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Thursday, 5 July 2012

Transferring insurance policies – more on the issues

In the previous post the unnoticed hazards arising from the transfer of insurance entitlements was raised. The situation seems to be widening and getting worse. The following is from a CanCERN media release:
IAG and VERO have confirmed that The Deed of Assignment of EQC and Insurance Claims will not now be interpreted to mean that ALL the rights of a previous homeowner and their insurance claim. This means the new owner will not get full entitlements as declared in policies when purchasing an earthquake damaged property even though this is stipulated in the present Deed of Assignment wording. VERO told us that they have not been interpreting this part of the policy correctly and actually do not have to pay out full costs of a house that is deemed to be a rebuild if a property is sold and that only indemnity value would apply.  One justification we have been given for this is to mitigate against people seeing this as a business opportunity.  There was also a suggestion that the SouthShore residents seriously looking at "house swapping" also may be something that VERO wants to avoid.

Southern Response has confirmed they will not be changing their interpretation of the policy although they have the right to interpret it as VERO and IAG are. They will continue to extend full rights to the new homeowner. We (CanCERN) have yet to hear from others about their position.

The following is from a generic letter to purchasers from IAG (I have underlined points that need emphasising):
Possible Expenses Not being met by IAG
IAG will not transfer any Owner’s policy benefit for alternative accommodation or loss of rent.  The purchaser will at their own expense be responsible for any consequential losses which may occur with any repair works.
The repair works themselves often require separate Contract Works insurance. IAG may be able to arrange the necessary cover but is not required to do so. If the purchaser arranges their own contract works insurance IAG is not required to meet the costs of this new insurance policy. 

As part of repairs other property not insured by the Owner’s policy may be affected as part of  the repair. The costs relating to this uninsured property, other than necessary removal to  effect insured repairs, are an expense the purchaser will be required to meet at their sole cost. Examples include: carpet not suitable for relaying after lifting, landscaping restoration costs beyond the limit which may apply under the claim.
If you have purchased a damaged house, and had the insurance policy assigned to you, have a word to your lawyer. Asked whether they checked to see if the vendor’s insurance company agreed to the transfer.

Added 1 August 2012: there is a further blog post on the involvement of lawyers here.

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