EQC’s obligations where earthquakes lower land and create increased flood/liquefaction

18 December 2014

Commentary , Insurance Law

In Earthquake Commission v Insurance Council of NZ the HC considered EQC’s obligations to property owners who, because of the Canterbury earthquakes, have land that has dropped and are at an increased risk of flooding and/or liquefaction. The Court made the following declarations:

1. In relation to residential land, natural disaster damage (in accordance with the EQC Act) may include circumstances where one or more earthquakes have caused physical changes to the land and such changes have adversely affected the uses and amenities that could otherwise be associated with the land by increasing the vulnerability of that land to flooding and/or liquefaction;

2. If the earthquakes have lowered the level of the land and created an increased flood risk, but not otherwise damaged the residential dwelling, then there is no natural disaster damage to the residential building (in accordance with the EQC Act);

3. If the land has suffered natural disaster damage as defined in (1) above then EQC is required to either:

(a). Indemnify the owner by payment of:

(i). The cost of repair or reinstatement;

(ii). In appropriate circumstances, by payment of the loss of market value of the insured land together with any associated residential buildings;

(b). At the option of EQC, EQC must undertake the necessary repair or reinstatement;

4. EQC’s option to repair the land or indemnify the owner must be considered on a case by case basis and included an assessment of the circumstances of the individual property, the claimant’s intention to carry out repairs, and the reasonableness of any required repairs.

5. EQC’s statutory obligations are enforceable by ordinary Court action and are not confined to Judicial Review proceedings