Council battles insurer to get replacement value

18:46, May 07 2013

The Christchurch City Council is battling with its insurers over whether it should get full replacement value for the 113 social housing units it has in the residential red zone.

Even though the Government has deemed the land on which the units sit as uninhabitable, the council's insurer, Civic Assurance, has indicated it will pay only the cost of having the units repaired, not replaced.

It is the same issue that Christchurch couple Matt and Valerie O'Loughlin took their insurer to court over earlier this year.

They argued that Tower Insurance was being unfair in offering to pay only the cost of quake repairs to their Dallington home when it was red-zoned and could not be lived in beyond July.

The couple won their case, but in his High Court judgment Justice Asher stopped short of a landmark decision that could have led to all red-zoners successfully arguing for the full insured value of their properties.

Christchurch City Council facilities rebuild portfolio manager Darren Moses said the council was still discussing the issue with its insurers but it would be pushing to get the full replacement value on the units, which are housed in five separate complexes.


"We need to fight to maximise our entitlement," Moses said.

The outcome could have a significant bearing on the council's ability to restore its social housing stock to pre-quake levels.

Early calculations by the council suggest that if it gets paid out repair costs only, it will have enough funds to rebuild only 35 to 40 of the 113 red-zoned units. Finding enough money to repair or replace the other 2057 housing units that the council is keen to retain in its property portfolio could also prove problematic.

While insurance and Earthquake Commission (EQC) payouts will cover about two-thirds of the costs of that repair and rebuild work, council staff estimate there will be a funding shortfall of $13 million which the council will have to make up.

In a report prepared for yesterday's community recreation and culture committee meeting, staff have also warned that there is no money available to replace the 479 open and closed units within the 17 complexes that the council identified in 2009 as being poor performers, essentially because of their age and lack of insulation.

Council community services general manager Michael Aitken told the committee that until settlements had been reached with EQC and the council's insurers it was difficult to quantify the funding shortfall but it was an issue that councillors needed to be aware of.

"This is a concern for us - we don't have an answer right now but we're working on it," Aitken said.

The council has been under pressure from the Government to restore the capacity in its social housing stock since receiving a $21m interim payout from EQC in April last year.

Under its work plan it aims to have 2456 of the 2649 units it had before the quakes fit for occupation by the middle of 2015, but 863 of those units will still need repairs.

There is no money for that work and there is also no money at this stage for the 336 new housing units it wants to build between 2016 and 2018.


The city council has come under repeated fire from Earthquake Recovery Minister Gerry Brownlee for its slow progress on repairing damaged housing units. In February, Brownlee accused the council of "sitting on their backsides" for nine months. In March he suggested that community, recreation and culture committee chairman Cr Yani Johanson should be relieved of responsibility of overseeing the repair and rebuild programme because it was progressing too slowly. The council says it is working as quickly as it can but it cannot get repairs under way until it has reached agreement with its insurers and the EQC on the scope of works.

The Press