Ruling EQC must repair to 'when new' standard has 'implications for thousands'
A settlement between the Earthquake Commission and the EQC Action Group is far-reaching and will affect thousands of Canterbury homeowners, the group's lawyer says.
However, EQC says the declaration – confirming its legal obligation to repair damaged homes to a 'when new' rather than pre-earthquake condition – would not spark any changes to its practices.
On Thursday, EQC and the EQC Action Group issued a joint statement agreeing on settlement principles, in what is being hailed as a "landmark victory" for Canterbury homeowners.
Lawyer for the action group, Peter Woods of Anthony Harper, said the number of Canterbury homeowners affected by the settlement would be "widespread", putting it in the thousands.
The number was in addition to 5500 repair jobs EQC has already admitted would need to be redone.
Woods split those affected into four groups.
"We could look at those where EQC have told the homeowner we are fixing you to pre-earthquake standard.
"Those where EQC have said 'you've got problems with your wiring and cladding. We're not going to touch it until you pay to get that fixed.'"
The third "big group" of homeowners were those EQC ruled would not be have their homes repaired because Ministry of Business, Innovation and Employment (MBIE) guidelines stated repairs were not needed if the floor was less than 50 millimetres out of level.
The statement clarified that sole reliance on MBIE guidelines – which many believe are to blame for so many substandard under-floor repairs – is not enough to fulfil EQC's legal obligations.
The fourth group, Woods said, was made up of homeowners who received cash settlements with EQC when the same scope of work for pre-earthquake standard repairs had been used.
Back in November 2015, the action group of 98 frustrated homeowners launched legal action against EQC seeking clarification of the organisation's liabilities and interpretation of the EQC Act and said without clarification, inconsistent repair standards would continue.
It filed legal proceedings in the High Court seeking declarations that would make the way EQC manages claims more clear cut.
EQC Action Group founder and committee chair Warwick Schaffer said the agreement the group reached was a "landmark settlement" and would have far-reaching consequences for all EQC claimants.
The group had previously offered to settle with EQC by issuing a joint statement in September 2015. This was rejected by EQC, sparking the group to seek a declaratory judgement.
THOUSANDS WILL BE AFFECTED
Canterbury Claimants group spokesman Cameron Preston believed Thursday's statement would "absolutely" affect thousands of homeowners whose properties were repaired and cash settled below the 'when new' standard.
"That's what makes this so monumental," he said.
On top of dealing with the implications of the joint statement, EQC still had thousands of botched repair jobs that needed re-visiting, he said.
GOVERNMENT SAYS AGREEMENT SPARKS NO CHANGES
A spokeswoman for the Minister Responsible for EQC Gerry Brownlee said the statement would not spark "any changes to EQC policies and practices" when settling building damage claims.
Both Brownlee's office and EQC say the agreed settlement principles merely reaffirm the organisation's position.
"The processes for making a claim, having it settled, and even seeking a review do not change as a result of the joint statement."
She said the settlement reached between the parties made it clear that the principles that have "guided EQC policy for assessing and settling building damage claims meet the requirement of the EQC Act".
There had always been "robust avenues" for review and appeal of the standard and scope of home repairs, she said.
"Regular customer audits undertaken by EQC and other insurers have shown generally high levels of satisfaction, but if property owners are dissatisfied there are existing remedies available to them."
EQC issued a second media statement on Thursday also rejecting the Action Group's claims it had won a "landmark settlement". Acting chief executive Bryan Dunne said the agreed settlement principles merely confirmed EQC's approach to assessing and settling building claims and would not require EQC to make any changes to its policies.
"From EQC's perspective, the statement makes it clear that the principles that have always guided its [policies]...meet the requirements of the EQC Act."
IMPLICATION FOR FOUNDATION REPAIRS Under the MBIE guidelines, floors less than 50mm out of level were not repaired by EQC.
The settlement with EQC stated the MBIE guidelines would not be used to determine if a floor needed to be re-levelled, or to determine how level a floor needed to be once repaired.
Instead EQC must return the floor to a condition "substantially the same as when new" and compliant with current regulations, the group said.
EQC Action Group committee deputy chair Craig Edwards said previously EQC had used phrases such as "pre-earthquake standard" and "like for like" when describing its obligations.
"This created the impression that the standard EQC had to meet was something less than as when new.
"This settlement clarifies that the standard required is higher," he said.
WIRING SHOULD BE UPGRADED
The agreement reached between EQC and the group also covered repair to undamaged parts of a property, such as old wiring that needed to be replaced as part of the earthquake damage repair.
Edwards said previously EQC had refused to undertake repairs when it would be required under building regulations to significantly upgrade items, such as wiring.
"In many cases EQC paid homeowners cash for the work, excluding the cost of the required upgrade, leaving homeowners with a substantial bill to complete the repair to their homes.
"The settlement clarifies that EQC will cover the cost of repair or replacement of undamaged parts, if this is required to repair the earthquake damage."
CASH SETTLEMENT STRATEGY
The settlement also confirmed that if EQC elected to pay the homeowner, it must base its cost on a reinstatement strategy that returned the damaged part to a condition 'substantially the same as when new', as defined by the Act.
"There has been widespread concern EQC was scoping repair work that did not meet the standard under the Act.
"EQC has been using the same scope of works whether it elected to do the work or pay the homeowner. In most cases a different scope will be required if EQC elects to cash settle," Edwards said.
Woods said EQC agreed to inform all staff handling the group's claims of the terms of the joint statement.
"The group believes having this clarification will ensure that EQC's assessment of the earthquake damage to their homes and the reinstatement methods will meet EQC's obligations under the EQC Act." Woods said people outside the group should check EQC's assessment of damage to their properties and how payments were calculated.
EQC 'ADMITTED THEY WERE WRONG'
The Canterbury Claimants group said EQC had "admitted they were wrong" after years of saying the organisation's job was to return a claimant's home to the way it was before the earthquakes.
"EQC's obligation is, and always has been, to reinstate to a 'when new' condition, not to 'pre-earthquake condition'," Preston said.
EQC had attempted to avoid the cost of consequential reinstatement works, such as rewiring houses, but the statement now confirmed such works should be covered at its cost.
The statement was an admission that relying on the Government's post-earthquake guidelines for floor levels did not fulfil its legal obligations, he said.
On Wednesday, EQC released the statement on its website and Twitter feed, but it was quickly removed.
DECISION REAFFIRMS EQC'S POSITION
EQC acting chief executive Bryan Dunne said there was "no material disagreement" between the government-owned insurer and the action group.
EQC believed the statement reaffirmed it would repair to a 'when new' condition, and that EQC would cover the cost of extra work required on undamaged parts of a home.
It also reaffirmed MBIE's guidelines were not the only benchmark used for EQC's repairs.
Customers could be reassured the standard of repair by EQC was the same whether the customer agreed to a cash settlement or repairs, Dunne said.
"How EQC settles any particular claim, applying the principles in the joint statement, depends on a raft of facts specific to each home."
LABOUR: BROWNLEE MUST FRONT
Labour's Canterbury spokeswoman, Megan Woods, said Earthquake Recovery Minister Gerry Brownlee had "urgent and serious questions to answer" following the settlement.
"[Thursday's] settlement . . . means thousands of homes in Canterbury may have been repaired to a lower standard than legally required."
Woods said there were many unanswered questions, including whether the principles applied to every homeowner who had dealt with EQC, and what the implications might be for the Budget.
Brownlee's office said the minister was travelling overseas and unable to comment on Thursday.
Woods said the settlement "raises concern" that homes repaired under MBIE guidelines could have been rebuilds under the EQC Act, "meaning many people may have missed out on the full rebuild they were legally entitled to".
"For five years, people in Canterbury have been telling the government they weren't getting the standard of repairs they were due. Gerry Brownlee didn't listen and now we are seeing the results.
"Gerry Brownlee needs to tell Cantabrians what will happen from here, and take action to ensure mistakes like this never happen again," Woods said.