Earthquake Commission to make ex-gratia payments for “on-sold over cap” properties
The Government has announced a new package to assist purchasers of earthquake-damaged homes who have discovered that the property had incomplete or insufficient repairs after they settled their purchase.
The announcement of this support package should help to resolve a number of claims currently before the courts including the resolution of a test case alleging that the Earthquake Commission (EQC) was negligent in completing repairs of earthquake damage to a residential property.
Details of the support package
The package is available to homeowners who meet the following criteria:
- they purchased a property in Canterbury after 4 September 2010 (the date of the first earthquake), and/or on or before 15 August 2019 (the date of the Government’s announcement);
- before selling the property, the previous owner settled a claim with EQC on the basis that the damage could be repaired for less than $115,000 per earthquake event (the EQC cap);
- after the purchase, the new homeowner discovered that the property had not been properly repaired (either because the repairs carried out were defective, or the damage was not properly assessed at the time);
- the cost of the repair, together with the amounts previously paid by EQC, is more than the EQC cap; and
- private insurance will not cover the cost of the repairs.
Eligible homeowners must also take an assignment of the previous owner’s EQC claim to claim an ex gratia payment.
If a person is eligible under these criteria, then the ex gratia payment will be based on a scope of works taking into account the work required to repair the earthquake damage in accordance with EQC’s statutory obligations, as well as any other reasonable cost of the repair work.
If the previous owner settled on a cash basis for some or all of the repairs, and:
- The purchaser also seeks an ex gratia payment for those repairs, then the purchaser will need to find out and notify EQC of who did the original work and which warranties are in place.
- The homeowner has reason to believe that the cash settlement was insufficient, did not include all earthquake damage, or will not repair the earthquake damage to the standard required by the EQC Act, then the homeowner can request that the EQC review the previous claim.
A claim for an ex gratia payment from EQC for an ‘on-sold over-cap property’ must be submitted by 14 August 2020.
Scope of the support package
Under this support package, it appears that EQC is willing to make good any defective repairs – even if the cost of doing so is greater than the statutory cap.
It also appears that EQC will pay for unscoped damage, provided that these costs cannot be recovered from a private insurer.
Resolution of claims before the court
Shortly after this support package was published, EQC announced that it had settled Gibling v EQC, a test case brought by the purchaser of an earthquake damaged home that alleged EQC was negligent in meeting its statutory obligations by missing damage and / or failing to properly repair earthquake damage prior to the purchaser. This proceeding would have tested the extent of EQC’s obligations to remediate defective repair – and, in particular, whether this obligation was subject to its statutory cap – and its obligations to pay for damage which had not been scoped. This support package allowed EQC to settle the case out of court and avoid a three-week trial.
This support package also provides a framework for the settlement of similar cases before the court. Reports have suggested that Shine Lawyers (who acted for the Giblings) had another 54 cases on their books.
EQC and private insurers may see a decline in claims from purchasers of earthquake damaged homes, who will have access to this support package until 14 August 2020.