Insurance Issues 1 – Assigning your EQC Claim
With Cantabrians coming into a fourth year post-earthquake, more and more homeowners are reaching settlement with their insurers and having repairs or rebuilds undertaken. As part of this process, an insurer will seek an assignment of the EQC payments a homeowner has received in relation to earthquake damage. It may be that a homeowner has received more than one payment from EQC, for claims relating to the September 2010, February 2011, and June 2011 earthquakes. An insurer will expect, prior to undertaking repairs, the homeowner to assign and transfer those payments to it in order to contribute to the costs it will incur in repairing or rebuilding the property.
A homeowner will be provided with a Deed of Assignment of EQC Claim. This document is a formal deed which includes a number of warranties. It provides the insurer with the right to receive a transfer of homeowner’s EQC payment and any other benefit accruing under the EQC claim.
There are some points a homeowner should consider before making an assignment:
(a) Many insurers have asked for an assignment somewhat prematurely:
- Often, a scope for repairs has not yet been agreed. There may be a dispute about the appropriate level of repair relative to the extent of the damage suffered to the property. In this respect, an insurer is not entitled to an assignment of the EQC monies until such time as the scope adequately captures all the damage, and the appropriate level of cost have been allocated to each repair element. If the matter is still in dispute, then you should note assign those monies.
- The assignment and transfer of money to the insurer is not necessary until around the time the insurer has called for contractor tenders or has appointed a lead contractor to manage the repairs.
(b) A Deed of Assignment should only seek to transfer payments a homeowner has received in relation to the "Residential Building”:
- An issue arising frequently of late is where an insurer seeks to have a homeowner assign the EQC monies received in relation to their “land claim”. Given the current uncertainty in Canterbury in relation to unknowns such as Increased Flooding Vulnerability (resulting in potentially having to raise floor levels if major works are being undertaken now or in the future); unknown soil composition and other subsurface layers of your land; and potential rezoning issues under the (draft) Replacement District Plan, it is important that a homeowner does not assign the land claim to their insurer without first seeking advice.
- As a homeowner, you pay a premium to an insurer to insure your house, outbuildings, hard landscaping, and other items such as pools. In these circumstances, and in these policy types, you do not pay for cover for the land. The corollary to that is your insurer is not entitled to payments you receive in relation to your land.
- An exception may arise only where the insurer will be undertaking significant ground remediation. In that respect, they may be entitled to claim the EQC “land claim” payment from the homeowner. But the caution is that it is only appropriate when the scope for repairs or rebuild calls for significant ground remediation and/or enhanced foundation replacement.
If you are uncertain as to whether your insurance company is going to undertake these types of work to your property while it managing your repair, we strongly recommend seeking professional advice in relation to your scope. It is also appropriate to have any Deed of Assignment reviewed by your solicitor, whether it assigns your “Residential Building” or your “land claim payments” from EQC. This is particularly important given the uncertainty as to where responsibility lies between EQC, Council and the insurers to remediate land. A declaratory judgment of the High Court has been sought by EQC in relation to this, but it has not yet been delivered and this is an issue that is bound to become more prevalent in the coming months.