It’s no secret that CanCERN has been frustrated from day one of the residential recovery by the lack of overall strategy and coordination. We haven’t just complained about it – we’ve also sought out or created opportunities where a more coordinated approach can be implemented.
Although there have been some awesome projects put in place based on some strategic and collaborative thinking, we still see no evidence of an overarching master plan and therefore we can honestly say that we don’t see a lot changing any time soon.
Because of this we are doing a lot of strategising in the office and with others to figure out the ‘who, what, where and how’ of a strategic residential recovery plan. The ‘why’ and the ‘when’ are easy – it should’ve been done yesterday and needs to improve on the ad hoc, hit and miss approach we’ve had to date.
The establishment of the CERA Transitional Advisory Board has helped put a spotlight on possibilities as we consider what needs to be in place to ensure recovery happens when the CER Act expires in April 2016. We believe this is a good time for all of those conversations that started with, ‘If only …’ to be back on the table. What would we do differently if we could? What have we learned that we can act on now? What do we need to do differently to ensure the focus is on best outcomes for the residents?
There is no one person, agency or organisation in this residential recovery that has everything they need to make sure a homeowner is settled well, but between them all they’ve got it covered. We also know that you can have all the jigsaw pieces and still not know what you are looking at. We need to put the pieces together.
At this point, we can’t say a whole lot more than that, but rest assured we’re thinking hard and will be doing our best to influence change.
Breakthrough update
We have had some really good Breakthrough meetings lately and the process is proving to be helpful for both customers and Southern Response. If you’re interested in having a chat about it email marcus@cancern.org.nz.
We are also looking at trialling a couple of facilitated meetings with EQC just to see if the process could work there. We are looking for a couple of people and are keen to talk to someone who hasn’t yet agreed on a settlement option with EQC. Your situation will probably be that you don’t agree with what they’re proposing, or maybe you can’t talk to the right person to get the info you need to make a decision. If you’re keen or know someone who might be, email marcus@cancern.org.nz so that we can get you some more details.
50% red zone payouts unlawful – Supreme Court
Today the Supreme Court has said the Government was unlawful in paying out uninsured and uninsurable vacant red zoned land at 50% its rateable value. There’s plenty of media coverage and commentary out there already, but here’s our two cents.
Below, we’ve put some paragraphs from the Court’s summary in italics and made comments in red underneath. You’ll also see links to the summary and full decision below, and further down the page are a couple of media releases from relevant parties. There’s a lot to take in, but it’s a big decision and has potentially major ramifications.
>> Full Supreme Court decision <<
>> Media release from the Supreme Court <<
The majority judgement deals with four issues. The first concerns the Crown submission that it was merely providing information about the condition of land in certain areas in the June 2011 announcements. The majority of the Court has held that the Crown was not merely providing information when identifying the red zones. Instead, the Crown made decisions on a number of important matters, including that there should be a central government response.
Speaks for itself.
The second issue was whether the procedures under the Canterbury Earthquake Recovery Act should have been used. The majority has held that they should have been. The Act provides a comprehensive regime to deal with earthquake recovery. This includes the promulgation of a Recovery Strategy for the region. The majority has held that the zoning and related decisions should have been dealt with under the Recovery Strategy. Given the Cabinet committee’s objective of acting quickly to restore confidence, it was, however, not feasible to wait for the promulgation of the Recovery Strategy.
The Act does provide a mechanism to deal with the need for urgent decisions by allowing Recovery Plans to precede the Recovery Strategy. The June 2011 decisions involved important earthquake recovery measures and a Recovery Plan was the appropriate mechanism for implementing the Crown’s land classification decisions. Given the close relationship between the zoning decisions and the purchase offers and the area wide approach, the majority has concluded that at least the broad outlines of the purchase decisions should also have been dealt with under the Recovery Plan processes. The majority has held that the s 53 purchase powers could not lawfully have been used, absent a Recovery Plan.
The red zoning decisions were made by a committee of senior ministers authorised by Cabinet. There are rules about how Recovery Plans are developed and part of the rules is the need for consultation with the community. By not creating a Red Zone Recovery Plan, the Crown in effect made decisions without consultation and this seems to be the crux of the issue here. Major recovery decisions were put in place with little to no input from the wider community and also without due consideration of the purposes of the Recovery Act. In summary, the Crown was able to make decisions outside of the policy constraints of the Recovery Act.
The third issue concerned the matters that were relevant to the September 2012 decisions relating to the uninsured and uninsurable properties. The majority has concluded that, although insurance status was not an irrelevant consideration, other relevant considerations weighed against insurance cover (or lack thereof) being a determinative factor. For example, the fact that many of those who were insured were anticipated to be paid more than the insured value of their properties was a relevant factor and should have been taken into account. The majority has also held that the recovery purposes of the Act were not properly considered. Additionally, the majority has held that the failure of process and consultation in June 2011, the delay in extending the offer to the appellants, and the very difficult living conditions faced by those living in the red zones were relevant factors that should have been taken into account when making offers to the appellants.
This decision sounds as if the court believes compensation for the difficulty of the situation ( i.e. expectation, delay, stress, and living conditions) for uninsurable and uninsured people was a valid consideration that should have been addressed in the Crown’s decision about how much they would offer.
The final issue dealt with by the majority is the appropriate relief. While the majority has held that the June 2011 red zone measures should have been introduced under a Recovery Plan, it is now too late for this to occur. As a result, a declaration as to the unlawfulness of the June 2011 decisions would not serve any useful purpose and therefore none is made. However, the majority has made a declaration that the decisions relating to the uninsured and uninsurable in September 2012 were not lawfully made and that the Minister and the chief executive of the Canterbury Earthquake Recovery Authority should be directed to reconsider their decisions in light of this judgement.
It is an interesting separation in terms of not officially declaring unlawful what was done for insured red zoners but officially declaring unlawful what has been done for uninsurable and uninsured properties (because their case is still not settled). We can only assume that the distinction is made to make sure that insured red zoners already settled can’t now sue the Crown for unlawful practice. The Court has given the Crown a clear steer on the topic – i.e. “You have screwed this up and now you should pay up to compensate for the fact that your process was wrong and these people have you by the short and curlies.” What the Crown will actually do remains to be seen. This whole recovery has a culture of denying any errors and we have yet to see anyone in authority put their hand up and say, “Sorry, we thought we had it right”. Multiple court decisions in the people’s favour are hard to deny.
MEDIA RELEASE
13 March 2015
Crown reviewing Supreme Court ruling
Canterbury Earthquake Recovery Minister Gerry Brownlee says the Crown is reviewing the Supreme Court’s decision, released this morning, on the appeal taken by a group of vacant, commercial and uninsured Christchurch landowners calling themselves the ‘Quake Outcasts,’ and commercial property developer Fowler Developments Limited.
“Crown Law and the Canterbury Earthquake Recovery Authority (CERA) will need to review today’s judgement and assess what steps are required.
“In December 2013 the Court of Appeal directed the CERA chief executive to make new offers to the owners of vacant, commercial and uninsured land in the residential red zone with specific reference to the Canterbury Earthquake Recovery Act 2011, and the chief executive was in the process of considering what those offers would be when the plaintiffs appealed to the Supreme Court.
“The Supreme Court has today reinforced the Appeal Court’s view that the CERA chief executive must reconsider the offers, and that in doing so a number of issues must be considered.
“I won’t be making any further comment on this matter until the Supreme Court’s judgment has been considered and advice is received,” Mr Brownlee says.
MEDIA RELEASE
13 March 2015
Human Rights Commission delighted with Supreme Court result
The government should act swiftly and take an individualised approach to each of the families remaining in Christchurch’s Red Zone, says Chief Human Rights Commissioner David Rutherford in response to the Supreme Court’s ruling on the ‘Quake Outcasts’ today.
The Supreme Court has found that the government offers in relation to uninsured properties and vacant land in the RedZone was unlawful and has directed the Minister for Canterbury Earthquake Recovery to reconsider his decisions.
“The Human Rights Commission’s view is that decisions concerning the Red Zone should have taken into account human rights principles. This could have happened if government had followed the process set out in the CERA Act. The failure to do so has – and continues to – negatively impact on the mental and physical health, housing and property rights of the people affected by the decisions,” says Mr Rutherford
“These people have suffered long enough, the government must act quickly to enable these people to move on with their lives,” says Mr Rutherford
“I am pleased that the Supreme Court found that although insurance status was one relevant consideration, other relevant considerations such as the social, economic, cultural and environmental well being of communities, weighed against it being a determinative factor in the government’s offer to uninsured properties and vacant land.
“The government has an opportunity to put things right now. It must ensure that it takes into account all its human rights obligations in reconsidering these and future decisions,” says Mr Rutherford.
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Cash settling – the pitfalls
Cash settlements are the talk of the town again and we are picking that more and more people will be ‘encouraged’ to take a cash settlement as the insurers look to getting certainty on their costs. We need further information about what this environment of cash settlements actually looks like, however, the concept doesn’t sit well if there isn’t much in the way of education and support.
We are seeking further clarification and have recently heard that a pack is being put together to try to get better information out there from a range of relevant sources.
Blogger Sarah Miles from the Christchurch Fiasco has recently written about the pitfalls of cash settling and she has put together a pretty good list of the pros and cons as a place to start for those considering one.
Excerpt from “Cash settling – the pitfalls – By Sarah Miles, March 3, 2015“
Benefits of Cash settlement
- you will have full management of your repair or rebuild which may speed the process up but this will also mean – you will have to project manage yourself, you will need to organise your own contract work insurance and you will bear the risk of cost overruns and well as technical and other project risks. If the insurance company chooses the contractor, you have the insurance company to fall back on if the contractor fails to complete the job or fails to provide quality work.
- you may find it easier to incorporate non- earthquake repairs or renovations
Issues Associated with Cash Settlement
- You will have to project manage yourself. You will need to organise your own contract work insurance and you will bear the risk of cost overruns and well as technical and other project risks. You may have to pay for professional project management.
- Your insurer may only be prepared to pay you for ‘like-for-like’ rather than for ‘as-new’ repair or rebuild which will mean that you cannot replace what you had in today’s money as costs will have risen.
- If further earthquake damage is discovered during your repair you will have to re-enter discussions with EQC or your insurer – it is for this reason that homeowners should not sign full and final settlements with their insurer, particularly in view of the history of ‘repairs’ in Christchurch, so far..[i]
- You will be responsible for any shortfall in the situation where your repair or rebuild costs are more than your cash settlement because of demand surge (see here) and increasing construction costs.
- If you decide not to repair or rebuild, your insurance cover may well be compromised and future sale of the property may also be compromised
- Do not assume that the sum the insurer provides you with is adequate – e.g. unidentified damage will not have been taken into account. In the case of replacement or total loss, a low valuation provided by a valuer who may be on retention by the insurance company will not reflect the true value of the property. Also be aware of overly optimistic estimates by builders and repair companies who have no actual intention of doing the work themselves.
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Two of probably the largest unseen risks in cash settlement are settlement of the building in relation to the Council’s flood levels, and lateral movement of the building in relation to the legal boundaries. In order to determine both of these against an insurance policy entitlement it requires a detailed survey assessment to determine how much the building has settled in height, and how much the building has moved in relation to the legal boundaries.Without knowing both of these, owners that have cash settled are finding to their dismay that their house is now deemed flood-prone and un-insurable, and, in some cases, their house is also now over the legal boundary and encroaching into the neighbours property. No cash settlement amount for cosmetic (or even structural) repairs will provide the funds to have the whole building lifted back up in height and moved back into the correct position as required by the legal insurance policy.It is prudent that independent assessments by all of the required experts are obtained by the home-owner prior to even contemplating a cash-settlement. Unless of course, the Insurer takes the risk and the cash settlement is for a total rebuild of the house to policy entitlement. That then would take away any risk transfer back onto the owner.
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Insurance dispute changes in the wind? (Guest post)
A helpful change to the insurance disputes process coming up?
By Lawrence Roberts, Avonside Blog – March 6, 2015
Yesterday Paul Goldsmith, Minister for Commerce and Consumer Affairs, announced the opening of consultations on changes to the maximum amount that could be taken to the insurance industry’s disputes resolution services (the full media release is below).
The change proposed is an “… increase to the cap on the compensation that dispute resolution schemes can award in relation to disputes about real property insurance claims. The proposed increase is from $200,000 to a minimum of $350,000.”
Post-earthquake, only disputes up to $200,000 could be considered by the insurers’ independent dispute resolution services. Beyond that amount disputes had to be taken to the High Court, an action too expensive for most people. Insurers could have agreed to have larger amounts considered, but this did not seem to happen. As a consequence many homeowners were, in effect, coerced by insurers into a take it or leave it situation. At the time there was significant demand for the cap to be raised.
The government’s proposal is in two parts. The first is to increase the maximum amount to at least $350,000. The second is to back-date eligibility for access to the amended amount to 2010, allowing those currently in dispute with their insurers to avoid the High Court process. Full details are in a document on the MBIE website here.
The submission process is relatively straight forward. MBIE require submitters to use a template (available on their website here). The document has a list of 15 questions they would like your answers to. Download it, fill it in, and e-mail it back to them.
If you think you might want to give it a go, but aren’t certain about the questions, give me a week or so to finish with the revised Fair Insurance Code and I will go through the submission questions.
Those wanting to make a submission have until 5.00pm on the 9th of April (Thursday after Easter) to make a submission to the Ministry of Business Industry and Employment. Information about the submission process is here.
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How the quakes have affected the coast and estuaries
The Natural Environment Recovery Programme video update on the ‘Earthquake effects on the coast and estuaries’ is now online. It includes presentations from:
- Deirdre Hart, Senior Lecturer in Coastal Studies, Dept. of Geography, University of Canterbury
- Matthew Hughes, Canterbury Earthquake Geospatial Research Fellow, Civil and Natural Resources Engineering, University of Canterbury
- Richard Measures, Hydrodynamics Scientist, NIWA
Environment Canterbury (Ecan) led the development of the Natural Environment Recovery Programme (NERP) to facilitate the restoration and enhancement of the natural environment, and capture opportunities to build future resilience. It is one of many recovery programmes under the Recovery Strategy for Greater Christchurch.
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Critiquing the code
Wow, Lawrence Roberts* over at Avonside Blog has been busy. He’s written a flurry of posts about the Revised Fair Insurance Code and doesn’t seem to be slowing down. Below, we’ve given you the first few paragraphs of each post as an entrée and you can follow the links for the rest.
Why are these posts important? The Fair Insurance Code essentially outlines how New Zealand insurers should conduct themselves. It outlines the rights and responsibilities of the both the insurer and the policy holder.
*Lawrence Roberts was the main man behind CanCERN’s submission to the Insurance Council on the revised code.
Summarising the Revised Fair Insurance Code and its shortcomings – Part 1
The Fair Insurance Code serves two purposes: operational and political.
Operationally the Code exists to briefly sketch how insurance processes work, to make customers aware that both insurers and they have rights and obligations, and that failure to fulfil the obligations carries penalties. In practice the Code places wide, strict and complicated obligations upon customers and narrow flexible obligations upon insurers.
Politically the Code exists to create the appearance of a fair and robust self-regulating regime. Creating and promoting this appearance is a defence against attempts to regulate the industry and reduce the power and enormous advantages insurers have in their dealings with customers.
Fair Insurance Code Questions & Answers – Part 3
In the previous post, covering FAQ 7, it was stated that an underlying purpose of the Code was to pre-empt any external control on how insurers carried out their business. The point was also made that as far as interpreting insurance policies is concerned, insurers are very strong advocates of the Humpty Dumpty Position:
“When I use a word,” Humpty Dumpty said, in a rather scornful tone, “it means just what I choose it to mean – neither more nor less.”
(Through the Looking Glass – Lewis Carroll )
FAQ 8 is where they excuse themselves from attempting to clarify what is meant by what they say…
Fair Insurance Code Questions & Answers – Part 2
Why is ICNZ so keen on having a Fair Insurance Code, and prickly over criticism directed at the Code?
At an operational level the Code is a useful means of providing a standard approach to offering, selling and administering insurance. This has benefits to insurers as they want customers to have a feeling of ease and security in buying and keeping insurance. It works quite well, with New Zealand having an extremely high uptake of insurance which, in turn, means significant revenue for insurance companies.
At the political level the Code is one of the means used by insurers as they work to prevent or obstruct legislation to regulate the insurance industry. Unrestrained self-regulation is their on-going goal, and the Code is the part of the public face of how they go about it…
Fair Insurance Code FAQ – Part 1
The FAQ (Frequently Asked Questions) is not part of the Revised Code, just an explanation of the Review process and some of the positions taken by ICNZ on particular issues.
While the FAQ may give an idea of what is intended in the Revised Code, it cannot be used to make an insurer interpret the Revised Code in any particular way.
Parts of the FAQ are purely background information so there is no reason to comment on them. Other parts are revealing, and a few give reason to believe that some of what is promised in the Revised Code is shadow rather than substance…
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