Elements of Claims Settlement
1. Reinstatement Standard
- Accepting a lesser standard than that allowed for by the EQC Act (or your policy) is like writing out a cheque to EQC / the private insurer.
- When you obtained your insurance policy you and the insurer entered a contract, they are as bound by that contract as you are.
- The EQC Act has a very specific standard that EQC must adhere to. That standard was confirmed in the Joint Statement HERE.
- If your home is not reinstated correctly future insurance claims are at risk of being declined due to "historic / existing" damage. It is also possible for homes to be devalued due to missed damage.
Know Your Repair Standard
- Review the Joint Statement.
- Obtain a copy of your insurance policy that was current at the time of event.
- Talk to other property owners, join Facebook Groups like TC3 Residents, as their members have a lot of knowledge.
- Seriously consider engaging with an insurance specialist / lawyer. If you are short on funds speak with Community Law.
- Be skeptical about EQC / Insurer led assessment scopes. A Case Study HERE.
Accept cash settlements made to you by EQC, even when you do not agree with the assesment the settlement payment was based on. This is because, as EQC are not able to make full and final cash settlements, like the private insurers, if you do not agree with the assessment you can go back to EQC with proof of your loss.
Some property owners have put aside the cash settlement payments from EQC to help fund the expense of proving the actual damage to their home. This is particularly useful for those who would otherwise struggle to prove their own loss.
NOTE: EQC have been known (not guaranteed and you must seek advice rather than rely on this statement), where they have relied on independent reports to pay for those reports.
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2. Proving your loss
Most insurance policies state that it is the homeowners responsibility to prove the loss. Interestingly however, the private insurers and EQC engage their own assessors and take on this responsibility. Refer to Insurance and Financial Services Ombudsman PDF.
As we are learning from the quakes of 2010 / 2011 many of the assessors appointed by EQC and the private insurers may not have had the knowledge or skill to identify earthquake damage, and by all accounts it would appear the in-house training provided might have directed them to assess to the lesser standard of pre-earthquake. NOTE: Recent documentation obtained by OIA indicates that this is still happening.
So, if after a significant event, which you believe has caused substantial / structural damage to your home what do you do? NOTE: where damage is minor / cosmetic it may be sufficient to appoint an experienced builder, but make sure they know the policy standard they are assessing to.
- Firstly, you may wish to engage an experienced insurance lawyer or insurance adviser to be your guide through the process. The role of this person is to set strategy for you and to help you appoint your team. A good person in this role will have knowledge of a variety of professionals they can recommend to you, such as geo-tech, structural engineers, builders and quantity surveyors etc. This cost is one that you cannot normally recover under your policy. If you are not in a position to pay for this yourself then contact Community Law.
- Talk over with the person you have appointed the concept of an instruction / brief which will be given to the people assessing your home. The purpose of the instruction / brief, is to tell the professionals assessing your home the reinstatement standard allowed for in your policy, and the EQC Act. If you have this written by a legal professional, with a good track record, it should increase the likelihood of EQC / insurers accepting your reports.
- Ask your appointed professional how to best go about ensuring the costs of proving your loss can be compensated by EQC / the private insurer.
- Find out how they recommend you engage with EQC / your private insurer.
- Be realistic, and don't fall into the trap of believing some people who may promise you the world. Some homes are able to be repaired to policy standard, so best to start from a realistic position (refer to our Case Law example Sadat v EQC & Tower ).
- Find out how the professional you engage charges, or if it is a free service who pays them (just so you are fully informed and happy with your decision). NOTE: Some people lock claimants into contracts, where payment is based on a percentage of the claim. This can be an expensive solution. Always obtain independent legal advice before signing any agreement of this nature.
- If the insurer appoints an assessor, and you wish to use that pathway, you are not locked into the organisation the insurer appoints. If you are not comfortable with their selection, ask them if there are other companies on their books.
- Community Law have a good body of knowledge these days, they are certainly worth talking to in the first instance if you are not comfortable paying for this service.
- When it comes to selecting the right professional ask them how they charge, the successes they have had, who you will be working with most of the time, and of course, their turn around times.
- Remember our Tip under reinstatement standard above, if you are assessed by EQC accept the payment. If it comes to it these funds might be just what you need to help your prove your own loss. Again, check this out with your professional support person.
- Finally, it's ok to be skeptical (in our unregulated market you cannot afford not to be), but you will need to work with EQC / the insurer to settle your claim. Working to a well thought out plan, supported by quality professionals, whilst keeping communication lines open may just get you the outcome you are entitled to under policy. You are not entitled to anything more, but you are equally not entitled to anything less.
3. Cash Settlements
The term cash settlement, we believe, is misused within the insurance industry. We think that it is confusing. Under most policies, and including the EQC Act, insurers make an 'election'. This means they can elect to manage the repair, or they can elect to make 'cash settlements'. It is their right under policy, so you have no choice. However, once they have made an election, they cannot chance their minds, unless you all parties agree.
ELection: Managed Repairs
This is when the insurer manages the whole process, end to end. The common examples of this are from the 2010 / 2011 Canterbury quakes. EQC used Flecthers and the came along, project managed the work and engaged the contractors. An insurer managed repair.
Election: Cash settlement - staying 'in policy'
This is when the insurer elects to pay cash to the homeowner, with the homeowner choosing their reinstatement team, for example, project managers, builders and so forth. We want you to think about this as staying 'in-policy' and think of it is a 'cash payment'. When the insurer elects to cash settle the repair 'in-policy' they are saying they will pay all reasonable costs to repair your home to the standard in the EQC Act (if it under-cap) or you insurance policy (if over-cap).
Where this can get tricky is we are seeing examples where claims managers at the EQC and in some private insurers don't always include costs for things like project management. We do not think this is acceptable as they are cost that are incurred when the insurer / EQC elects to manage the repair.
In addition, there is a strong argument under the terms of the Act and policies that you be paid upfront, on quotes. Not reimbursed on invoices. In other words, you are not expected to carry the risk / debt on behalf of the EQC or the insurer.
Cash settlement appears to be the preferred method for the Kaikoura quakes.
Out of policy Cash Settlements - Full and Final 'Out of policy'
This is the 'gotcha'. This kind of settlement is the end of the road. The legal term is 'discharge'. You are discharging the claim saying it is all over and complete. You can never ever reopen the claim (unless you suspect the insurer or EQC have acted in some dishonest way). If you accept a discharge of claim then you are exiting the policy terms. Sometimes you might want to to do this, say, if you want to use the money for something else. Homes that are sold 'As Is' usually have a discharged claim associated with them.
Many people have accepted a discharge of claim when the amount being offered is much less than the actual costs to repair the home. This can be very distressing when people realise this has happened to them. We strongly advise you NEVER discharge a claim without obtaining 'independent professional advice' first.
And, no, you do not have to accept a discharge offer. We hear some insurers make discharge offers first, with claims managers not clearly explaining the risks first. Be very very wary.
4. Land Claims
Please review the presentation panel on the right for information currently available on land claims. You may also like to speak with Empowered Christchurch.
The following buttons link you to presentations from meetings organised by EQCfix.NZ