The following information is from CanCERN. It is a report on their discussions with IAG regarding the situation of hill residents who have been Red Zoned
We met with IAG to clarify settlements for Port Hills Red Zoners with Section 124 notices. It is complex and case-by-case so if you have any further questions, please contact your IAG claims case manager.
IAG deems a home a ‘constructive total loss’ IF it is a Port Hills Red Zone property with a Section 124 notice that unequivocally will not be removed, meaning there is no available mitigation that would result in the removal of the Section 124 notice.
The reason the house is deemed a constructive total loss (regardless of actual damage to the home) is that the homeowner has legally lost the access to their home based on the rules of the S124 notice (in which the Council can enforce vacation of property). There are some properties with S124 notices that this may not apply. The key factor is the permanency of the S124 notice. This may be affected by factors including the Council initiated Rock Fall Protection Fund. Under this scheme if mitigation is possible Council will perform a Cost Benefit Analysis (CBA) to determine whether or not the Whole of Life Cost Threshold (50% of Red Zone Funding) is met. (This is a lengthy and complex process which can be researched here).
Homes that are red zoned and have S124 notices because of cliff collapse and cliff inundation are likely to be the first settled. The area of rock-fall needs more analysis because it is feasible in some circumstances to remediate and therefore the S124 notice can be removed.
If your home is deemed a constructive total loss, all the same settlement choices are available to you and need to be discussed with the claims case manager.
At this stage, IAG is the only insurer we know of that is interpreting policy liability this way. We will keep you informed if there are updates.
Obviously this will raise questions from flat land red zoners and the impact on policy liability IF the Crown brings in compulsory acquisition in the residential red zone after the deadline has expired. We are exploring this question but in the meantime, make sure you know what your policy says you are entitled to under terms of compulsory acquisition. We believe it is not a financially positive situation to be in so check with your insurer.