offer at 100% of the 2007/08 rateable land value. • For all insured commercial red zone properties: a new Crown offer at 100% of the 2007/08 rateable land value and 100% of the 2007/08 rateable improvements value for the insured improvements, if the insurance benefits are transferred to the Crown. Alternatively the owners may choose not to accept any payment for the […]

EQC Act reform

Discussions begin on reform of EQC Act Minister Responsible for the Earthquake Commission (EQC), Gerry Brownlee, and Associate Minister of Finance, Steven Joyce, say the Government has developed a number of proposals to reform the EQC Act, which are being released for public discussion today. “These reforms are designed to ensure the EQC scheme remains focussed on insuring homes; resolves the difficulties experienced in Canterbury with the interaction of land and building cover; better integrates EQC and private insurers’ claims handling processes; and ensures the ongoing financial sustainability of the scheme,” Mr Brownlee says. “We also propose keeping EQC’s role in supporting research and education about New Zealand’s natural hazards and […]

Insurance Settlement Agreement Not Set Aside

In Prattley Enterprises Ltd v Vero Insurance NZ Ltd [2015] NZHC 1444 the High Court (Dunningham J) considered a claim by Prattley to set aside the insurance claim settlement agreement it entered into in August 20111 with Vero Insurance for damage to its building known as “Worcester Towers”.  The building at 103-105 Worcester Street, Christchurch was damaged in the earthquakes on 4 September 2010, 26 December 2010 and 22 February 2011.  It was “red stickered” and demolished in September 2011.  In August 2011 Prattley entered into an agreement with Vero to settle the insurance claim(s) at $1,050,00 plus GST.  Later Risk Worldwide became involved and prosecuted the Prattley claim(s) seeking a […]

High Court Earthquake List & Case Summaries

Here is the link to the NZLS page with links to the most recent High Court earthquake list and case summaries.

More Uretek Problems

More problems are emerging with houses purportedly fixed by Uretek insertion beneath the concrete slab in Christchurch.  We issued new Court proceedings recently for one house against Uretek, Southern Response, Christchurch City Council and the builder/engineer involved.  More to come.

CERA- compulsory acquisition

In the judgment of Minister for Canterbury Earthquake Recovery v Ace Developments Ltd & anor [2015] NZHC 1027 the High Court (Osborne AJ) has ordered that the defendants vacate a property at 115-117 Moorhouse Avenue that was subject to notice of acquisition by CERA in July/August 2014.  The defendants were the owner and lessee of the property.  The defendants unsuccessfully opposed the vacation order on the basis that there was no offer/agreement about compensation.

EQC loses costs appeal

The Court of Appeal has today dismissed the appeal(s) by EQC against High Court decisions awarding homeowners costs and disbursements where EQC paid cap after being sued.  Here is the judgment.  This is an excellent result for homeowners and should encourage more people to sue EQC.  The High Court had awarded each homeowner 50% of the 2B costs and disbursements on the basis that an insurer was still a party.  The Court of Appeal refused to increase this to 100%.

Avonside Holdings (Supreme Court)

Southern Response applied to the Supreme Court for leave to appeal the Court of Appeal decision including a 10% contingency and 10% professional fees as part of a rebuild costing.  By a brief judgment released 4 may 2015 the Supreme Court said: A The application for leave to appeal is granted (Avonside Holdings Ltd v Southern Response Earthquake Services Ltd [2014] NZCA 483). B The question on which leave is granted is whether the Court of Appeal was correct to find that the respondent was entitled under its insurance policy with the appellant to claim allowances for contingencies and for professional fees given that the respondent has elected to purchase […]

Newsletter No. 5

Here is the link to newsletter no. 5  

No Costs – EQC Declaratory Judgment

Subsequent to the High Court judgment of 10 December 2014 on declarations sought by EQC on flooding and liquefaction vulnerability etc the two intervenors applied for an order that EQC contribute to their costs.  By a judgment 12 March 2015 the High Court decided to let costs lie where they fell.

Earthquake Claims for Multi Units

EQC and Insurers postponed dealing with what they termed “multi-unit” claims.  These claims are now emerging and raise many issues.  They use the term “multi unit” to refer to physcially connected properties.  These properties can be unit titles within a body corporate, cross-leased properties or physically connected units on separate titles.  The primary reason for the delay in the resolution of multi unit claims is that EQC postponed its assessment of them.  With a body corporate there is a single insurer and usually a single sum insured.  There will be issues with the apportionment of the sum insured between units when there is insufficient cover to pay for reinstatement.  If […]

Seismics and the City 2015 – Southern Response (Peter Rose)

Here is a link to a presentation by Southern Response CEO, Peter Rose, at the recent “Seismics and the City” event held on 27 March 2015.  Mr Rose considers Cancern and RAS to be excellent from the Southern Response perspective, however, I am not sure that is a positive recommendation for insureds.  Mr Rose uses the phrase “qualitative easing” for Southern Response now considering information provided by insureds.   Interestingly Southern Response has settled only 57% of its 7348 “overcap claims” more than 4 years after the 22 February 2011 earthquake.  That leaves about 3160 unsettled.  This number presumably excludes those claims that are still “under cap”.  Apparently I am […]

Reinstatement and “as new”

In East & anor v Medical Assurance Society New Zealand Ltd [2014] NZHC 3399 the High Court (Whata J) discussed the  timing of payments by an insurer on reinstatement of a house and considered whether proposed concrete slab foundation remediation methods met the “as new” policy standard.  The Court decided that the insurer was liable to pay the reinstatement costs up front and not as they were incurred.  It decided that clear wordng was required in the policy to require an insured to spend the money before the insurer was required to pay.  Witnesses for the homeowner apparently accepted that underpinning the foundation met the required standard. The insurer wanted […]

Kraal v EQC (s124 notices)

In Kraal & anor v EQC & anor [2015] NZCA 13 the Court of Appeal upheld the decision of the High Court in Kraal & anor v EQC & anor [2014] NZHC 919 to the effect that the Council imposition of the notice under s124 Building Act  2004 preventing occupation/building work was not physical damage to the insured house so there was no cover from EQC/Allianz.  This case was run as preliminary issue case for the owners by a law firm that acts for Southern Response.  Surprisingly they do not appear to have run the argument that the inability to legally repair the house by reason of the s124 notice made the […]

Wall verticality

Leans of walls are a symptom of earthquake damage.  This is know as wall verticality.  We recently did a trial against Lumley General Insurance  where the primary issues was whether the wall leans were caused by earthquake(s) and if so, what is the required remedial work and cost.  The Court reserved its decision.  The lean of walls is often an item overlooked by people assessing earthquake damage.  It is important that it is not overlooked.

EQC and assessments

Thousands of people appear to still be trapped in the process and the victims of delayed and inadequate EQC assessments.  EQC prioritises assessments for houses where it is sued.  So the quickest way to get out of the EQC process is to sue.  If through the Court process EQC then pays cap EQC will be liable for legal costs and disbursements.  So, suing EQC is better economic choice.

EQC and its liability for legal costs

There High Court judgments have ordered EQC to pay costs and disbursements to homeowners where EQC paid cap after being sued. These are Whiting & ors v EQC & anor [2014] NZHC 1736; Ryde v EQC & anor [2014] 2763 and van Limburg v EQC & anor [2014] 2764.  EQC appealed each of these decisions to the Court of Appeal and Ryde and van Limburg cross appealed the Court’s decision to reduce the costs to 50%.  The High Court had said that it would reduce the award by 50% because the insurer was still a party.  The Court of Appeal heard the appeals on 11 March 2015.  It is hoped that the Court of Appeal […]

Kelly v EQC & Southern Response

The closing submissions in the case of Kelly v EQC & Southern Response took place on 3 & 4 March 2015.  This is the case notable for the defence by EQC and Southern Response that a weatherboard house in Burwood (TC3) with a post earthquake(s) floor differential of 88mm suffered no foundation damage in the earthquake(s) notwithstanding that the property moved downwards about 360mm and horizontally about 660mm and immediately adjacent houses suffered foundation damage.  EQC and Southern Response also said that the floor differential was caused by the wind and a flax bush.  EQC and Southern Response first said there was no foundation damage in September 2014 having accepted […]

High Court Earthquake List

Here is the link to the most recent High Court earthquake list.    

CERA- Port Hills Red Zone Update

A message from CERA – Port Hills residential red zone Final offer acceptance date The final date for property owners to accept the Crown offer to purchase eligible properties in the Port Hills residential red zone is 27 February 2015. The settlement deadline for properties in the Port Hills residential red zone is 6 weeks after the date of the agreement for sale and purchase. Given the potentially large number of transactions scheduled to settle during the period following 27 February 2015, we ask that practitioners do everything reasonably possible to ensure that preparations for settlement are completed in a timely manner, including sending settlement statements and undertakings as early […]

Newsletter 4

Link to newsletter 4 below   http://us9.campaign-archive1.com/?u=d5b576ad87990334eed3b48a7&id=3f0de8eaea&e=[UNIQID    

EQC Appeals Costs Decisions

In three separate High Court judgments the High Court has ordered EQC to pay legal costs and disbursements to homeowners who had commenced court proceedings against EQC and insurers during which EQC changed its position and paid its cap liability.  Hopefully all 3 proceedings are heard by the Court of Appeal in March 2015.  

Avonside Holdings – update

After losing in the Court of Appeal in Avonside Holdings Ltd v Southern Response Earthquake Services Ltd [2014] NZCA 483, Southern Response filed an application for leave to appeal to the Supreme Court.  Both parties have now filed submissions with the Supreme Court and it will now decide the leave application.  Over 2 months after the Court of Appeal judgment and after service of a statutory demand Southern Response paid the increased judgment sum by paying a further $215,308.66.  Notwithstanding the comments from the Court of Appeal, Southern Response then refused to pay any costs for the High Court hearing.  By a judgment on 19 December 2014 in Avonside Holdings […]

No Supreme Court Appeal In Reinstatement Cases

In QBE Insurance (International) Ltd v Wild South Holdings Ltd [2014] NZCA 447 the Court of Appeal dealt with 3 appeals about the interpretation of reinstatement clauses in commercial insurance policies.  QBE Insurance filed an application for leave to appeal to the Supreme Court, but later abandoned it.  Vero Insurance did not seek leave to appeal.  Lloyds Underwriters applied for leave to appeal to the Supreme Court, however, in the judgment released 16 December 2014 in Certain Underwriters at Lloyds & anor v Crystal Imports Ltd [2014] NZSC 186 the Supreme Court refused leave to appeal.  The underwriters wished to argue that the effect of the reinstatement clause is that cover […]

Tower Insurance & Reinstatement

The Supreme Court in the decision in Tower Insurance Ltd v Skyward Aviation 2008 Ltd [2014] NZSC 185 on 15 December 2014 dismissed the appeal by Tower Insurance about the interpretation/rights under Tower’s home insurance policy.  Tower had sought to impose on Skyward in settlement of its insurance claim either a second hand house chosen by Tower Insurance or to pay as a maximum the value of a comparable second hand house, rather than pay  the full replacement value for the property being the cost to rebuild the insured house.  The Supreme Court decided that where the house is damaged beyond economic repair and Tower has not chosen to rebuild or […]

EQC Declaratory Judgment

EQC asked the High Court to make various declarations in relation to whether a property’s increased vulnerability to flooding after the earthquake(s) was land damage and, if so, approval to settle the claim by paying the diminution in value of the property rather than the cost to remediate the damage.  The declarations changed over time and by the end of the Court hearing on 31 October 2014 there were also declarations sought that a property’s increased vulnerability to liquefaction was land damage; that the vertical movement of a house was land damage and not building damage and that the only method of claiming against EQC was by judicial review.  EQC […]