Search This Blog

Saturday, February 18, 2012

Apportionment - is EQC now your insurance company?

Most are familiar with the High Court declaratory judgement instructing EQC that the total cost of claims must be apportioned over the number of claims lodged. As it happens, the Court's decision has a serious unintended consequence for some claimants.

Where a house is a "rebuild" or requires major repairs, and no single claim breaches the cap, the claim cannot be passed to the private insurer. As a consequence EQC becomes responsible for the rebuild or repairs.

The following, which focuses on rebuilds, is specifically about those in the Red Zone but the underlying EQC as insurer issue also affects many in the Green zones.

Where a house is in a residential Red Zone the owners are given two choices: Option 1 or Option 2.
  • Option 1 is to take the rateable value for both the land and house.
  • Option 2 involves taking the rateable value of the land and settling with your private insurance company for the building(s). Those whose house is written off are entitled, by their policy, to have a new house built. 

The problem arising from the High Court Judgement involves Option 2. The steps in the scenario are:
  • EQC assess a house.
  • It is agreed to be damaged beyond economic repair - a rebuild.
  • Apportionment is applied correctly.
  • Even though the house is a rebuild no single event exceeds the cap.
  • Because the cap has not been exceeded the "file" will not be passed to the private sector insurer.
This scenario is likely to arise often with houses at the lower end of the value scale (rebuild value < $250,000 +/-). Through the judgement EQC is the only insurer in a position to cover the policy on the house.

Consequences 
The consequences for the homeowner are unclear, but potentially financially damaging.

Had the claim been passed to the private insurer then a rebuild would have been available as part of Option 2. It is not stated whether EQC will stand in the place of the private insurer for Option 2. As EQC is the insurer in other regards, it seems very clear that they pick up all the private insurer policy obligations.

The absence of publicity about this from EQC or Gerry Brownlee suggests there is no desire to have EQC face these costs, perhaps in the hope those in this situation will be diverted into taking Option 1. As the cost of a rebuild will be significantly higher than rateable value, taking Option 1 will mean a financial loss to homeowners and a gain to EQC.

Legal stuff
The Crown Offer policy and documents were drawn up before the apportionment matter went before the High Court in Wellington. The Declaratory Judgement makes no decision (or comment) on how apportionment is to be carried out, nor on the effect it is to have on insurance policies. Consequently the Judgement cannot be used to deprive anyone of the rights they had prior to it being issued (the Judgement was purely about who paid for what, with policy entitlements not up for consideration).

As mentioned above the Crown Offer, and the policy behind it, was developed and promulgated prior to the declaratory judgement. The environment that gave rise to it has changed substantially, and in an unanticipated way, while the content remains the same.

How it is worded and operates need to be revisited to ensure that it continues to accurately reflect the legal situation, and does not deprive or deceive claimants of and about their legal rights. In particular it needs to state that EQC is an insurer in its own right under Option 2, for those who wish to consider that choice and are under-cap.

Bottom Line
Clarification is needed that any legal right to a rebuild is not removed by the apportionment judgement or process, and that EQC will stand as insurer under Option 2. Those who are undercap through apportionment, and have been sent offers, should be sent amended offers. If such clarification is problematic then the matter needs to go to the High Court for another declaratory judgement.

An Official Information Act (OIA) request has been sent to CERA about this. Don't hold your breath while waiting for the response. CERA don't seem greatly influenced by the Ombudsmen's requirements for the prompt handling of OIA requests.
.

Friday, February 17, 2012

Engineers on the Canterbury earthquakes and building earthquake-resilient cities

The Science Media Centre blog has a Q&A session with earthquake engineering specialists.

The topics covered are:
  • What is an earthquake-prone building?
  • How do they vary in terms of factors causing their “prone-ness”?
  • In the wake of the quakes and the current commission, can we expect to see the building code or enforcement changed?
  • What possible areas of the code might be focused on in future review of the legislation?
  • Why does it take so long to analyse a building? What does it involve?
  • What are some of the ways a building which is earthquake prone can be brought up to a higher standard?
  • To what extent will the strong ground motions recorded in the Christchurch earthquakes lead to changes in New Zealand’s building code?
  • Has enough been learned in engineering terms to reduce the damage that liquefaction and lateral spreading does to foundations of structures?
  • And if sea levels rise 2m over the current century, will the higher water table increase the risks of liquefaction in Christchurch or Wellington?
  • Should households pay insurance premiums based on the perceived seismic risk of their site, the anticipated performance of their house design, and the risk that the suburb around them may be abandoned even if their specific house survives?
  • Should homeowners be rebuilding to a standard which will enable their homes to perform much better in the next big quake – such as a major shake on the Alpine Fault – rather than simply suffering exactly the same damage all over again?
The blog is here
.

Thursday, February 16, 2012

Cathedral Update

Bishop Victoria Matthews has issued a statement on the state of affairs with the Cathedral. A PDF version of the statement along with photographs is here.
The significant damage to the Anglican Christchurch Cathedral was exacerbated further in the earthquakes of 23 December 2011 and has set back our decision-making about the future of the Cathedral. This update is part of our communication programme as we endeavour to keep communities informed.
We also want to again be clear in stating that buildings, however dear to our heart and beautiful, are secondary to our concern for people. At this time we are especially aware of those who suffered injuries on 22 February 2011 and the families of those who died on that tragic day.
We are also aware that the Church is the people and not the buildings. The proclamation of the Gospel and the ministry and mission of the Kingdom are carried out by people empowered by the Spirit of God. Nevertheless, church buildings do invite us to worship God and lift our spirits in awe and wonder at all God is doing in our lives.

Wednesday, February 15, 2012

Earthquake Royal Commission - Department of Building & Housing submission on engineering competence

The Earthquake Royal Commission received a submission from the Department of Building and Housing (DBH) in January 2012 on the training of engineers and the organisation of the profession.

It has been made available in their technical library here.

The summary of recommendations in the report is:
  1. The Department considers that appropriate masters level qualifications should generally required for engineers undertaking complex specialist structural or geotechnical work, in combination with appropriate experience.
  2. The Department supports IPENZ’s position that assessment of overseas engineering qualifications should be undertaken by the registration authority.
  3. The Department recommends that set programmes of supervised training and graduate assessment are implemented to ensure the engineer meets the expert level of competence for independent practice in the design of large complex building structures prior to registration as a CPEng. The Department will work with IPENZ to be assured that appropriate oversight and training for new graduates is provided.
  4. The Department is strongly of the view that scopes of practice should be developed as the basis for assessing engineering competence.
  5. The CPEng register should display the practitioner’s discipline and practice area/specialist skills, or scopes of practices when they are developed, to assist the public, building owners and building consent authorities to identify the areas in which engineers are competent to practice.
  6. It is recommended that the registration authority consider some form of competence declaration at least every two years as part of the renewal of licence between the formal 5-6 year competence assessments.
  7. The Department intends to consider the issues related to the relative roles of the Council and IPENZ as part of its review of occupational regulation in the building and construction sector. In the interim, it recommends that IPENZ move to more clearly separate its role as a professional body from its role as a registration authority.
  8. The Department supports IPENZ’s view that in general CPEng should be required for engineers practicing in the building and construction sector, and that Building Consent Authorities should inform the registration authority when a practitioner consistently produces sub-standard consent applications which may reflect on competence.

Tuesday, February 14, 2012

Notes from the Red Zone meeting on the 13th of February

For those who couldn't make it to the Red Zone meeting last night the following is a summary from my notes and recollection.

There were 6 topics for the evening:
  • Zoning criteria (Mike Shatford)
  • What has happened to the land (Mike Jacka from T&T)
  • The Crown Offer (Michelle Mitchell) 
  • The Property Clearance process (Michelle Mitchell) 
  • Support Available (Michelle Mitchell) 
  • Questions (Michelle Mitchell).
Zoning criteria - more or less the standard stuff, but not in line with what Cabinet agreed. No surprises for anyone. The main message was that land damage was the key factor

What happened to the land - brief, generalised, and not clear for some. The problem Tonkin & Taylor had to assess was the extent of large lateral spreading around the river and old river terraces (Patton Street). The outcome was to put the area into the Red Zone. It was not economic to repair the area as to do so would require large scale works to deal with flooding, crust depth and infrastructure problems. All this would exceed the cost of zoning everyone Red

Land assessment was done in three phases: quick wide area assessment after the major quakes, more detail obtained from individual properties on a quick assessment basis (in, look around, peer over the fence and out sort of stuff), plus individual EQC land assessments. The last bit is unlikely to be correct as EQC have not yet done assessments in this area. Don't think much credibility was attached to what was said.

The Crown Offer - this was the most contentious bit so have put the detail at the end.

Monday, February 13, 2012

Earthquakes and human cognitive performance

Science Daily, an on-line science news service, has a report on New Zealand research done into the impact of a natural disaster (September 4, 2010 earthquake) on the ability of individuals to assess and respond to situations.

Psychology department Associate Professor William Helton, and PhD student James Head, were investigating  human performance prior to the September earthquake, which fell between the first and second round of tests. This presented an opportunity to see to what extent the earthquake affected their performance.

Some selective quotes from the Science Daily report:
"In their upcoming Human Factors article, "Earthquakes on the Mind: Implications of Disasters for Human Performance," researchers William S. Helton and James Head from the University of Canterbury explore how cognitive performance can decline after earthquakes and other natural disasters.
"We were conducting a [different] study on human performance requiring two sessions," said Helton. "In the midst of the study, between the two sessions, we had a substantial local earthquake, which resulted in the rare opportunity to do a before/after study. We were quick to seize the opportunity."
The researchers measured participants' cognitive control by asking them to either press a button corresponding to numbers presented on a video screen or to withhold a response to a preselected number presented on the same screen. Normally, participant performance would improve during the second session, but the authors found an increase in errors of omission following the earthquake.
"Presumably people are under increased cognitive load after a major disaster," Helton continued. "Processing a disaster during tasks is perhaps similar to dual-tasking, like driving and having a cell phone conversation at the same time, and this can have consequences."
This is banality raised to a fine art. One wonders what the use of it is. Comparing the increased cognitive load of an earthquake with a mundane form of dual tasking suggests a lack of appreciation of both the gravity, and long duration, of the consequences of earthquakes. From rescue, to recovery, to rebuild, to rebuilt is a very long journey.

In our context, a damaging earthquake is both a brief catastrophic event and a catastrophic series of encounters consisting of personal loss, unexplained nature, bureaucracy, financial loss, powerlessness, oppression, and obstructions. The earthquake is instantly damaging, dealing with the processes of personal recovery in the face of uncertainty and obstructions is a period measured in years. For some, personal recovery will never be accomplished in full.

The February 22nd earthquake and its aftermath is where research is required. Impaired performance has been with us constantly from that day, and will continue for an unknown period. Better science with improved focus is needed to measure what is happening to individuals, and also the medium to long term consequences for them, their families, society, and our health, welfare and financial support institutions

The news article is here.
.

Sunday, February 12, 2012

0800 Hungry and Addington Action

0800 Hungry is the country's largest foodbank. It operates a food warehouse, and provides essential support to families and individuals who would otherwise go hungry. 0800 Hungry provides food parcels to Addington Action who distribute them in their area. Other organisations in Christchurch who distribute food parcels are also helped by 0800 Hungry.

To assist with the foodbank's mission, Addington Action have undertaken to provide 0800 Hungry with support for their computer needs.

If you need a food parcel you can apply directly to 0800 Hungry. It is not means tested, and you don't need letter from WINZ. Once the details are sorted the parcel(s) will be delivered to your house. Details are here.

Information about Addington Action is here, and 0800 Hungry here.
.