Buyers of homes needing to be rebuilt could be left severely out of pocket and owners may be unable to sell because of a tough new stance by insurers.

Canterbury's two biggest insurance companies say they will not pay for damaged houses to be rebuilt or pay accommodation and some other costs for owners of homes sold since the earthquakes.

The rule so far applies to customers of IAG, which owns the State, NZI, AMI and Lantern brands, and Vero, and both say they will now pay no more than indemnity settlements to new owners. Indemnity is a lower, depreciated value and in older homes can be a fraction of the cost of a rebuild.

The two insurers have about two-thirds of the Canterbury market. It is understood both took legal advice and revised which rights to transfer to new owners.

This is despite real estate agents and lawyers having told buyers and sellers since the quakes that all insurance rights would be passed on.

Neither insurance company has advertised its policy, and nor do they mention it on their websites, but both confirmed their stance when approached by The Press. Smaller insurers may be following their lead.

Leanne Curtis, of residents' action group CanCERN, said the move appeared to be a commercial decision and was unfair.

"Once again people are in a position where they have very little control over what happens. We really don't need this right here, right now in Canterbury," she said.

"It's always been said you can get the insurance transferred to you. It's not ever been said before that not all a policy's rights would be transferred."

Curtis believed the insurers wanted to stop people swapping houses or making money buying damaged homes, "but once again it becomes the general Joe Bloggs who is hit".

She felt the insurers had not communicated properly with real estate agents and lawyers, and residents needed facts.

The news came as a surprise to Richard Lang, a specialist property lawyer with Duncan Cotterill.

"This could create huge issues and people could be caught out.

"We do a lot of property [sales] with insurance assignments," he said.

"I suppose it only becomes an issue when the new owner starts negotiations with the insurer."

Lang said that although most homes being sold were not severely damaged, buyers could find the damage was worse than expected.

Buyers and sellers should speak directly to their insurer before doing any deals, he said.

Homeowner Esther Vallero had just started trying to sell her damaged Beckenham home and said the news was a worry.

The house had damaged foundations and would-be buyers were already asking about insurance, she said.

Both insurance companies involved in the tough new rules said their policy on reassigning claims had not changed; just their interpretation.

Vero spokeswoman Vasanth Naidoo said the company was reviewing relevant claims and would contact customers.

It would "obviously honour any existing commitments" customers could prove.

IAG spokeswoman Renee Walker said owners of homes that had been sold would not get a rebuild payout or accommodation allowance during repairs, or some other entitlements.

AA Insurance said it was "working through" the matter and would not pay accommodation costs, but would discuss settlements individually with claimants.

Tower could not be contacted.

Real Estate Institute spokesman Tony McPherson said the institute was seeking urgent clarification from the Canterbury District Law Society so it could update agents, buyers and sellers, and write correct clauses into sale-and-purchase agreements.

"Insurance is an ongoing frustration. It appears that the goalposts are moving all the time," he said.

- © Fairfax NZ News

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