Thousands of businesses inside the central Christchurch cordon could have their insurance payments slashed because of the inner city "depopulation".
Insurance lawyer Glenn Jones, of Lane Neave, said firms unable to open could receive as little as 10 per cent of their business-interruption insurance, even if their building was badly damaged.
"This will cause quite a lot of alarm and surprise among people who thought they had coverage."
Jones said business-interruption policies typically calculated payments based on how much a business would earn if they were open, but taking into account any changes to the surrounding area.
For businesses in a cordoned zone, particularly those that relied on foot traffic, such as cafes and bars, accounting for depopulation meant payments could be reduced to almost nothing.
Thousands of central-city businesses could be affected, and some cases would inevitably end up in court, Jones said.
Canterbury Hospitality spokesman Max Bremner said he was aware of insurance loopholes, and many hospitality business owners feared for their livelihoods.
"It could potentially all go to s..."
Getting payments was difficult, with insurers waiting on the assessment of damaged buildings inside the cordon before paying out.
"The insurance companies' view on the whole is that it is always better in their bank account than ours."
Recover Canterbury spokeswoman Renee Walker said many inner-city businesses were still waiting for business-interruption payments more than six weeks after the February earthquake.
"People are really relying on that business-interruption payment to see them through," she said.
Insurers said they were paying businesses for loss of profits, but IAG, which owns State and NZI, said business-interruption cover would vary depending on the policy.
Frontrunner general manager Laurie Blyth, who has a shop in Lichfield St, has been fighting Vero over depopulation since the September quake and said he was preparing to sue the insurer and his loss adjuster.
Blyth said Vero had agreed to cover the week the shop was closed but not the subsequent four months, when his trade had dropped by 50 per cent because of depopulation.
"It is insulting just to listen to these people talk around the facts."
Blyth said he had spent more than $600,000 on business insurance over the decades and it was "absolute rubbish" that the insurers were now refusing to pay out.
With so much damage caused by the February quake, he expected more businesses to join the fight against insurers.
Vero would not comment on Blyth's case.
- The Press