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Red Zone Residents: Clarification on Replacement Policies

Red Zone Residents Support MP’s Request for Legal Clarification on Full Replacement Policies

The Wider Earthquake Communities’ Action Network has applauded MP Lianne Dalziel’s request for a legal opinion on red zone insurance issues that she announced yesterday in her Information Update 26. WeCan has been seeking answers to these important legal questions for some time – a declaratory judgement would do that.

WeCan! insurance spokesperson, Evan Smith, said, “Insurance companies have interpreted their obligations under premium full replacement policies in such a way that they take no responsibility for full replacement of repairable red zone properties – although they must be demolished.”

“This means for many red zone residents they are not able to get the replacement value of their homes, only the Rateable Value, which for many is significantly lower. However, the Insurance companies’ interpretation of full replacement obligations in these circumstances has never been legally tested.

“Lianne Dalziel’s announcement that she is undertaking the preliminary work investigating the legal issues with respect to this is welcome news – at last we may have some clarity around this issue. This is important not just for red zone home owners but for all home owners in New Zealand with Full Replacement policies.”

“For months Government has been doing deals with Insurance Companies and EQC behind closed doors, it’s time it started working for the people and supported and funded this request for a declaratory judgement”, said Smith.

Ms Dalziel’s request seeks judgments on three questions according to her Update:

“The three questions that need answering are these:

1. Are insurers obliged to replace a property that would have been repairable had it not been located in the red zone? Interestingly the insurers seem to accept that they are obliged to do so if an individual property cannot be repaired on a property that has had too much land damage to be economic to repair – refer video: http://www.rebuildchristchurch.co.nz/blog/2011/11/cera-land-decisions---panel-discussion-video-explanation

2. Is EQC obliged to pay out the formula or minimum section size even if the individual section would have been repairable for less if it had not been re zoned? This is the same question as above but this time directed to EQC as the insurer of residential land.

3. What is the market value of properties under a compulsory acquisition by CERA under the Canterbury Earthquake Recovery Act? The reason I raise this is because although it states that it is valued at the time of purchase, I am sure it cannot take into account the fact that it is red zoned and most of the properties have been sold to the Crown under a voluntary offer. This wouldn’t be fair and there are plenty of cases where the government hasn’t been allowed to get away with this under the Public Works Act.”

“WeCan! believes these are all questions that need clarification so that Red Zone land owners can make informed decisions about their future – full marks to Lianne for bringing these issues to the fore and seeking legal clarification!”, said Smith.

WeCan! has organised a number of rallies around insurance issues over the last few weeks, the biggest of these was held on Saturday attended by over four hundred people and ended in a march on CERA.


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