Jumping through insurance hoops
Some Christchurch business owners are struggling to stay afloat as they battle insurance companies to settle their earthquake claims three years on. About 25 per cent of commercial claims are yet to be resolved. CECILE MEIER talks to three business owners.
Many Christchurch homeowners were angry and frustrated when it became clear in 2012 that commercial earthquake claims were being settled faster than residential claims.
But when it comes to insurance problems, business owners suffer financial and emotional consequences from a slow resolution as well.
With 27 years experience in the insurance industry, Dean Lester has helped more than a thousand Cantabrians progress their earthquake residential and commercial claims. He says insurance companies have to face enormous workloads, and some fail to engage efficiently with their clients, causing frustration and delays.
The September 2010 and the February 2011 earthquakes shook Olympic athlete and Christchurch Martial Arts owner Graeme Spinks' life on a personal, professional and emotional level. His house in Avonside, his judo practice in the Christchurch City Council (CCC) building, and his shop on High St were all lost in the quakes.
After September 2010, he relocated his shop and Dojo to Stanmore Rd, but the new location was damaged in the February 2011 earthquake too.
He says three years of battling damage and business interruption claims while living in a damaged red-zoned house has taken a toll.
"It became too hard to deal with [insurance] people who didn't seem to understand us. I honestly couldn't cope."
The house was finally sorted at the end of 2012 but the commercial claim is still in limbo three years on.
About a year ago, Spinks hired Lester to handle his claim because he "couldn't process it anymore."
Spinks says it's been difficult to provide the insurer, Vero, with the required documents, receipts, and proof as many were lost in the damaged building on High St. And when his accountant died suddenly last year, it made things all the more difficult.
"That claim in particular is so slow because we can't meet with the assessor to talk it through, " Lester says. "It continues to go on and on and on. We provide information, they come back with more questions. If we could meet with them, then so much would be achieved."
Lester and Spinks say they repeatedly asked Vero for a face-to-face meeting, but the insurer and the appointed assessors declined.
"Some of the further information they seek needs to be discussed and understood by meeting; not by the insured being forced to write lengthy essay-type reports to a person who sits at a desk far away from Christchurch and does not truly understand," Lester says.
"We're consistently told that this is the largest insured disaster in the world. How does that compare with ‘no sorry we won't fly an assessor to Christchurch'. That doesn't add up. That's not reasonable," he says.
Meanwhile, Spinks' business "continues to be financially affected".
Spinks says he is still living week to week. " I had been spending about $7000 a year on insurance before the quakes - if I had kept that money in the bank, I would be much better off."
The Press contacted Vero about Spinks' claim, and the insurer has agreed to organise a meeting in the coming weeks. Vero says that it has made three non-specific progress payments for Spinks' claim, totalling $35,000.
"A fourth progress payment is being demanded but the necessary documentation is not being provided," a spokesperson says.
Vero says the communication with Spinks and Lester has been difficult for them too.
"This year alone, there have been 16 separate attempts at corresponding with Mr Spinks and/or his representatives. We've also been in contact a number of times since 2011.
"A face-to-face meeting is preferred by us as well, but we need the requested information in order to have those discussions."
Spinks and Lester are delighted to finally get a meeting with a representative of the company.
LACK OF ENGAGEMENT
Lester says that with good communication insurance claims would be solved faster.
Red Cafe owner Liz Symons agrees. The cafe was a tenant in the Beckenham Library, which was damaged in the December 23, 2011 quake.
Seven months later, the city council closed the building for an inspection. The cafe had to close for five months and reopened in December 2012.
For insurer NZI (part of the IAG group), closing the building to inspect it does not trigger coverage for Symons' business interruption.
Lester disagrees and would like the insurer to appoint an assessor or at the very least to organise a face-to-face meeting to discuss the claim.
Lester says it is normal practice for an assessor to be appointed, but NZI chose to assess the claim from Wellington and declined invitations to come and meet Symons, him and the CCC. "We asked NZI to engage and meet. They refused and eventually said they would close the claim and asked us to go through their complaints process to further engage with them.
"Not being able to meet with the insurer, whether it be on domestic or commercial insurance is just not acceptable in a claim situation," Lester says.
Meanwhile, Symons has to keep her business afloat despite the five month loss of profit. "I used all the savings I had to keep paying my employees during the interruption. I wanted them to come back when we reopened. I knew I was insured for business interruption so I thought the insurance would pay for it."
IAG spokesperson Renée Walker says the insurer had considerable involvement with the Red Cafe claim, but that this was managed through the cafe's broker.
"The insured's broker claimed that the closure was caused by the 23 December 2011 event. However, the cafe continued to operate . . . until the 23 July 2012."
Walker says that the building was closed for inspection, which did not trigger coverage for business interruption. However, she told The Press she would organise a meeting between Symons, Lester, and a representative from NZI. Lester and Symons were relieved at the prospect of finally talking to a representative in person.
Lester says that when insurers engage with their clients, the results can be fantastic. He cites the fast recovery of China Kitchen as a good example of efficient collaboration between the client, the assessor and the insurance company.
Stella and Wesley Li lost their Hereford St restaurant in the February 2011 quake. Stella says it was initially difficult to communicate with the insurer, State (also part of the IAG group). But after the company appointed an "outstanding" assessor for the business interruption claim, things started to move fast.
Lester says the amount to be paid under the policy was agreed, which allowed the Lis to buy an existing business on Main North Rd in mid 2011. The insurance provided funds to fit the new business, and to keep advertising during the interruption. The result? China Kitchen reopened in less than seven months and everyone was happy.
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Canterbury Employers' Chamber of Commerce chief executive Peter
Townsend says it is "absolutely critical" that insurance companies and their clients understand each other.
"There are enormous complexities involved on both sides. It's important for insurance companies to understand the frustrations that their clients are going through, and important for clients to understand that the insurance companies have a lot of complexities they're dealing with.
"The time's come now in this whole insurance process where we should be looking at finality, outcomes and everything that we can do to get to a conclusion, not to prolong the negotiations."
Business owners should make sure they understand exactly what their insurance covers to avoid future misunderstanding.
"One of the things we learned in hindsight in Christchurch is that people did not understand what they were covered for."
Townsend says the CECC is still trying to reach finality on its own commercial claim.
"It's just going on and on and on - it's ridiculous.
"It is time to tidy up the remaining 25 per cent . . . There has to be an intent on the insurance company sides to get these closed out and to get them sorted.
"And if this requires a bit of creative thinking and a little bit of practical resolution then that's exactly what we should be looking towards."
Dean Lester says: Read the contract carefully and, if necessary, ask a lawyer or an insurance expert to go over it with you.
Clients should make sure they have a claim's preparation clause with enough money to handle a claim.
Discuss and consider the amount that you insure for claim preparation costs and additional increased costs of working (the amount of money that you can spend to help your business recover).
Make sure you have a mutual assessing clause to have an assessor appointed in case of damage.