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Elements of Claims Settlement (Kaikoura Meeting)

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In these PowerPoint slides Dr Duncan Webb covers the three elements of the claims settlement process. This is a great, high level overview, of managed repairs, cash settlements. Duncan also touches on full and final (discharge of claim).

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Elements of Claims Settlement (Kaikoura Meeting)

  1. 1. ELEMENTS OF CLAIM SETTLEMENTS Duncan Webb
  2. 2. How is the claim settled? • When you reinstate the insurer will pay • The insurer will manage the reinstatement • The insurer will pay the cash equivalent of the cost to reinstate • Usually the insurer’s choice • No policy requires a final settlement • Insurers may require a clear settlement agreement which is consistent with the policy
  3. 3. When you reinstate we will pay… • Most common settlement clause • No right to cash settlement (other than indemnity value) • Needs insurer’s consent to incur costs • Query who is in control of reinstatement project • Insurer will often seek to dictate reinstatement method / professionals / contractors
  4. 4. The Repair Contract • Whose Contract? • Insurer - builder / homeowner – builder / homeowner – insurer – builder. • Check the Policy • If there are additional works then you may need to be a party. • Contract terms are negotiable. Look out for: • Variations • Completion dates • Penalties • Unforeseen conditions • Insurer can be liable for increases in cost (where no final cash settlement). • Get the contract reviewed.
  5. 5. Some Legal Niceties • Insured has obligation to prove loss / damage • Insurer cannot equivocate forever • Reinstatement may require disproportionate repair • Damage is any adverse change (amenity / aesthetic / structure / durability) • No policy allows payment of the “best estimate” of the cost of reinstatement. • Windfalls possible
  6. 6. Cash- can my insurer insist? • In some policies the insurer has a right to pay the cash equivalent of repair or rebuild but: • Did the insurer make an election to repair themselves? • Has the insurer represented that they would manage? • Good faith… • Rebuff threats in respect of repair / rebuild contract timelines.
  7. 7. Full and Final? • Insurer cannot insist that your settlement is “full and final” • Beware of full and final agreements if you are going to repair. • May be advantages to full and final agreements where you intend an outside of policy solution
  8. 8. When should I agree to a full and final settlement? • When risks are low • When you are wanting to depart from policy • Different house • Waiting before undertaking repair • Buying two properties • Note the terms of the settlement agreement • “intend to…” • Repair / rebuild / reinstate / replace? • In general must spend on reinstatement.
  9. 9. Can I ask for more cash later…? • Not if the agreement was full and final: • Limited exceptions (such as fraud) • Partial settlements are possible. Insurers may agree to pay more for: • Variations • Increased foundation costs
  10. 10. LAND… Duncan Webb
  11. 11. Land Damage • the land on underneath the building; and • all land within 8 metres of the building; and • the land holding— • within 60 metres, in a horizontal line, of the building; and • Which is the main access way; and • all bridges and culverts situated within the land; and • all retaining walls and their support systems within 60 metres, in a horizontal line, of the building which are necessary for the support or protection of the building or of the land. • Must form part of the “land holding” (not just legal title).
  12. 12. Damage • Adverse change affecting usability. • EQC categories: • Flat land: Land cracking (spread and shaking); undulation; ponding; settlement based drainage issues; groundwater springs; ejecta; increased vulnerability (flooding and liquifaction); • Hill: mass land movement; rock fall / cliff collapse; localised movement (small slips / retaining wall failure). • Must be change to the land in question. • Kraal v Earthquake Commission [2014] NZHC 919, [2014] 3 NZLR 42.
  13. 13. The Amount of Land Insurance • For land the lesser of: • (a) the value, at the site of the damage, of an area of land being: • the minimum area allowable to be used under the District Plan for residential land; or • 4 000 square metres; or • The land that is actually lost or damaged— • For retaining walls , bridges & culverts - indemnity value.
  14. 14. Land Damage: Fix or Pay? • Sometimes that will be the cost of repair • Will never be more than the value of the insured land at the time of the loss • May be the “diminution of value” (EQC v ICNZ [2014] NZHC 3138 • Value of land lost where total loss. • May be by reference to cost of ancillary works to house (lifting / foundation enhancement).

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