Andrew Hooker retells a horror story of how new Christchurch homeowners were left $200k out of pocket due to EQC errors made after the 2010/11 earthquakes & argues for a commission of enquiry

By Andrew Hooker*

To most people in New Zealand, this story may sound quite unbelievable. But to people in Christchurch who are still fighting to have their houses repaired, it is common, but certainly not mundane. 

A bit of background. 

After the 2010 and 2011 earthquakes, EQC, that is the government natural disaster insurer, rushed around assessing thousands of houses. The way it works is that EQC covers the first $100,000 plus GST for each earthquake, and the private insurance company then steps in to pick up the rest, up to the cover provided under the policy. If EQC assesses the damage at being over $100,000, it is called “over cap”. EQC can either pay out the $100,000, or undertake repairs to that level and then hand to the insurance company.

In many cases, EQC assessed the house at being well over “over cap”. In those circumstances, one would have expected that EQC would then pay out the $100,000 plus GST and hand it to the insurance company. But no, EQC proceeded on many cases to “rescope” or “reassess” houses. Having recorded that the damage exceeded $100,000, EQC decided to have another look and reassess the damage. Miraculously, in many cases what started life as a “major structural damage” claim, often with an estimated $200,000-$300,000 repair cost, was rescoped and reduced substantially.

There are cases where houses that were assessed within months of the earthquakes at $200,000 or $300,000, ended up at well under the $100,000 cap, sometimes $50,000 or even less. The house owners then had a choice. They either accepted the new scope of repairs or they fought with EQC. Those who fought with EQC, are in many cases still fighting, six years later. But many people “trusted” EQC and simply allowed EQC to carry out the repairs. EQC repaired the house to this significantly reduced “scope” and walked away. 

In many cases, the substantial area of damage was around foundations with cracked ring foundations or failed piles. EQC would fill the cracks, paint over and walk away. The homeowner, “trusting” EQC, simply accepted that their house was repaired. 

In significant number of cases, this “rescoped” repair was simply inadequate and, to coin a common phrase in Christchurch “botched”. But the homeowner “trusting” EQC assumed that their house was fixed, and got on with life. 

One of two things have happened in many of these cases. Either:

Subsequently, the homeowner has noticed that the house is still out of level or the cracks have reopened identifying the botched works; or

The homeowner has sold the house, innocently assuming that it had been repaired and equally innocent person has purchased the house also assuming that it has been properly repaired.

Back to the story. Georgia Scott and Mike Rogers purchased a house in Christchurch just over a year ago. The house had been “repaired” by EQC. The day after they moved in, there was a fire that caused significant damage to the house. As if this wasn’t shock enough, what the fire revealed was a totally botched repair to the foundation by EQC. 

After their insurance company settled the fire damage claim, Georgia and Mike contacted EQC to point out the problem. 

And here is where it gets interesting – EQC looked at the house and acknowledged fully that the repairs were totally botched. It acknowledged that it had initially assessed the damage as a significant foundation repair in the $100,000s but had not done that work, it had simply filled a few cracks, painted over the foundation and walked away. 

Of course, Georgia and Mike were rapt that EQC had admitted this mistake, surely now EQC would put it right. Not so fast.

EQC, having admitted that it had totally botched the repairs, simply paid out the remainder of the $100,000 cap and washed its hands. 

Of course, Georgia and Mike had no insurance company to claim off, because they did not own the house at the time of the earthquake. And assuming that the house had been repaired properly they obtained no assignment of the private insurance company’s claim. 

But EQC refused to pay the difference. Mike and Georgia were over $200,000 out of pocket because of EQC’s “incompetence”. 

Distraught, and living in a sleepout behind their damaged house, with their two young children, top and tailing in a single bed, Georgia and Mike arranged a meeting with EQC. EQC agreed to meet to discuss the issue. 

I was at the meeting. In 27 years in the game, I have never attended such a surreal event. The senior manager at EQC totally admitted that it was entirely EQC’s fault. He acknowledged that the repairs had been botched and that Mike and Georgia were out of pocket due to EQC’s failings. He expressed significant personal regrets for their position. 

But when asked if EQC would right the wrong it had caused, he bluntly refused. Claiming to rely on the $100,000 cap under the Act, he said that EQC would not pay any more. 

Georgia had undertaken a detailed review of EQC’s file. What she could not understand was how the repairs got from a substantial foundation repair to, wait for it, $90 spent on filler for some cracks! 

So, at the meeting, the manager was invited to explain EQC’s reasoning.  How could it be that EQC’s own records showed a major foundation repair job being miraculously reduced to a $90 crack filling exercise? Surely there was some analysis on the file or evidence of a good faith decision making process. Maybe even input from an expert such an engineer or a licenced building practitioner? What about some records of an internal review, perhaps minutes of a meeting or file notes recording why EQC had justified this enormous reduction in scope. 

But no, there was nothing. Not a single document on EQC’s file justified or explained this decision. When asked to explain, the senior manager from EQC, simply said something like “well scopes change”. He was unable to point to a single shred of evidence justifying why EQC’s scope went from a major foundation repair to a $90 crack filling exercise. 

Questioned again about how this happened, he was unable to provide an explanation. Asked again about whether EQC would compensate Georgia and Mike for their losses, he again refused. He openly acknowledged that it was entirely EQC’s fault but simply refused any request for compensation. So, there we have it. A massive government backed organisation whose job is to protect the people who pay into the scheme against earthquake damage, refusing to compensate people who it admits have suffered enormous financial loss as a result of its “error”. 

But wait, there’s more

Pushed further, the senior manager from EQC agreed to refer the matter to the office of the Chief Executive. He agreed to a generous timeframe in which to provide a response. He promised that he would reply to these people within that timeframe. When the time elapsed, he simply wrote saying that they needed more time. Fed up, Georgia and Mike went to the media. The media contacted EQC for comment. Immediately EQC then wrote to Georgia and Mike, referring to the media contact and stating that it was not prepared to alter its decision. Clearly punishment to these people for daring to speak out against EQC’s refusal to compensate for its admitted errors. 

This is a terrible story. But it is not a particularly unusual one. There are many people who have purchased houses in Christchurch thinking that EQC has repaired them, and have later found out that they have bought a lemon. And even when EQC admits full responsibility and fault for the botched repairs, EQC refuses to compensate. 

Why? Because it can.  

There needs to be a full commission of enquiry into EQC’s handling of these claims. We have a government organisation that had admitted botching many, many repairs. It admits causing enormous financial and emotional harm to the citizens of Christchurch. But it refuses to compensate those people. Nor can it provide in this case, a shred of evidence to justify its amended scope. Someone needs to get answers here, and the government needs to hold EQC accountable. There needs to be a commission of enquiry that identifies:

  • Why EQC rescoped these repairs and reduced them so substantially.
  • What was the evidential or factual basis for this rescoping.
  • Whether there was an internal policy decision made by EQC to deliberately reduce these repairs without justification. 
  • Why, when acknowledging wrong doing, EQC refuses to compensate those it has harmed. 

EQC is not some private insurance company accountable to its shareholders for profit. It is a government organisation whose purpose is to compensate people fairly, and according to the Act. 


*Andrew Hooker is the Managing Director of Shine Lawyers NZ Limited practices as a specialist insurance lawyer in Albany on Auckland's North Shore. He also runs an insurance information website - www.claimshelp.co.nz

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22 Comments

"I am from the Government and I am here to help"

EQC go to great lengths to rip you off if they can get away with it. You need to deal with them in a professional manner and tackle any issues quickly. My family members and myself have had a number of disappointing dealings with them.

NZ will have more earthquakes, others should not have to suffer a repeat of Christchurch. Lessons need to be learnt. We should have an commission of enquiry.

I agree with Andrew this nonsense is wide spread and of course it is downright dishonest. I thought acts of dishonesty were a criminal offence so maybe people should be taking this issue to the police! Did someone within EQC issue the order for this dishonesty to occur? Builders will have work for years repairing this blunder......Chch earthquakes most expensive in the world is not a title to be proud of!

Agreed. Fraud and criminal charges against EQC need to be maid.

Im sorry for this couple but it is the tip of the iceberg and they are probably the lucky ones, at least they received
some cash! In many cases people have taken the cash spent the $90 themselves and on-sold as "repaired". Then there are the thousands of houses sold "as is where is" (effectively a right off), one week repair and sold as all good. the buyers of these homes will have no comeback and possibly not claim in future events.
I believe in time it will all make Leaking homes look like a non-event.

The buyer is fully aware of the risks in an "as is where is" sale.

This is not an isolated example, far from it. What is concerning as well, even sinister if you like, that if there is a future catastrophic EQ, and that botched repair should fail &, as a result, cause the whole house to become uneconomic to repair, it of course goes over cap & falls into the hands of the relative insurance company. But wait, no insurance covers bad workmanship. There are probably a few thousand EQC repaired houses at least with that potential. But it gets worse, the ultimate responsibility for the integrity of the house in terms of the building act, rests not with EQC, Fletchers or any other contractor or insurance company, but with the home owner even though that identity would have been given absolutely no say in the repair process. What a nice, neat convenient cynical little circle this government, EQC, CHCH City Council and Insurance Coy's have fashioned. All of it flouting the very legislation put in place to protect the citizens of this country & using it to persecute instead. Go National, and go the useless opposition that we all rely on to ask the right questions!

Time to get rid of EQC for good and save taxpayer money. Why do we pay these clowns?

The agent at the open home showed me the 2011 EQC scope of works and said the damage was all superficial and had been repaired by EQC and signed off. The owners had received $2,000 from their insurance company for the driveway that they would hand over to the purchaser. He looked aghast when I told him the owners had almost certainly been ripped off and that I wouldn't look at anything repaired by EQC. "But that means most houses in this suburb" he blurted out in disbelief. I smiled as I walked out.

That's the thing. Some house and sections would be worth more as a hole in the ground!

These issues and problems will run for decades I suspect. - and yes, there will be another major event somewhere and all the same problems will arise. Seems to me we need a permanent EQ Tribunal - much like the Waitangi Tribunal which looks at historical claims and makes recommendations to a Crown agency to then settle with the claimants.

'Botched' stuff will always happen with such a major event. Everyone - public and private sector - gets stretched beyond their ability to cope. Decisions get made under immense confusion and pressure - often by people with inappropriate qualifications and training. But that's the nature of major disasters.

It seems to me the Christchurch earthquake was nothing more than a gravy train for present and previous politicians (amongst others) at the expense of home owning families.
It was disgusting what these people were "earning" from other peoples misfortunes!

An awful experience for this young family. But anyone buying a CHCH house with an EQC foundation repair knows to proceed with caution. As did this couple, who prudently got a building inspection report. Which indicated there was no problem - if I understand the story correctly. Hooker is right to slate EQCs incompetence and terrible attitude since but a bit of balance please. Why is he also not calling out the firm who did the inspection. And also, if I recall the details correctly, cover on the house was not replacement , it was indemnity only. The implications of this for assignment of the claim and the ability to pursue the insurer can be profound and hopefully these were pointed out to this unfortunate couple by the lawyer who advised them during the purchase so they could go in with eyes open. I'm working from memory so may have some details wrong and not to detract at all from EQCs awfulness ( they absolutely should pay cap in my view)!on this occasion but I suspect there is a bit more to this story.

Do EQC repairs show up on a LIM? How much are you to trust the repair history that the Vendor or their agent gives you? Are you sure your building inspector can see past the gap filler and paint?

Anyone buying a house in Christchurch built pre-2012 should be incredibly careful and demand a hefty discount for this uncertainty I reckon.

This is refreshing - usually Andrew Hooker's articles only get 1 or 2 responses

I have some issues with this article. Firstly it is written by a person who has a vested interest in painting this picture. Specifically Mr Hooker is a lawyer who makes his money out of these cases and is therefore benefiting by presenting a pessimistic view on the big bad EQC/Insurer world.
I also have an issue with this case. Whilst I agree that EQC have obviously botched the repair I'm not convinced that they owe this person anything. What happens to the 'buyer beware' scenario and the need for due diligence when buying a property. These people should have done thorough checks on the house and the structural state of the building at the time they purchased the home. To subsequently say that the insurer and EQC have an obligation back to them is a stretch that I'm not sure the courts would support. What right do they have when they didn't own the home at the time of the earthquake and didn't have an insurance policy or in fact insurable interest in the home at the time the damage happened?. These arguments outside of the earthquake world would have little support.
Whilst these comments should not be seen as supporting EQC, there is another side to this that needs some balance.

not sure it is possible to balance what almost seems like, feels like , some kind of criminality..??
Assess the damage at $200, 000 and then change that assessment to a $90 repair job.
As if the phrase "rescope" legitimizes anything.. or even means anything..??
( sounds like a policy "mantra" sent down from above (CEO level.. maybe) )

And to have no contemporaneous evidence to support the changed assessment ... is kinda "off the planet".
And to admit all this and still decline proper compensation...wow.
One can only assume EQC are adversarial... ie.. they don't exist for our "peace of mind"..

Falls far outside the realms of any kind of human error kinda excuse..... don't u think??

Rescoped to $90.

Really.

Im inclined to think that there needs to be a proper inquiry.

Independent. Wide terms of reference. That sort of thing.

And that after it, the prosecutions start.

We need some people in jail.

This has all the hallmarks of another leaky-homes fiasco and will drag on and on and on

Yes, a proper enquiry, before the main players disappear

I got worked up reading this article, it makes me so angry, such a common occurrence. I do note that the word 'incompetence' has been used to describe EQC, but what about the conveyancing lawyer, it's not hard to write up a deed of assignment and every property transaction I've discussed involved one at the insistence of the lawyer. Also if we are looking to hold people accountable for this mess, it seems to me that many of the senior EQC staff are just puppets for the real dishonest, which in my view if the government.