By Andrew Hooker* (email)
The earthquake claims arising out of the Christchurch earthquake are now slowly being considered by many insurance companies, and there are a number of themes that are arising.
As predicted in an article immediately after the first earthquake, disputes are arising over cash offers being made by insurance companies. There are numerous cases in which insurance companies are assessing claims, coming up with an estimate for reinstatement or repair to a building and making a cash offer to the client. As the New Zealand Law Society recently warned, people must be careful before accepting these offers. You are entitled to get a second opinion, and if you believe the offer is too low, do not accept the offer unless you are completely satisfied that the figure offered will be enough.
Insurance companies seem to be overlooking the real meaning of “replacement”.
For many years, insurance companies have provided better and better benefits in terms of what you are covered for. Most good house policies these days provide cover for full replacement, often regardless of the amount.
There are technical limitations in which the insurance company is not obliged to replace exactly the same as before and may use modern materials. But that does not mean that the insurance company can downgrade your house. For example if your house was built with cedar weatherboards, that is what you are entitled to.
The insurance company cannot obtain a quote or insist that you use a cheaper substitute.
Like for like, not a cheap facsimile
Similarly with aesthetic matters such as native timbers. If your house has features including native timbers, then that is what you are entitled to. Unless those timbers are no longer commercially available, the insurance company must replace with the original material. The fact that it will cost more is no excuse. The insurance company promises that you could replace like with like, and where those materials are available, it is obliged to do so.
In a leading case, the judge ruled that the use of materials more consistent with the architectural style of, and originally used in, the damaged building, instead of cheaper more modern materials, was not extravagant or unreasonable in view of the insurer's obligation in the policy to pay the cost of reinstatement in a condition ``equal to'' the original structure. Thus the insured was entitled to use tongue and groove timber for internal walls, rather than Gib board which was cheaper
If the insurance company elects to actually rebuild your house, the insurance company cannot force you to sign an agreement in which you are limiting its exposure to a fixed figure. If the policy does not have a sum insured limit, and the insurance company decides that it will rebuild your house, it must do so. What it costs is the insurance company’s problem, not yours.
No "sum" policies
Do not be forced into signing an agreement with the insurance company agreeing that the insurance company will rebuild your house up to dollars XYZ. If your policy does not have a sum insured limit, then the insurance company must rebuild regardless of the cost.
Cases are starting to come out in which the insurance companies are taking a position on whether the second earthquake was a separate event. You can bet your bottom dollar that when they talk to the reinsurance companies, they will be treating it as a separate event, and for the purposes of policy coverage such as alternative accommodation, that must be the case.
So what if your house was uninhabitable after the September earthquake? And if you were in the process of repairing your house so you could move back in, and it would have been inhabitable had the February earthquake not occurred, do you have another claim?
It seems, depending upon your actual policy wording, that you may well be able to claim again. The mere fact that that the house was not inhabitable at the time of the February earthquake does not in itself mean that there will not be a second claim. If the house would have been inhabitable by now but for the February earthquake, you may well be entitled to a second benefit. It will depend upon the words of your actual policy but don’t accept the insurance company’s word for it.
Storage costs claimable
In relation to contents claim, storage does appear to becoming an issue.
Insurance companies are strictly enforcing policy clauses in relation to storage costs. So if property has been removed from your house by the insurance company and placed in storage, some insurance companies are saying that the storage allowance has been used up and you must now meet that cost. That may well be the case, but be careful to analyse how the policy benefit was spent, whether the charges were reasonable, and whether there has been any unnecessary delay by the insurance company in repairing your house. It may be that the insurance company has an obligation to continue paying or that the amount being claimed as storage costs is partly attributable to other expenses.
All of the above examples identify one issue. Do not feel that you have to accept the decision that the insurance company makes or the offer made to you.
Do not be forced or pressured into accepting such an offer, and do not be scared to obtain independent advice from either a quantity surveyor, a builder or a lawyer. Many insurance policies on the market these days are very generous in their terms. You are entitled to the benefit of those policies. The insurance companies are not doing you any favour merely by honouring their contractual obligations, so don't feel guilty about insisting on every last cent.
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*Andrew Hooker a lawyer specialising in insurance law and a director of Claims Information Specialists Ltd, running an insurance information web site www.
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