Janine Starks walks the great wall of EQC rules to look at rules find out what is and isn't covered and how much you'll get. Tell us your story:

Janine Starks walks the great wall of EQC rules to look at rules find out what is and isn't covered and how much you'll get. Tell us your story:
A long, expensive fall if you don't know your rights.

By Janine Starks* (email)

From my mail bag:

I have a number of retaining walls around my property, holding up the driveway and supporting a lawn area.  These have all sustained damage in the various earthquakes and will cost a lot to replace or fix.  I was initially told these walls were not covered as they didn’t support the house.  I was horrified to discover my insurance company wouldn’t cover them either. 

After a full EQC inspection I found a number of walls would be covered, but only to indemnity value.  I have a feeling that not all EQC inspectors know the rules.  Can you explain these and tell me how they work out the indemnity value of a wall?

Home owners around New Zealand should be sitting up and taking note of the insurance issues around retaining walls.  They might be dull, but they are hellishly expensive items and could be financially crippling to replace at your own expense.  Knowing the rules could save you thousands.

Not just a Christchurch problem

It’s not just the hillside dwellers of Christchurch who need to get to grips with it.  Our Wellington friends also face earthquake risks and nearly every home in the city is propped up by retaining walls.     

In normal circumstances, it’s generally Humpty Dumpty who needs to be put back together again, not the wall itself.  Annoyingly, an egg is a heck of a lot cheaper to replace than a whole wall.  I also have a feeling you are correct about the EQC inspectors.  Some of the king’s men are struggling a little with section 2(1) of the Act, where the definition of ‘residential land’ is outlined.

Email questionsto starkadvice@gmail.com, subject line: Financial Agony Aunt.  Anonymity is guaranteed.  

The reason I think you might be right, is that during my own EQC inspection we were declined cover for most of our walls.  I queried it and the inspector went away to check, but it was declined again.  They said the walls were not supporting the house and were not part of its foundation. 

They were supporting patios and were not covered.  I now believe this is incorrect, but didn’t start investigating the ins and outs, until I had a mailbox of queries like your own.  Given we have five substantial retaining walls, I feel like a bit of an egg myself.  It pays to know the rules before your inspection, rather than try and correct a problem later.  

After a careful read of the Act and a bit of back and forth with EQC, there are three types of retaining walls which you should know about:

  1. Retaining walls which support or protect a building: EQC will cover these walls as long as they are within 60 metres of your home, or garage.  These walls are not just aesthetic; they are needed to help protect the house. If it’s not obvious whether they do or don’t ‘support’ or ‘protect’ an engineer needs to be appointed to get a ruling.   
  2. Retaining walls that hold up your driveway: they refer to these as walls supporting the ‘main accessway’, from your boundary to each building on the property.  EQC will cover these walls if they are within 60 metres of the building.  Remember EQC will not cover the surface of your driveway, such as asphalt or concrete surfaces (your insurer should cover this, but check your policy).
  3. Retaining walls which do NOT support or protect a building: this is where the most confusion lies, as it is assumed that these are not covered.  This is not correct.  EQC will cover any retaining wall within 8 metres of a building, regardless of its use.  It doesn’t have to be protecting the house.  Even if the wall is holding up a pool or patio, it will be covered if it’s within 8 metres.  EQC won’t cover the pool itself, or artificial surfaces on patios (your insurer will deal with that), but they will cover the wall and its support system. 

And furthermore:

1.      Retaining walls are part of a land claim, so they don’t form part of the $100,000 maximum payout for damage to your home.  EQC may well settle your claim for the walls at the same time though.

2.      The 8 metre and 60 metre rules apply to any building on your property, not just the main house (sometimes referred to as ‘appurtenant structures’).  So if you have a separate garage, the measurements apply from these other buildings, out to each retaining wall in a horizontal line. 

3.      The wall must have failed as the result of an earthquake. Cracks or damage due to old age, lack of maintenance or poor design/construction are not covered.

4.      A link to the EQC Act can be found on www.eqc.govt.nz (go to ‘About EQC’).  Check out section 2 (1) and look up the definition of ‘Residential land’.  Point ‘e’ talks about retaining walls and it’s important to note that it cross references back to points a, b and c.  It’s this referencing which allows the inclusion of any wall within 8 metres of the house, and walls holding up driveways. 

How do EQC value retaining walls?

Unfortunately the legislation doesn’t cover full replacement value.  Instead, ‘indemnity’ value is used for each wall (see Part 2, section 19(b) of the Act).  This is the depreciated value of the wall, allowing for age.  If the wall can be repaired for a cheaper price, this will be paid instead.    

When assessing a retaining wall, a registered Valuer is appointed.  EQC estimate the average life span of a good quality engineered retaining wall at 100 years (probably generous because the Building Act allows for a life of 50 years).  However, the 100 year rule is a guideline only and EQC leave it to the valuer to decide. 

They tell me that old retaining walls that are not engineered have very little value and newer engineered walls, which comply with the building code have a better value.  As an observation, for those with newer homes, the outcome may not be too bad.  If the valuer uses the 100 year guideline, a new wall should suffer very little depreciation.

Valuations take time as the scope of options has to be covered.  The cost of full replacement will be calculated and adjusted for age to get the indemnity value.  EQC then compare this to a repair solution to calculate the most cost effective option.  On a final note, it should be remembered that there are always shades of grey and each claim is worked through on a case by case basis.  

*Janine Starks is Co-Managing Director of Liontamer Investments. Opinions in this column represent her personal views and are not made on behalf of Liontamer.  These opinions are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product.  Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.

 

 

 

 

 

 

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Does anyone know how the Act is meant to be interpreted where retaining wall damage is also associated with land damage? How is EQC meant to deal with this? Should the land compensation calculation (areas 'exhausted' & 'inundated') be seperate from the retaining wall calculation? If not, under what premise should they be combined? 

Does anyone know why there is an apparent disparity of principle in the Act, where one's home, (along with it's foundational systems, which may include retaining walls) is covered to full replacement value, yet retaining walls that support the main access way to the home, thus allowing one full functionality of the home - are not covered to full replacement value? 

Cheers, Les.

 

Yeah no worries Les..the interpretation that matters is the one the owner accepts as dinkum..

I think the lesson is, if it don't sound reasonable keep asking for clarification until it does, even if it does mean referencing back to the legislation. It has to be accepted that given the way EQC has expanded since September (30 to 1200 staff) knowledge will be quite variable across the organisation, hence ask for clarification by people further up the mangement chain and with greater experience. In comparison to others who comment here it would seem I've had quite limted dealings with EQC, but so far it's not been a bad experience and while I've come across gaps in knowledge too I've never found people to be impolite or deliberately unhelpful. It's felt like they are as frustrated as anyone and are probably quite fatigued by now.

Yeap they will need to set up a Retaining Wall EQC team....headed by a ridiculously expensive overseas engineer..and ten of his mates..perfect.

Definitely a need for a working group and several conferences overseas...ka chinggggg another hundred million...