Gaps between EQC, insurance obligations

00:31, Sep 30 2013

Do you have a legal question arising from how the earthquakes have affected you? Lane Neave partner Duncan Webb has agreed to be an "agony uncle" on how the law applies to certain situations.

We are an "under cap" repair. Fletchers/EQR have finally got around to repairing. We are not happy with the quality of the repairs. Some bits are downright shoddy. In other cases the repairs are OK - but not to the "new" condition we thought we were entitled to. Lastly, in our bathroom we have a cracked tile which they accept is earthquake damage but are saying that it is not serious enough to warrant fixing.

There are a number of problems here.

First, quality: if the repairs which are undertaken are not properly completed you have a number of rights. Under the EQC Act you have a right to repair and if the repair is defective you can claim against EQC - although EQC's process for dealing with claims and complaints is slow and ineffective so you may find yourself frustrated (unless you want to raise the matter in the District Court).

However, any repairs undertaken on a home are covered by the Consumer Guarantees Act. Under that Act repairs must be completed with reasonable care and skill; be fit for purpose and be completed within a reasonable time (yes it's true).

Those guarantees are by law deemed to be given by the supplier (which may be the builder or subcontractor) to the consumer. Therefore if the repairs are defective you will have a right to claim against the person who did the work.

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Disputes like these should be raised with the builder in the first instance, but if no progress is such complaints are often heard by the Disputes Tribunal (which is part of the court system).

In respect of the standard to which the repair is completed, EQC is not in fact required to repair to "as new".

The EQC Act says it is "not be bound to replace or reinstate exactly or completely, but only as circumstances permit and in a reasonably sufficient manner".

Thus the obligation is to reinstate - that is to repair to an "as before" standard but it need do so only in so far as it is reasonable.

Your cracked tile may be a situation where EQC considers it not worth repairing as it is not considered reasonable (especially if it would require the entire room to be retiled and the crack is minor). However, the matter does not stop there.

Almost all insurance policies state that the repairs must be to an "as new" standard. This gap between EQC's obligations and the insurance policy is to be filled by the insurer but not by EQC. This is "out of scope work".

The real difficulty is that it makes no sense for EQC to undertake a partial repair to an as before standard then for the insurer to complete the repair up to an as new standard.

Early on, EQC were repairing to as new (hence the early re-paint of all of Christchurch). However, recently EQC have been indicating that they will repair only in accordance with the reinstatement/as before obligation.

Probably the easiest thing to do in this situation is for the insured party to take the cash and inform their own insurer that they are responsible to bring the repair to an as new standard (or to pay the additional costs of doing so).

However, I doubt that this will be welcomed by your insurer.

Dr Duncan Webb is a partner at Lane Neave lawyers. Email questions for him to legal.questions@laneneave.co.nz.

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