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If you are insured with EQC, your home is secured against damage caused by natural disaster for its “replacement value” (up to a maximum of $100,000 plus GST). Under the Earthquake Commission Act 1993 (‘the Act’), this means that EQC is liable to pay any costs “reasonably incurred” to replace or repair your home (or any part of it) to a condition which is “substantially the same as but not better or more extensive” than its condition when new. In other words, EQC does not have to pay for repairs which give you a home which is better than what you would have had when it (or any part of it) was built. However, you are entitled (subject to certain conditions) to receive something which is largely the same as it was when built. Consequently, you are not limited to receiving what is known as an “indemnity” payment, whereby an insurer is only responsible for paying for the cost of repairing your home to the condition it was in before the damage (which in most cases will be less than new). However… 1. Are there any limitations on EQC’s repair obligations? Yes. If EQC choose to repair or replace any part of your home, they are not obliged under the Act to replace/repair it “exactly or completely” but only as “circumstances permit” and “in a reasonably sufficient manner”. In other words, if EQC chooses to repair your property (rather than pay you a cash sum), they don’t have to give you exactly what you had before but only what is reasonably adequate and can be achieved in the circumstances. The Act also seems to suggest that these limitations apply in calculating any payment EQC has to make to you, if it elects to pay you a cash sum, rather than repair your home. However… 2. Do the repairs have to comply with current building regulations? Yes, notwithstanding the limitations on EQC’s obligations. Under the Building Act 2004, all work which is required to repair damage to a home is ‘building work’ and needs to comply with Building Code requirements, whether or not a building consent is required. However, that doesn’t mean that your home has to be fully upgraded to comply with the performance requirements of the Building Code. Only the relevant repairs have to comply with the scope of the Building Code that applies to that particular type of repair. In addition, the EQC Act provides that its obligation to replace/repair a person’s home to a largely new condition (but not better than what the person had before) is modified “as necessary to comply with any applicable laws” (which would include current building regulations). The cost of such compliance, subject to some conditions, is EQC’s responsibility. This has several implications including that you may end up with something which is better than what you had before. This is because, although your home (or part of it) may have complied with building regulations at the time it was built, this may not be the case now. Consequently, EQC may have to pay for additional work to be done to ensure that any repair to the relevant part of your home complies with current regulations. Similarly, this may prevent your home being repaired to the way it looked/functioned before. 3. Is EQC responsible for paying any other costs? Yes. Under the Act, EQC is also responsible for paying any costs “reasonably incurred”: a) To demolish your home (or any part of it) and remove debris but only to the extent that such was required to enable your property to be repaired/replaced; b) To pay architects’ fees, surveyors’ fees and council fees. 4. Can EQC decide whether to repair my home or pay me a cash sum instead? Yes. Under the Act, EQC can choose between settling your claim by payment, replacement, or repair. 5. Will I have to pay anything towards the cost of repairs? Possibly. EQC is only responsible under the Act for covering damage to your home which occurred “as a direct result of a natural disaster”. Consequently, if you have damage to your home which was not caused by the Christchurch earthquake (e.g. pre-existing damage) but which needs to be repaired as part of your earthquake repairs, you may have to meet the cost of that. Likewise, if your home (or part of it) did not comply with building regulations at the time it was built or no building consent was obtained, you may have to contribute to the cost of any additional work required to ensure that your repairs comply with current building regulations. This is particularly if the failure to obtain a building consent/comply with the relevant regulations increased the earthquake damage to your property. The reasoning for this is twofold. Firstly, as noted, EQC is only responsible for covering damage caused directly by the earthquake, rather than other factors such as non-compliance with building regulations. Secondly, EQC is only liable to pay the “reasonable costs” of repairing your home to “its condition when new”. If your home (or any part of it), when new, didn’t comply with the building regulations in force at that time or didn’t have a building consent, then EQC may not be responsible for meeting the cost to provide you with a home that now does. In addition, for that reason, any cost associated with ensuring compliance may not be considered “reasonable”. Consequently, although the repairs will still have to comply with the current Building Code, you may have to meet some of the cost involved. We consider the situation is different however where your home did comply with building regulations in force at the time it (or any part of it) was built and a building permit/consent was obtained for the work. In that situation, your home, when new, did comply with the relevant regulations and, accordingly, any cost now associated with ensuring your home continues to comply is more likely to be considered “reasonable”. In addition, if you want (and EQC agrees) repairs carried out differently to what EQC proposes (and is liable to provide) or additional work done, you may need to meet any extra cost arising from such. For example, if you want rooms repainted in a different colour to what they are currently and that will require additional work (e.g. additional coats of paint) then it is likely you will have to meet any additional cost associated with that. 6. Are there any other limitations on what EQC has to pay? Yes. The Act also provides that EQC only has to settle any claim on the basis of the amount it would have cost to replace or repair your home at the time the earthquake happened. This may mean that any sum paid is less that what it actually costs now to repair your home as, for example, building costs/materials may have subsequently increased. There is one exception to this however. EQC can, in its discretion, choose to calculate the cost at the time of settling your claim (rather than the earlier date of at the time of the earthquake) if “because of circumstances relating to the cause of the damage, the claim cannot be settled promptly”. It is arguable that that exception should be adopted in the case of the Christchurch earthquake(s) as, as a result of the magnitude of claims after that the quakes, it is taking some time for EQC to settle claims. 7. Are there any time frames? The Act provides that EQC shall settle any claims “as soon as reasonably practicable” but no later than one year “after the amount of the damage has been determined”. If you require assistance in this area please contact Peter van Rij at Parry Field Lawyers (348-8480). The information contained in this outline is of a general nature, should only be used as a guide and does not amount to legal advice. It should not be used or relied upon as a substitute for detailed advice or as a basis for formulating decisions. Special considerations apply to individual fact situations. Before acting, clients should consult their Parry Field Lawyer.
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