Uncertainty remains for on-sold EQC claimants

Thursday, 21 September 2023

A second round of repairs under way by EQC at a Christchurch home in 2016 after the previous repair failed.

Homeowners discovering botched EQC assessments or repairs are also discovering they have no guarantee of a full payout, despite options including a reopened claim or a lawsuit.

About 10 damage claims a day are still coming into Toka Tū Ake EQC (the Earthquake Commission). Most are for so-called on-solds, homes that have changed hands since the Canterbury quakes.

Registrations to join a class action against the organisation close this week, on Friday at 5pm. The lawsuit alleges negligence, and seeks compensation for buyers of quake-damaged homes where EQC carried out defective assessments or repairs.

EQC was found to have botched repairs or missed damage in many homes.

It is funded by a litigation funder, and will cost homeowners 15% of any amount they are awarded.

Grant Shand, the lawyer for the representative plaintiff in the case, said about 120 claimants had joined the action, with more coming in every day.

“This offers an alternative for people from dealing with EQC - they can do whatever they want with their compensation.”

Lawyer Grant Shand is counsel for the representative claimant in a lawsuit against EQC.

Shand said discussions were scheduled with EQC, and if these did not resolve the issue a High Court date had been set aside in July.

“EQC knows it’s got problems,” he said.

“The best outcome for the individuals is a settlement, because it’s quicker. But if it goes to court, it will be good for everyone to have a clear decision on EQC’s liability.”

Recently discovered foundation damage is the reason for many recent claims to EQC.

Toka Tū Ake EQC’s head of on-solds, Pip Andrews, said they received about 300 queries a month about previously resolved claims, mostly from new homeowners.

About two-thirds of those required action, and most were handled as a standard reopened claim resulting in an under-cap (under $100,000 plus GST) settlement, she said.

“In the remaining cases where earthquake damage exceeds the statutory cap and there is no access to private insurance cover, we assess on a case-by-case basis to determine if an ex-gratia settlement is required.”

Andrews said after a review of claims not eligible for the Government’s one-off on-sold support package, only a few were determined to warrant an ex-gratia settlement.

The on-sold Government programme was established after earlier legal action revealed many buyers had discovered EQC’s botched assessments or repairs after purchase. That lawsuit was settled before it went to court so did not establish a legal precedent.

Funded by Treasury, the one-off programme was limited to homes purchased before August 2019 and was open for 14 months.

Insurance lawyer Peter Woods says the uncertainty of EQC’s approach is very frustrating.

Unlike the on-sold scheme, which was funded by Treasury, EQC funds ex-gratia payments through its natural disaster fund.

Peter Woods, a Christchurch lawyer specialising in earthquake insurance claims and a partner with Anthony Harper, said the Government should run the on-sold programme on an open-ended basis.

He said he had clients whose renovations had turned up foundation damage not picked up in a pre-purchase report.

EQC staff assess damage to a home shortly after the 2011 quake. Many assessment and repairs were later discovered to have been badly done.

“They think they have bought a lovely house. That sort of damage isn’t always apparent.

“A lot of people have moved into Christchurch after the earthquake and aren’t familiar with what’s happened. They are just totally shocked to discover something is wrong with their home.”

The over-cap claims were the problem, he said.

The class action against EQC will go to a High Court hearing in July if not resolved before then. (File photo)

Like others who missed out on the on-sold scheme, his clients must now decide whether to take their chances with EQC or join the class action.

“We asked EQC to treat them as if they are in the on-sold programme, but they won’t.

“We’ve got no idea why someone might be paid out and someone else isn’t. There’s no criteria.

“It’s just a shambles. It’s incredibly frustrating.”

Woods said in the face of uncertainty from EQC, some people would be better off joining the class action. However anyone winning compensation through the courts would not have sufficient money for the repairs after paying the commission.

They were also under no obligation to repair at all, meaning the home could remain damaged.

“That was what the on-sold programme was all about, to make sure the housing stock is protected.”

EQC said those joining the class action may “lose the opportunity to pursue alternative settlement pathways with EQC” and “lose access to entitlements, or only be eligible for a reduced sum of compensation, under the Government on-sold policy”.

In 2020, a report from a public inquiry into EQC was scathing of both its processes and treatment of customers after the Canterbury earthquakes.

At the time, EQC made an unreserved apology for its failures and the negative impacts on claimants, and promised to do better in future.