Following the Kaikoura earthquake in 2016, EQC and private insurers advised that private insurers would act on behalf of EQC in receiving, assessing and settling home and contents claims arising from the earthquake, even those claims that were under the EQC cap. Customers were reassured however that this approach would not change their entitlements under their insurance policy or the Earthquake Commission Act (‘the Act’) and that insurers would receive training to ensure compliance with the Act.
Homeowners affected by the Kaikoura earthquake may well be wondering what exactly is the extent of their entitlement under the Act. This article considers that issue. For homeowners dealing with EQC in respect of the Canterbury earthquakes, please see our earlier article “EQC is repairing my home – what am I entitled to?”
What is the extent of EQC’s obligations?
If you have fire insurance, your home is secured against damage caused by natural disaster for its “replacement value” (generally up to a maximum of $100,000 plus GST).
Under the Act, this means that you are entitled to receive the costs “reasonably incurred” to replace or repair the damaged part or parts of your home to a condition which is “substantially the same as but not better or more extensive” than its condition “when new”.
In other words, you are not automatically entitled to repairs (or the cost of repairs) which give you a home which is better than what you would have had when it (or any part of it) was originally built. However, you are entitled (subject to certain conditions) to receive repaired property which is largely the same in appearance, quality and working order as it was “when new”.
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).
Does EQC have to cover the cost of ensuring the repairs comply with current building regulations?
Yes, as a general principle.
The EQC Act provides that:
· EQC’s obligation to pay to replace/repair a person’s home to a largely new condition (but not better or more extensive than what the home was like when new) is modified “as necessary to comply with any applicable laws” (which would include current building regulations).
· The cost of such compliance is EQC’s responsibility – EQC is responsible for paying any costs “reasonably incurred” to comply with any applicable laws in relation to the replacement or reinstatement of your home.
In other words, while in general EQC is not obliged to pay to repair your home to a condition which is better or more extensive than what it was like originally when new, this limitation is modified where it is necessary for the repairs to comply with any applicable laws.
Consequently, this means 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. Therefore 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.
This may include paying the cost of upgrading non-earthquake damaged aspects if those aspects need to be upgraded as part of completing the repair of your earthquake damage. In other words, if your earthquake damage cannot legally be repaired without also upgrading non-earthquake damaged parts, EQC may be responsible to meet those costs too.
However, that doesn’t mean that your entire home has to be fully upgraded to comply with the performance requirements of the Building Code. In general, only the relevant repairs have to comply with the scope of the Building Code that applies to that particular type of repair. With the exception of such things as ﬁre safety, the balance of your home only needs to comply with the Building Code to the same extent as it did before the earthquake.
Be aware however that, 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 when required, 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 caused or increased the earthquake damage to your property.
Is EQC responsible for paying any other costs?
Yes. Under the Act, EQC is also responsible for paying any costs “reasonably incurred”:
· 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;and
· To pay architects’ fees, surveyors’ fees and council fees.
Are there repairs/damage EQC may not have to cover the cost of?
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 Kaikoura earthquake (e.g. pre-existing damage) but which is also being repaired as part of your earthquake repairs, you may have to meet the cost of that.
However, this is not always the case. If your earthquake damage cannot be repaired without the non-earthquake damage aspects also being addressed, EQC may still be responsible to pay (see point 2 above for example). Likewise, if pre-existing damage has been made worse by the earthquakes.
Correspondingly, 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 (again see point 2 above).
Every situation is unique so please discuss your situation with a professional advisor who can provide tailored solutions to you.