EQC & Insurance Settlements
EQC & Insurance Settlements – The Landscape Has Changed
The landscape has changed, now EQC and insurance companies seem to suddenly be in a hurry to get claims settled. How things have changed. I am sure that there are plenty of you out there that might like this, but there are issues with quick settlements. So What has brought this on?
In July last year, politicians gave a directive to EQC which in turn was passed on to Fletchers. They said that they wanted the job completed by 19th December 2014. On the face of it this would seem a good thing for the politicians to do. They represent constituents that want their houses fixed, why not give EQC a hurry up. Of course it had nothing to do with the coming election, just a desire to help the people. It might have something to do with the fact that the Fletcher managed repair is costing the taxpayer over a million dollars a week and the Treasury maybe applying some pressure as well. But for whatever reasons, there is now some urgency to see the EQC process completed.
How it is completed is what will affect you. Basically there are three ways that your job can be completed. The first is that EQR turn up for the fifth time, having miraculously found less damage every time. You want it over so you agree on the repairs to be done. You move out for 5 weeks, then a little more and finally it’s complete and you’re basically happy with it and move back in and the job is signed off.
The second way is that you choose to opt out. So you Phone 0800 OPTOUT and ask for your scope of works. In due course you will receive one that hopefully vaguely represents the house and the damage. You must then choose your own builder. You should then get a call from an EQC assessor who will meet your builder on site to go over the scope. It is at this point that should there be any technical issues it’s a good idea to involve an engineer. This report should help your builder argue any tricky issues. I have found the EQC workers in this department to be quite reasonable and although the rates they will pay are very low it at least can give both builder and the homeowner more control. EQC will pay progress payments and pay on the 20th of the month following invoice. This way also works well if you are going to do other work or just want to do a more thorough job of your repair. The end result is that the claim is signed off.
Now both these two methods have one thing in common and that is should you or you contractors find more earthquake damage you can go back to the EQC and they will be forthcoming with a payment for it to be done. The third way to finish your claim does not come with any such security.
This third way is a cash settlement. According to EQC they will cash settle homes where damage from any single earthquake is under $15,000 or when there are pre-existing design or construction issues and, despite EQC doing a perfect repair job, there can be a legal risk. Their wording not mine. So basically if you have a house that looks like it might have leaky building syndrome they will give you your cash and run. At least, I believe that this was what the direction from Ian Simpson was originally meant for. Now that everything is being hurried up it seems to be stretched to any house, which looks like it could be a bit tricky or perhaps even has an owner that is hard to deal with.
EQC Insurance Settlements
Recently I have been approached by clients where EQC has rung and offered them these cash settlements. They have been unsure of what their rights are and how much they should accept. Without fail their repairs were of the more tricky variety. Asking around, it seems that this is becoming quite common. Given that once you accept this cash offer your claim is finished, I am not surprised that this approach has increased. There a few things you should take into account before accepting any offer.
These offers may indeed seem sizable if not generous. As there is potential in some cases for there to be a maximum cash payout of $300,000+GST if you made three claims and proportioned the damage in the correct way. How much will your repair really cost? If you are receiving this offer, your repair is probably complex. Even if it’s not, you would be a fool to accept an offer without knowing this and to know this you will need to get the appropriate technical help. Probably a lead builder to analyze the house and a engineer to asses the real depth of the damage and to provide a repair strategy that will stand the test of time and allow the house to be sold without any hitches. This information will need to be put together and priced.
Now you will know roughly what to accept, you will still have to be confidant in your ability to manage this repair alongside your builder. Some of the people that have received these offers would not count themselves in this bracket and it was for this very reason, among others, that the Fletcher repair process was created. Even though there have been many hash jobs done, the great majority have been completed without problems and Fletchers has to stand by the repair. Again, if you accept a cash settlement then that’s it, no going back for more.
I would only recommend cash settlement if you personally have the technical knowledge or are confidant that your team is on top of the job with no likelihood of hidden problems.
Of course these three ways are not the only ways that EQC can sign off your claim. They have created a fourth way to sign off your claim and have been doing this in huge numbers since January. If EQC deem your claim is over cap then your claim will be transferred to your insurer. What amazes me though, is that for the last three years EQC and EQR have seemed to do everything possible to drive claims down. Claimants talk of multiple visits with each subsequent scope of works having less on it. But all of a sudden they are more than happy to add things and “oh dear, its gone over cap, we will transfer the claim to your insurer” has become a common refrain. One unnamed insurer has been receiving up to 50 new earthquake claims a week. Before January it was in the low ten’s, and they are not alone.
This also applies to opt out quotes where EQC are agreeing to more work on the scope than expected. This causes the job to now go over cap and is sent to the insurer. This could be put down to only the complicated work and bigger jobs being left, but I don’t think so. It seems too big a coincidence to me, that a deadline is put in place, and all of a sudden the numbers of signed off jobs and jobs transferred to insurance companies leap in such huge numbers.
Mind you, is it a bad thing? The general belief is that insurance company repairs are better than an EQC repair. I would tend to agree with that. Insurance companies tend to employ more professional staff and encourage quality work done to code, something that a makes a Licensed qualified builder more inclined to work for them. But can these insurers handle the work? Well yes, but they need a lot more staff. As I understand it they are all looking at ramping up their staffing levels to deal with these extra claims. Of course it’s not just office staff that gets these repairs done. The first years following the disaster, the city was full of painters and plasterers completing simple repairs. The builders had very little work. Now painters and plasterers seem to have very little work and builders are inundated.
One insurer decided that it would only use nine nominated building companies to carry out repairs and you, the insured, had to pick one of these. Very few of these companies actually have any builders on wages and rely on subcontracting out work to complete your claim. Of recent days I have been approached to work for these companies but I, like many of my fellow builders, have no need to sub out to these firms. So I have some doubt as to the capacity of the work force to get the work done quickly.
One other thing that worries me is, what happens after the December the 19th deadline when the insurer finally gets to your claim and realizes that it has had things added to it which they deem to not be earthquake damage and return the claim to EQC. There now being no Fletchers repair scheme, and possibly large amounts of returned claims and hash jobs to be completed, who will do the work? How will they maintain quality? Can they really finish this disaster without creating another?
So always be mindful, that for most of you, your house is your biggest asset. Getting this repair right is important. This changed landscape might offer more choices but be careful they might not be as good as they seem.