By Andrew Hooker*
Opinion - There is a new group of Canterbury earthquake victims that is rapidly growing: On-Solds. That is people who bought houses in good faith, thinking they had been fixed by EQC.
Photo: RNZ/ Conan Young
Later on, these people found out that EQC had totally botched the repairs.
A quick lesson: EQC 101. If a house is damaged by earthquake, EQC pays the first $100,000 plus GST and the private insurer picks up the rest, up to the policy limit.
So if the house is assessed as being over the $115,000 to fix, the claim is handed to the private insurer to manage.
In many cases, EQC inspected houses, declared that they could be repaired for maybe $20,000, did so and closed its file. The private insurer was never notified, and the owner trusted EQC had done the job properly.
Fast forward a few years, and someone else buys the house assuming that EQC had repaired it properly. Thus the term 'on-solds' has been coined, meaning that the house was 'on-sold' after the assumed repairs.
The problem for these people is that there is no insurance company to claim off for the damage over the $100,000 EQC statutory cap. They did not own (or insure) the house when the earthquake happened, and the previous owner never made an insurance claim because they assumed that EQC had fixed it.
As a direct result of EQC's negligence, these people have lost often hundreds of thousands of dollars.
Common sense would suggest that if EQC had botched the repairs and these people suffered as a result, EQC would pay for the repairs to be done properly. Even more so when EQC is a government-run organisation whose own board statement of intent says its role is "to reduce the impact on people and property when natural disasters occur".
Not so. EQC has refused to pay for these repairs, or compensate above the $100,000 statutory cap. Its lawyers say that EQC has no responsibility outside its governing legislation and won't pay more than $100,000 per house.
Many of these houses cost $300,000, $400,000 or $500,000 to fix or even more. So limiting compensation to this amount is little help.
Many of these people are now in the terrible situation in which they have a house they purchased for, say, $400,000 with a $350,000 mortgage only to find out that the house is only worth maybe $200,000 as a result of EQC's botched repairs.
The mortgage is more than the value of the house.
EQC, which in many cases has openly admitted botching the repairs, simply won't stump up and pay.
Imagine that. A government organisation admitting that it has caused losses, but refusing to put it right. In some cases, there is even evidence that EQC had initially assessed the damage as substantial, then later "re-assessed" the house and reduced the claim to a few thousand dollars.
Reasonable people assume that a government-run organisation that has through its own gross negligence caused people to suffer massive financial and other losses would put it right.
The new government needs to step in and order EQC to carry out a full and proper audit.
EQC can no longer be trusted, and an independent body needs to contact every person whose house was repaired by EQC, and fund independent engineering assessments. Until EQC stops hiding behind the legislation and auditing its own work, this issue will never be resolved.
* Andrew Hooker is the managing director of Shine Lawyers NZ, and practises as a specialist insurance lawyer with offices in Auckland and Christchurch.