Earthquake Commission (EQC) chief executive Ian Simpson says there is a real prospect of a court fight between the government earthquake claims body and general insurers over land-damage claims.

Visiting Auckland early last week, Simpson said the first of 70,000 land-damage claim cheques would start arriving within weeks, and that issues expected with insurers might need to be resolved in court.

The central issue was the insurers would have to pay for more extensive foundations in order to build durable houses, and there would be cases where greater land remediation, such as stiffening with cement, would reduce the costs.

But Simpson indicated there would be cases where the EQC would find land that liquefied had simply returned to its original state since the quakes subsided. It was no more likely to liquefy in the future than it was before the quakes, Simpson told the Sunday Star-Times.

He did not expect insurers to be pleased, and there were ongoing discussions about which costs should lie with the EQC and which with insurers.

"The prospect of legal dispute is very real," he said.

The insurers confirm the issue, and say talks are under way on where the costs should lie on the foundations and land remediation issue on each property, but a court decision could be required.

Insurers are also suspicious that the EQC plans to find less damage than they believe has occurred.

Insurance council chief executive Tim Grafton acknowledged issues where there was what insurers perceived as a shortfall between the cheques the EQC sends out and the cost of land remediation.

"Insurers do not accept that after 11,000 earthquakes and tremors, including 50 greater than 5.0 over the last two years, and extensive liquefaction, that this land is the same today as it was before the 4th of September 2010," he said.

He urged people receiving cheques and advice from the EQC to talk to their insurers.

Not only would their insurers be able to advise them whether they thought the EQC had made a fair determination of land damage, but that without land being repaired, rebuilds could be delayed.

But that is not the only potential flashpoint. Insurers are anticipating some people will not be keen to hand the EQC land-claim cheques over to their insurers, though the insurers believe they should.

"Insurers will only want to start repair or rebuild where they are convinced the land has got integrity," Grafton said.

Grafton said the insurers believed they could help people understand if the payments were fair, and help them fight for fairer payments if they were not.

One issue that might arise was whether the EQC had made site-specific tests to determine land damage, or relied on assumptions based on testing nearby sites.

In many cases, insurers might ask homeowners for the EQC payouts in order to organise remediation themselves, but one insurer told the Sunday Star-Times it might not be easy.

- © Fairfax NZ News

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