EQC have released three new items of information for those with land damage (see details toward the end of this post). Arising from what EQC intends doing and paying on land, there are major risks for many with significant land damage. Some of the risks are speculative at this stage, because there is insufficient information to remove doubt and give confidence.
EQC will not, in most cases, be carrying out or organising land repairs themselves. Instead, land owners will be cash settled (or in some cases whoever holds the mortgage gets the money), and it will be their responsibility to have the land “fixed”. Under no circumstances can a property owner expect to receive the real cost of making good land that has significant damage. As EQC say in their Guide to Canterbury Land Claims:
The value of a cash settlement therefore will not be the amount of money needed to reinstate the insured land, or retaining walls, bridges or culverts.
The costing of repairs is done by EQC. To do this “EQC has a range of potential land repair methods and selects the one most appropriate to repair the damage.” Given EQC’s track record of inaccurate assessments and costings, plus the little matter of underpaying some assessments, there can be no confidence that all settlements will be at the appropriate level.
Not everything in the process is transparent. The land settlement pack (see item 2.below) includes a diagram of the property with the damage marked out on it, plus a Land Assessment – Legend Sheet describing the nature and size of the damage areas. However the sample Land Settlement Calculation letter, which gives the value attributed to damage, contains no information of what the repair consists of, or the repair methodology used to calculate the settlement. So, you get your letter and have no way of knowing exactly what has to be done, or the methodology EQC used to price the work. This is the first risk – is it all there, is it a suitable methodology, and will the calculation be realistic?
The second risk is if EQC, as they have done with some property cash settlements, use the “cost to us” approach i.e. the price they would be offered with their huge purchasing power (say 10% discount). Some people who were cashed out for their repairs have been treated this way. If the approach is adopted no one will receive a settlement based on the actual price an individual property owner could negotiate.
A third risk is apportionment. EQC consider each claim for land damage separately, and apply excesses for each one. If you made only one land claim, but apportionment was applied to your house claim, then it is possible this would be applied to land damage too. Should this happen then multiple excesses will be deducted at the rate of a minimum of $500 per claim up a maximum of 10% (but no more than $5,000) per claim.
The fourth risk is inflation – how much will prices increase before all land repairs are completed? No doubt EQC are aware of this risk and are keen to pass it on to individuals.
The potential consequence of these risks is that some land repairs will be unaffordable, and not get done. There is a snag here too. If the land is not repaired, or is but not to a level satisfactory to EQC, then future EQC cover may not be available. This in turn is likely to affect general insurance cover which will then have an impact on mortgage finance.
There is no appeal process as such. In their Guide (see item 1. below) EQC state the following:
If you do not agree with the decision, or you have new information you believe may support your claim, you can ask EQC to reconsider. Reconsideration may result in us upholding or overturning our original decision, or issuing a new decision for a different reason, not previously considered. Please send your request with supporting information within three months of the date of your settlement letter to Land Challenges, PO Box 311 Wellington 6140 or alternatively you can scan and email to email@example.com.
The second sentence is significant. If you ask EQC to reconsider their decision it is possible they will do so and come to the conclusion that the damage is actually less than originally assessed and reduce the amount you receive. This approach has been applied by insurers.
Claim settlement timeframes
- The earliest settlements are expected to begin in May 2013.
- Settlement of simple claims will roughly follow the direction of assessments moving from east to west across Christchurch.
- Settlement of complex claims, such as those involving increased risk of liquefaction or flooding, will be delayed.
- It’s expected that all land claim settlements will be made by the end of 2014.
EQC will pay any cash settlement amount to the homeowner, unless there is a mortgage and the amount is over the mortgagee threshold. If the cost to repair the damaged land is less than the minimum excess of $500 per claim, then no EQC payment will be made
1. There is a new edition of the brochure Guide to Canterbury Land Claims. A copy can be downloaded here. The Guide covers:
- How to claim for land damage
- What is covered by EQCover
- What is the settlement process for land claims
- How much the excess is
- What private insurers may cover
- The possibility that resource consents may be required before the work is undertaken
2. An information page on understanding your land settlement pack (here). There is a sample settlement pack on the page along with the note:
If you have a mortgage and the settlement amount across all your EQC claims is over the mortgagee threshold then the mortgagee will receive the payment and copies of the settlement letter, calculation sheet, land sketch and legend.
The contents of a pack are:
- Land Settlement Letter - showing the settlement amount and related information.
- Settlement Calculation Sheet – a breakdown of the settlement amount, including the types of land damage covered and excesses deducted.
- Assessors' Land sketch – a drawing showing the location of damage evaluated by the assessors.
- Legend – note showing the assessors' measurements and calculations.
- Guide to Canterbury Land Claims – step-by-step guide to the land claim settlement process.
- Guide to Settlement of Canterbury Flat Land Claims – guide to some common land repair methods.
- Local Authorities insert, 'Land Repair: How we can help you' – information on resource consents which will be needed for some repairs
3. Another page describes the types of damage found on flat land (here).