Last week, we posted an article by Lane Neave Lawyers about Increased Flooding Vulnerability (see it here). That article was also posted on one of the earthquake-related Facebook groups, and a helpful Q&A soon followed in the comments section between residents and lawyer Duncan Webb. We’ve been given permission to post an abridged version and have removed names for privacy reasons. It’s quite a bit of info to get through, so you may like to skim through the questions in bold and see if there’s anything that piques your interest. Cheers to the residents who asked questions and Duncan Webb for letting us publish this!
What you are advising people to do when Insurers are insisting on assignment of full land claim for damage (without IFV) in order to settle (cash settlement)?
That can be a tricky question. Insurers often claim that they are entitled to this because the repair / rebuild requires land remediation. The right thing to ask the insurer is what land damage (ie actual damage, not pre existing condition) is being remedied by the insurer that triggers a right to any EQC land funds. They will often respond by saying that they are improving ground conditions (particularly if filling for a rib raft foundation) or are raising the level of the house. In response you might note that this is as a result of local body and Building Act regulatory requirements and they are captured by the Policy. Ultimately it is a question for you – some people will accept the insurer position on the basis that the money may never arrive or may be small and they want to get on with their lives. However others have successfully argued against the insurer getting this assignment. It does depend on the facts of the case. If you are going to enter into the assignment I would advise capping the amount to cover only the identified “land remediation” that the insurer says that it is going to have to do for the reinstatement.
We signed a DOA (deed of assignment) as we were a major repair on a TC3 section in the flood zone. We’ve now gone to a rebuild. The major repair was not foundation replacement therefore not triggering land money being paid over. Now that we need (TBC though) 1.2m foundations, if land remediation is required is our insurer entitled to it given that they’ve changed the goal posts and it was not an issue before?
That is exactly the right question – but the answer is sadly not clear. Insurers would be obliged to build the house on the land as part of the “regulatory upgrade” clause in the insurance policy. Insurers argue that you must provide good ground (or at least as good as it was pre earthquake) as they do not insure land. There is something in this argument – but they need to show – 1. that the land is changed and now more difficult to build on and 2. what the costs of that are.
If you sign a DOA for the land claim, is the IC then responsible for paying the EQC excess amount?
Sadly I think probably not. The excess is that part of the claim that you must pay. The Insurer will say that you must pay over the value of the damage to the land – which is the amount EQC pays plus the excess. The better argument to have is that they are not entitled to the assignment unless and until they can show that 1. they are remediating actual land damage, and 2. they can establish the cost of that remediation.
If a DOA has been signed with the IC but the property may only have a repair to the foundation not requiring land remediation, how do we stand legally regarding any land claim payment?
If there is no land remediation then there should be no assignment of the land payment / claim. However insurers often consider things as land remediation which I think are just building costs such as deeper piles, or compacting engineered fill underneath a rib raft.
Hi Justin,
EQC’s land payouts for land damage categories 1-9 (the latter two being ILV and IFV) cover damaged land underneath the dwelling and eight metres out from the dwelling footprint. You’ve asked who pays for remediation work under the house if a repair is being done – in all cases this is EQC; insurers don’t cover land damage. However, where it gets confusing is that your insurer may have asked you to assign all or part of your EQC land claim to them to cover the cost of any remediation work that is done during the rebuild/repair (this is called a Deed of Assignment). This is a tricky topic and not all insurers treat it in the same way. Here is a Facebook post by lawyer Duncan Webb from Lane Neave which explains the issue:
WHY DOES MY INSURER WANT MY EQC LAND PAYMENT?
This is another good question (there are so many) From one of the EQ pages (there are a few of them too).
The basic point is that insurers insure buildings only and not the land upon which they sit. EQC insurers the land against natural disaster damage – like earthquakes.
This leads to some tricky line drawing. In particular if the insurer wants to rebuild or repair your house then as between you and the insurer the state of your land is your problem not theirs. For example, if your land had disappeared (in a landslip for example) then they would not have to replace the land (though most policies allow for replacement of the house on new land that you would have to provide).
In the present case where there is earthquake damage to the land and EQC is going to pay out on that damage insurers tend to take the view that homeowners should hand that EQC land money over to pay for any “land improvement” that is required to repair or rebuild the house. However the line-drawing that arises is about what amounts to land improvement and what is simply part of building a house.
This is particularly relevant in TC3 land. Clearly (in my view) actual structures are not land improvement – things like deep piles or a rib raft foundation (ie enhanced foundations) are simply part of the cost of building a house on particular land. However things are not so clear in those cases where land is excavated and filled with good ground (engineered fill). While on the one hand it can be referred to as “sub foundation” work it can also be considered ground improvement.
Here are a few things to think about for the insurer to have any claim to land payments:
1. there must be land damage (not just land that is just as crap as it was before the earthquake). The insurer should be asked what evidence they have of that.
2. there must be actual land remediation proposed. This is not just enhanced foundations but actual ground work of some kind.
3. the cost of the land remediation should be costed and the assignment of the payment capped at the costed amount.
Of course at the end of the day insurers do not always agree to these things and it may be that the best thing to do is to try to get the best deal you can and move on even if it is not perfect. While it is unclear at the moment, it seems likely that many homes which have some land damage will receive only modest payments so it may be that even in assigning the land payment you are not giving away a great deal. Always ask for the insurer to 1. use reasonable endeavours to pursue the payment and 2. to notify you when payment is made.
Does the land remediation claim (paid out by EQC) just cover remediation to the damaged land surrounding the dwelling(s), or does it also cover the land work to be done under the house, before the new foundation & new house is built (ie: dig out foundation area & back fill)? Or is this under house land remediation cost covered by our private insurers as part of the total building cost?