Insurance
The earthquakes in Canterbury raise a number of insurance issues.
The earthquakes and the subsequent aftershocks have caused widespread property damage and business interruption throughout the Canterbury region.
Residential Claims
For residential claims, the first port of call will be EQC (the Earthquake Commission). EQC covers any residential dwelling, contents or land which has suffered damage caused by the earthquake. However, the property owner must have had a valid fire and general insurance policy (also called a house and contents policy) at the time.
There are limits to EQC cover. EQC will meet claims for damage to dwellings up to $100,000.00. EQC covers certain contents of up to $20,000.00 and land on which the house is situated. There are complex provisions relating to the amount of land actually covered. Not all of a section may be covered. An excess (deductible) will apply of 1% of the amount claimed with a minimum excess of $200.00. An excess of 10% of the amount of a claim on land will apply with a minimum excess of $400.00 and a maximum excess of $5,000.00.
Any claim over and above $100,000.00 must be topped up by the home owner’s insurer. The scope of cover will depend very much on the terms of the policy. For instance a fire and general policy may be for a replacement sum insured or for a specified sum. Such a policy may not apply to land.
Some homeowners may find themselves in a position where they are not fully compensated for their loss because of the excess they have to pay and where damage falls outside the cover provided by EQC and their insurer.
Commercial Claims
EQC covers residential property only. It does not cover non-residential property or commercial property.
Claims under insurance policies for business interruption or damage to commercial property are likely to be more complex.
For instance business interruption insurance may provide cover for various financial risks such as loss of income or profit, expenses incurred due to the interruption to business operations such as wages and rent, or the costs of relocating to alternative premises.
Property insurance typically covers specified events such as fire, theft and weather damage. Cover for damage caused by an earthquake must be specified. Specific property insurance may be contrasted with all risks insurance cover where all risks are covered other than events which are specifically excluded.
In all cases cover will depend on the terms of the insurance policy which provide for the conditions and circumstances under which the insured will be indemnified (compensated).
Rural Claims
A number of Canterbury rural properties have suffered damage. EQC will cover residential properties only. The home will be covered by EQC provided the owner has fire and general insurance. EQC does not cover damage to rural land. Nor does EQC cover damage to crops. Rural property owners should contact EQC and their insurer in relation to any property damage to their home, contents and curtilage and their insurer in relation to any damage caused to their farming operations.
Practical Issues
In all situations it is important that the insured contact their insurer immediately and lodge a claim for any damage caused by the earthquake. Demolition and repairs should not be carried out until such actions are approved by the insurer. It is important that the insured take photographs and keep a record of any damage in order to both assist the insurer’s assessment of the loss and in order to maintain a personal record should a dispute arise at a later date.
Where Insurance is Declined
Invariably there will be claims which are declined. Insurers decline claims for a number of reasons. Typical grounds for declining a claim include:
- Material non-disclosure. The insurer may argue that the insured failed to disclose material information when the policy was taken out. The information will be material if the insurer would have taken it into account when assessing the premium or agreeing to provide cover.
- The policy does not respond. An insurer may argue that the policy does not cover the particular property damage or financial loss claimed. This will depend on the wording of the policy.
- Cover is excluded. Insurance policies typically contain exclusion clauses which will exclude cover which would otherwise apply should specific circumstances arise.
- A claim is not made within the time limit stipulated in the policy.
- The insured has failed to pay the premium on time.
The reasons given by an insurer for declining a claim may be open to challenge. Much will depend on the interpretation of the policy document and the circumstances surrounding the loss. On occasions a term of the policy will be overridden by legislation such as the Insurance Law Reform Act 1977. Harmans has extensive experience in acting for the insured in these situations.
Conclusion
If you have suffered damage you should lodge a claim with EQC and your insurer immediately for any loss or damage caused by the earthquake. EQC and your insurer will guide you through the claim process. If, however, you have concerns about your insurance position or your insurance has been declined it is important that you take professional advice without delay.
Contact Brian Burke or Graeme Riach for more information.
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