Tower leads charge against quake homeowners

Tower is leading the charge against Christchurch quake-ravaged homeowners.

The insurance company's representatives began giving evidence this week in the second week of a case in the High Court at Christchurch.

It involves a dispute between Tower and homeowners Matt and Valerie O’Loughlin, who want full compensation for their red-zoned Dallington home.

Tower refuses to offer more than repair compensation, even though it is legally impossible to rebuild in a government red zone.

The sum deemed fair for a rebuild has changed during the course of the hearing as new assessments have been entered as evidence.

Mrs O’Loughlin told the court of her daily struggle to communicate with Tower officials. She resorted to taking notes of conversations.

The O’Loughlin case is one of several due to clog the courts for some time, lending support for proposals to set up an insurance mediation service.

Another pending court case involving Tower is a claim over a St Martins house. Tower says it can repair it for $330,000 but the owners question whether this is economical when the repair meets the policy standard of “same extent and condition as when new”.

Some of the cases involving Tower and other insurers before the courts include (summarised):

# A Hillsborough home subject to a s124 notice and said to be economically unrepairable. Red zoned (rock fall risk). Claim $650,000 for rebuild. Tower has offered $184,000 for notional repairs.

# A Somerfield home damaged in Sept and Dec 2010 and Feb 2011 quakes. Plaintiffs claim $663,000 to repair or rebuild. Tower has offered $127,000 for repairs.

# An IAG case – a Burwood home damaged in the Sept and Feb quakes and said to be a total loss and uninhabitable. Raises red zone issue. Claim $1.3 million to rebuild elsewhere. IAG has offered $275,000, less EQC payment for repairs. Alternative accommodation costs claimed.

# Tower – house in Kennedys Bush Rd. Parties agree house is a rebuild on same site. Plaintiff says rebuild cost including architect, engineer and surveyor fees is up to $2.475 million. EQC has paid. Specific foundations requirements (screw piles or timber driven piles) and issue whether garage damaged in quake account for much of the difference between parties.

# Merivale house, damaged in Sept and Feb. Plaintiff seeks judgment for full replacement value, architects’ fees and demolition/removal costs ($2.5 million). Tower accepts liability to rebuild and elects to contract the builder, says no breach of policy and no liability for damages. Plaintiff responds Tower has made election and house cannot be rebuilt as must now be elevated. Underlying issue is scope of rebuild and costs.

# Hillsborough property, not fully built when allegedly damaged in Feb quake. Full replacement of $1.3 million, less EQC sought. Tower says damage mostly confined to retaining wall and due to faulty workmanship, and wall not code compliant. House area understated in policy; how resulting rebate is calculated.

# Replacement policy over neighbouring New Brighton Rd houses damaged in Feb quake. Red zoned. Plaintiff says rebuild costs $564,000 and $781,000. Tower says rebuild costs are $264,000 and $266,000. Raises question whether plaintiff can claim foundation costs for this site although will rebuild elsewhere, and if not, what foundation requirements should be assumed?

# New Brighton house damaged Sept and Feb. Claim for rebuild on same site $800,000. EQC claim made but no payment. Claim Tower has failed or refused to pay.

# Burwood house in residential red zone, insurer offers repair costs only of $255,000. Plaintiffs claim rebuild cost $1 million, including $470,000 for foundations. They also say house damaged beyond economic repair.

# Burwood house and sleepout said to be damaged beyond repair in Sept quake and further damaged in Feb. Property red zoned June 2011 and sold for rating valuation. Tower offered repair costs (net of EQC) $104,000. Plaintiff says repair would require structure’s removal, new type 2B foundations at former elevation and extensive remediation of structure. Repair costs $764,000 said to nearly match rebuild cost elsewhere. Plaintiff wants Tower to pay for rebuild. Primary issue whether house repairable at economic cost.


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"Tower refuses to offer more than repair compensation, even though it is legally impossible to rebuild in a government red zone."

Staking an argument on a course of action that legally is impossible to carry out.

A modern-day Merchant of Venice...

This issue could go down in the annals of history, the source of future classic textbooks examples for budding law students.

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Seems maybe it is not a good idea to have home insurance any more. Maybe the people in Chch who had no insurance have in some cases been better off. They were paid 50% of the property value, no questions asked. The insured people are certainly getting a rough time from "named" insurance companies, which were quite happy to take the insurance premiums over the years, until disaster struck and they were asked to deliver. The insured are quite rightly asking the companies to "show us the money".

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Just to clarify - the current offer for the uninsured home owner is 50% of the land only, nothing for the dwelling.

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What a catastrophe.
First the earthquakes then, despite all the warnings that EQC and so many insurers were procrastinating, we now see the truth of what is going on. A real tsunami of court cases.
EQC and the insurance industry are scum and the statement needs repeating loudly and often.

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More misery for those already distressed.

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In the main case mentioned, one could argue that Tower is within its rights to only cover the rebuild. The main issue in this case is that government is refusing the landowner to rebuild on their land. Therefore, in my mind, the buck stops with government.
It's a frustrated contract, isn't it?

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As someone in a similar situation to the O'Loughlins (house in red zone, repairable in our case, though it's yet to be determined whether their property is), I agree that the buck stops with the government. But there are other issues involved: Tower's refusal to comply with OIA requests from both our family and our lawyers), Tower's refusal to reply to questions, again from us or our lawyers. In fact, Tower's refusal to engage with policyholders and their lawyers at all. This is a common complaint among the law fraternity in Christchurch. Talking to a (non-Tower policyholder) red zoner recently, she said "what's happening with Tower - none of their policyholders are rebuilds?" Well, I know of one! Another lawyer said he had no clients insured with Tower who were rebuilds. Their offer to us, by the way - $8500. Yes, I agree Tower is within its rights to only cover the repair if the house truly is a repair only. Unfortunately, many of the homes Tower is deeming a repair really are rebuilds.

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I don't think Tower are covered by the OIA, are they? That's only central government.

Agree with your other points, though.

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Correct, the OIA is government agencies only.
It will be under the Privacy Act 1993 that they will be requesting the information, as the claim will be their personal infomation.

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For a good list of other things insurers fail to do see http://thechristchurchfiasco.wordpress.com/2013/03/10/good-faith-insurance/
Unfortunately, this is only the beginning. The courts will be clogged for years with cases to come. I agree 100% with Chris: 'the buck stops with the Government'.

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I think we are all missing the point as to why the insurance companies now have our houses insured for this ill-famed "replacement value". Quite simply, historically homes were insured for a fixed sum nominated by the owner and the appropriate premium was charged. That changed when the companies realised they were missing out on significant potential profits and they began using "replacement value".
Take that to court!

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The cover of "replacement value" will soon disappear from the NZ insurance market and be replaced by a fixed insured sum.

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No to mediation - let the insurers be punished in the public arena!

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All insurers invest the float ... thus when a major disaster hits they don't have the balance on hand to pay out so they must delay payments.

The insurance industry as a whole needs tighter regulations so the consumer is protected, which should be the whole modus operandi of the industry but it isn't any more.

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They're generally covered by reinsurance.

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Insurers can borrow just like a homeowner. What's the problem?

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Some of the rebuild costs put forward by the plaintiffs seem extremely over inflated. Most are only in average parts of Christchurch.

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Looks like only the wealthy people with million dollar properties are involved. What about people with only $300,000? Did they get denied as well?

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They can't afford the legal fees and are therefore priced out of justice - forced into take it or leave it unjust insurance settlement offers.

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Come on Nat govt. Set up a state owned insurance co. Oh, thats right NZ did have one but some govt sold it.

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Because when people think of ACC they think of unabashed benevolence....

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Tower does seem to be dreaming about the rebuild costs whether notional or not - my sister had an interior repaint and some flooring screwed down to stop squeaks (people at her house for two weeks) and that cost EQC $20,000!

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Everybody is becoming familiar with the game plan planned by the insurers. They had no intention of repairing property in a timely manner. This whole debacle is unconscionable.
I have requested the BBC to report on this.

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I would like to see a report on which insurers are NOT contesting claims, and which insurers are paying out the most with no questions asked and in a timely fashion. Because I want to move my home insurance in Auckland to them...

Can you provide these figures? If the rest of us make it financially unfeasible for them to contest these claims, it would be better for everybody.

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