In these PowerPoint slides Dr Duncan Webb covers the three elements of the claims settlement process. This is a great, high level overview, of managed repairs, cash settlements. Duncan also touches on full and final (discharge of claim).
2. How is the claim settled?
• When you reinstate the insurer will pay
• The insurer will manage the reinstatement
• The insurer will pay the cash equivalent of the
cost to reinstate
• Usually the insurer’s choice
• No policy requires a final settlement
• Insurers may require a clear settlement agreement
which is consistent with the policy
3. When you reinstate we will
pay…
• Most common settlement clause
• No right to cash settlement (other than indemnity
value)
• Needs insurer’s consent to incur costs
• Query who is in control of reinstatement project
• Insurer will often seek to dictate reinstatement
method / professionals / contractors
4. The Repair Contract
• Whose Contract?
• Insurer - builder / homeowner – builder / homeowner – insurer –
builder.
• Check the Policy
• If there are additional works then you may need to be a party.
• Contract terms are negotiable. Look out for:
• Variations
• Completion dates
• Penalties
• Unforeseen conditions
• Insurer can be liable for increases in cost (where no final cash
settlement).
• Get the contract reviewed.
5. Some Legal Niceties
• Insured has obligation to prove loss / damage
• Insurer cannot equivocate forever
• Reinstatement may require disproportionate
repair
• Damage is any adverse change (amenity /
aesthetic / structure / durability)
• No policy allows payment of the “best estimate”
of the cost of reinstatement.
• Windfalls possible
6. Cash- can my insurer insist?
• In some policies the insurer
has a right to pay the cash
equivalent of repair or rebuild
but:
• Did the insurer make an election
to repair themselves?
• Has the insurer represented that
they would manage?
• Good faith…
• Rebuff threats in respect of repair
/ rebuild contract timelines.
7. Full and Final?
• Insurer cannot insist that
your settlement is “full
and final”
• Beware of full and final
agreements if you are
going to repair.
• May be advantages to full
and final agreements
where you intend an
outside of policy solution
8. When should I agree to a full
and final settlement?
• When risks are low
• When you are wanting to depart
from policy
• Different house
• Waiting before undertaking
repair
• Buying two properties
• Note the terms of the settlement
agreement
• “intend to…”
• Repair / rebuild / reinstate /
replace?
• In general must spend on
reinstatement.
9. Can I ask for more cash
later…?
• Not if the agreement was
full and final:
• Limited exceptions
(such as fraud)
• Partial settlements are
possible. Insurers may
agree to pay more for:
• Variations
• Increased foundation
costs
11. Land Damage
• the land on underneath the building; and
• all land within 8 metres of the building;
and
• the land holding—
• within 60 metres, in a horizontal line,
of the building; and
• Which is the main access way; and
• all bridges and culverts situated within
the land; and
• all retaining walls and their support
systems within 60 metres, in a
horizontal line, of the building which are
necessary for the support or protection
of the building or of the land.
• Must form part of the “land holding”
(not just legal title).
12. Damage
• Adverse change affecting usability.
• EQC categories:
• Flat land: Land cracking (spread and shaking);
undulation; ponding; settlement based drainage
issues; groundwater springs; ejecta; increased
vulnerability (flooding and liquifaction);
• Hill: mass land movement; rock fall / cliff collapse;
localised movement (small slips / retaining wall
failure).
• Must be change to the land in question.
• Kraal v Earthquake Commission [2014] NZHC 919, [2014] 3
NZLR 42.
13. The Amount of Land
Insurance
• For land the lesser of:
• (a) the value, at the site of the damage, of an area of
land being:
• the minimum area allowable to be used under the District
Plan for residential land; or
• 4 000 square metres; or
• The land that is actually lost or damaged—
• For retaining walls , bridges & culverts - indemnity value.
14. Land Damage: Fix or Pay?
• Sometimes that will be the cost of repair
• Will never be more than the value of the insured
land at the time of the loss
• May be the “diminution of value” (EQC v ICNZ
[2014] NZHC 3138
• Value of land lost where total loss.
• May be by reference to cost of ancillary works to
house (lifting / foundation enhancement).