Insurance lawyer takes aim at Insurance Council for shooting down Labour's proposal to form a Canterbury quake tribunal

Image sourced from Duncan Webb's Twitter page

By Andrew Hooker*

It is interesting that, after showing little or no interest in the Christchurch insurance fiasco, both major parties have taken an interest now that there is an election coming.

Gerry Brownlee still seems to have his head in the sand and is lauding the apparently amazing job he thinks EQC has done. He obviously hasn’t spoken to the hundreds of people who have contacted us about their insurance debacles; many of them the direct result of EQC’s delayed, botched or incompetent claims settlements.

At least Labour is promising a commission of inquiry, and this is needed. EQC has admitted botching thousands of repairs, and despite being asked to explain, cannot (or will not) tell us how it is that so many major foundation rebuilds got re-scoped to minor cosmetic repairs. Time will tell whether the terms of reference of any commission of inquiry are wide enough to ensure that EQC is held to account.

Labour has also proposed a tribunal of sorts to resolve outstanding claims. Whilst the High Court has done a great job in responding to this debacle, the problem is just too big, and something needs to be done.

The typically vitriolic and aggressive response from Tim Grafton of the Insurance Council to Labour’s proposal to set up a tribunal is unsurprising but also unjustified. It is unclear why an industry that repeatedly claims to be committed to resolving all claims as quickly and efficiently as possible would oppose a tribunal whose purpose would be to do just that.

The insurance industry is as much to blame for this debacle as the Earthquake Commission, and for the Insurance Council to complain that a tribunal to resolve insurance claims runs shod over natural justice almost defies belief. I suspect that many of my 100s of clients who are still fighting for their rights under insurance policies have a slightly different view about the attitude of insurance companies to natural justice. 

Mr Grafton needs to learn that no matter how many times you say something, it does not make it true. His usual trotted out response that insurance companies are committed to settling claims as quickly as possible needs to be considered in light of the fact that more than seven years after the first earthquake, there are still 1000s of unresolved claims. 

Nor does he address the enormous and growing problem of botched repairs. Many people whose houses were repaired under their insurance policy are now finding that the repairs were inadequate. Many people were unwittingly convinced to sign contracts direct with repairers. Some major players in the insurance industry are ducking for cover, telling these hapless house owners to sue the repairer (often chosen, supervised and paid for by the insurance company) for the botched repairs. What was that about natural justice again?

I have been called a “claim farmer” by Seamus Donegan, Deputy General Counsel at IAG and blamed for the raft of court proceedings being brought by customers against insurance companies for delayed or botched earthquake repairs. But one thing is for certain, if the insurance industry had resolved these claims rather than dragging them out over seven years, I would have no claims to farm, and the proposed tribunal would not be needed. 

The Labour Party, and in particular, Duncan Webb, the Christchurch Central Candidate should be applauded for actually taking steps to bring the industry to account. The National Government seems to have its head in the sand and be pretending there is no problem. 

It appears that Mr Grafton believes that the vast majority of claims will have been settled by 2018. That is not my experience. My firm alone filed over 50 cases last week against insurance companies, and there are dozens more in the queue. Unless someone does something soon, these cases will be litigated into the next decade. 

Election time can be an annoying time where political parties attempt to court support with endless promises. But is a result of that is some accountability by EQC, and some process to fast track insurance settlements, then that must be good for all sides. Unless, of course the industry is not genuine in its desire to get this situation sorted as soon as possible.

Insurance Council press release on Labour Party policy:

The Insurance Council of New Zealand today firmly rejected Labour’s plans to set up an Arbitration Tribunal against insurers in Christchurch.

“This is a misconceived, poorly thought through seat-of-the-pants policy that runs rough shod over natural justice” said Insurance Council Chief Executive Tim Grafton.

“Insurers have been at pains to settle claims in Canterbury as quickly as possible- over 95% of all residential claims are settled.   Insurers are committed to settling claims as quickly as possible, but the proposed tribunal is not the right way to do it.

“Insurers helped establish and fund the Residential Advisory Service (RAS) to help people navigate through their claims. This is the service Labour are pledging more money to.

Insurers waived their rights to close of claims under the Limitation Act to help people to have more time to settle their claims in response to public demands.

“We already have a free system available to homeowners to take complaints against insurers already.

“We also have a justice system in New Zealand where judges sit in judgement over cases. What does it mean to our sense of justice when Labour picks lawyers to run an inquisition over insurers?

“Who are these lawyers? Will their decisions be appealable consistent with the rules of natural justice? What is an undue delay?

“RAS, IFSO, Parliamentary Ombudsman, and EQC have also adapted their existing processes to try to settle disputes before having to go to court. These schemes have also been successful in resolving claims.

“Claims settlement delays have been contributed to by homeowners and by EQC. Would Labour be suggesting that homeowners and EQC could be liable to insurers for undue delay?  If EQC is to pay, then where will that money come from? Taxpayers?

“Insurers are still receiving over-cap claims from EQC, 7 years after the first earthquake. EQC would have to be a party to Labour’s scheme as EQC is involved in every residential Canterbury Earthquake. Is Labour suggesting EQC is liable to pay for its delays?

Three weeks to submit documents is laughable given the complexity of contested expert evidence, apportioning loss between events, etc. in so many of these disputes. 

“Would the tribunal only be able to look at unsettled cases, or would it be able to reopen settled cases and consider whether there has been delay?  If the suggestion is to open up full and final settled claims, this raises serious concerns about Labour's commitment to uphold contract law.

“The proposed power to compensate for undue delays that have already happened is retrospective, and therefore flouts the rule of law. Labour expects the tribunal would not be operating until 2018 – by which time the vast majority of claims will have been settled. What will be left for the tribunal to do?


*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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9 Comments

Was it all worth-while Mr EQC ?
Wonder if, in the final wash-up, if the cost-savings achieved by EQC by re-scoping and under-repairing and under-fulfilling their obligations will be more than the costs of final remediation plus any penalties plus any interest the courts impose

How do you ever compensate someone for 7 years of their lives

Teina Pora is to be compensated $145,000 for each year

Better late than never one supposes, but the Labour's sudden interest can best be described as belated, with the exception of course of Ruth Dyson, who has been steadfast & unflagging in supporting her constituents. NZF?? Nowhere to be seen! There should have been one heck of a lot more parliamentary opposition to the shenanigans and dreadful management by this government who willingly facilitated unlawful practices by EQC and green flagged the insurance industry to follow suit. Thousands of good people have suffered unnecessarily and severely for which, there is absolutely no justification other than Mr Key needing a surplus for his ego and image. Of course there must be a Royal Commission. You cannot have, well in a democracy that is, a government that uses a law enshrined to protect the people, to persecute them instead.

That's quite surprising from ICONZ. I thought they would want all the dodgy insurance practices exposed for the benefit of the industry, unless of course the insurance industry is woefully undercapitalised and trying to socialise the loses from mismanagement. I couldn't imagine any insurance company wanting to do dodgy repairs on earthquake damaged buildings just to save a few dollars even though it might be discovered later or kill the occupants. So why are ICONZ making such a big deal when the Christchurch rebuild was the follow-up disaster.

"..to resolve outstanding claims" ".. would oppose a tribunal whose purpose would be to do just that?"

It is hard to imagine that any political led inquiry would be more than a witch hunt with tax payers money.

I agree with Pharos comments about Ruth Dyson. She's diametrically opposite to me in political leanings but I've had some dealings with her over claims and think she is the most fair minded but straight shooting and pugnacious battler for EQ affected Cantabs that the disaster produced.

Hooker repeats the usual generalised litany of accusations about EQC and Insurer incompetence, implying the modest number of claims he has been appointed to are representative of widespread systemic industry failure. When clearly his perspective is a limited one given the vast scale of this disaster and focussed as it is on a comparatively small number of the most contentious claims. No ratio data of claims in dispute vs settled, comparisons with settlement timeframes/legal disputes in other similar disasters, or other credible performance metrics against which his allegations can be tested, are offered in support of his assertion that the CHCH industry response was a 'fiasco'.

His dramatic announcement that 50 cases were recently filed, appears to invite readers to infer that this is common and not a peak produced by limitation statute period cut off dates. I suspect it is more the latter.

It is intriguing that Doctor Webb supports a tribunal system being implemented, presumably on the basis that courts are not up to the task of delivering a sufficient volume of decisions. As with Labours secret tax working group, details on how these tribunals will work, have not been released to the public.

But unless Dr Webb believes it's just a resource/quantity problem and has a cunning plan to magically produce a batch of new judges and supporting infrastructure, a reasonable guess is that Labour is proposing to give its peoples tribunals power to bypass established legal processes and potentially override contract law.

If so this is dangerous territory, especially given the disquiet being expressed by international reinsurers about the NZ EQ exposure. Any move that undermines their confidence in the good reputation of NZ courts for upholding the integrity of contracts, will further unsettle the catastrophe reinsurers NZ is so dependent on.

middleman is wrong in thinking that the NZ courts have a good reputation, in Timaru and Hamilton at least. The corruption in the legal profession in these two places in and out of court is beyond belief !!

Yes Middleman, I am in the exact same position concerning Ruth Dyson. Yet despite her diligence and effectiveness, she was removed as Labour spokesperson on EQ's etc etc. And in my opinion, of course, the one and only priority her replacement has, is lunch. It is interesting politically though, that since most of the EQ damage was inflicted on the eastern side of Christchurch, the residents there are largely lower on average in income and assets. One would think that these people, and their treatment, would be of prime concern to the
Green Party social do gooders etc, but not even a whisper or squeak.

Pharos. With only a very small number (in relative terms) of claimants not yet settled or in dispute with EQC and insurers, the EQ story in CHCH has largely moved on from housing and is now about the CBD rebuild and roads. Which probably explains Wagner's focus on the Cathedral and the momentum she is being partly credited for having achieved on it. I suspect the wily Dyson figured out the EQ was quickly going to become yesterdays story and would have been happy to let Woods take that role.

Perhaps, perhaps not. Think Dyson lost that role when in the thick of things, about same time maybe, that Dalzell went to Mayor. The Lord can move in mysterious ways, so too can the Labour Party it would seem. For instance, which appreciate an entirely seperate topic, the ill concealed tax agenda currently being electioneered. But to go back on song, would take an extremely optimistic view to conclude the Canterbury EQ claims have been put to bed. The review ex EQC & Sth Response, due conveniently 26 Sep, is supposedly to reveal in excess of 11000 dud EQC repairs, hundreds on hundreds to go overcap, many now rebuilds. But don't quote me.