Insurance forum august 2014

We Didn’t Know Enough
Insurers Leading with PMO’s Did Not Work
We Can’t Do This On Our Own
We Need Good Quality (HONEST) First Tier Information
Consultants | Contractors Must Understand Our Policies
We Must Understand Our Policy
We Must Try to Be Pragmatic and Unemotional with Insurers
We Have to Be Prepared to Prove Our Own Loss

The Planning Meeting Know Your Responsibilities as a
Post Disaster Home Owner
Be Confident About
Talking to Your Insurance Policy
Fight the Barriers of Indecision
Retain the Value of your Home
and Protect Its Integrity
Take Ownership of the Consent Process
Know How to Get Started (or Restarted)
the Right Way
When to Mediate or Litigate

• Roger Bourke – Visible Skies
• Cam Preston – Financials
• Bevan Craig – Underfoot
• Adrian Cowie – Topografo
• Zoran Rakovic – Structura
• Stewart Harrison – Harrisons QS
• Dean Lester – Insurance Advisor
• Grant Cameron – GCA Lawyers
• David Hutt – CCC
• Ken Pope – RAS
• Malcolm Macmillan - MBIE
• Sarah Miles – ChCh Insurance Fiasco |Claimant
• Lorraine Guthrie - CIAS
• Lester Bryant – Asset Sure Quality Surveyors
• Chris Fleury – Pro Claims
• Warwick Shaffer and Other – EQC Claimants Group
PRESENTERS SUPPORT

DISHONESTY
MISINFORMATION
CONFUSION
ISOLATION
INDECISION
LACK OF EXPERIENCE
POOR QUALITY LOSS EXPENSE
The Claimant Experience

TIME CAN BE A FRIEND
PROVE LOSS
BE WARY OF OUT OF POLICY
SETTLEMENTS
CANNOT DO IT ALONE – NEED
TO ENGAGE EXPERTS
KNOW THE CONSENT PROCESS
CONSULTANTS MUST KNOW
YOUR POLICY
(AND SO DO YOU)
MONITOR QUALITY
WORK TOGETHER
BE DECISIVE
IN MY POLICY IT SAYS >>
IT DOES NOT SAY >> IN MY
POLICY.
Let’s Change the Experience

The Project Management Process
Initiating Planning Executing Closing
Appropriate and Timely Communication | Education | Training
Monitoring and Controlling
Prove Loss
Scopes
Inspections
Contracts
Costing
Assessments
Meeting Schedules
Timelines
Budgets
Design
Detailed Planning
Risk Management
Roles & Responsibilities
Resource Allocations
Doing the Do Reviewing against
goals, budget,
timelines.
Defect Lists
Debrief
Close out
documentation and
reporting
Handover
Understand the Project Management Process

Prove Loss
Scopes
Inspections
Contracts
Costing
Assessments
Meeting Schedules
Timelines
Budgets
Design
Detailed Planning
Risk Management
goals, budget,
timelines.
Defect Lists
Debrief
Close out
documentation and
reporting
Handover
Appropriate and Timely Communication | Education | Training
Hand Out Provided

Appropriate Communication
Prove Loss
Scopes
Inspections
Contracts
Costing
Assessments
Meeting Schedules
Timelines
Budgets
Design
Detailed Planning
Risk Management
goals, budget,
timelines.
Defect Lists
Debrief
Close out
documentation and
reporting
Handover
Hand Out Provided

CAM PRESTON – INSURANCE COMMENTATOR
Talking to performance of a range of insurers

Analysis of Current Progress
1. Target Settlement Dates
2. Claim Settlement Progress
3. Financial Drivers
Cam Preston

1.1 Target Settlement Date - Southern Response
1. September 2011 Press Release from AMI:
2. December 2012 Quote from Peter Rose in The Press:
3. May 2013 Press Release from Hon Gerry Brownlee:
4. February 2014 Press Release from Southern Response:
5. July 2014 Southern Response’s latest Statement of Intent published 7 July 2014:

1.2 Target Settlement Date – IAG (State, NZI, Lantern, BNZ, ASB)
1. December 2012 IAG Press Release:
2. June 2013 The Press 12 June 2013:
:
3. July 2014 Question to IAG:

1.3 Target Settlement Date– Tower
May 2014 Article in NBR:

The Reports Insurers Used to Provide

June Survey? “The latest survey was conducted on 1 July and then takes about 4-5 weeks to formalise returns,
CERA to go through verification/review process etc. So I’m expecting release around 8 August”
-ICNZ
What they provide now!

2.1 Claim Settlement Progress
Southern Response

Southern Response v IAG

All Reporting Insurers

Other Insurers? We asked them
Vero, Lumley, Westpac, FMG, MAS, Ansvar:
“Ask CERA we give them our data”
They Said….

EQC

Q: “Your news release and website state that EQC
has 15% of properties with a building left to settle
or approx. 25,631 properties. Your website states
that approx. 11,980 of these will be settled via the
EQR home repair programme.
How many of the remaining 13,651 properties are
in dispute or joint review with private insurers?”
A:
Actual numbers are more telling
than percentages

EQC Cost Summary
Total Cost of Canterbury Earthquakes: $12.5bln
Less: Reinsurance recovered overseas: $4.5bln
Less: EQC Disaster Fund: $6.0bln
Equals Crown bailout required: $2.0bln
A $2 Billion Shortfall

Where did the $2.bil shortfall (GAP) go? Who paid for it? The homeowners?

Bridging “The Gap”
A difference in opinion between Treasury and EQC??

Insurers in Distress:
EQC - $2bln taxpayer guarantee “untriggered”
AMI - $1bln taxpayer guarantee “triggered”
Tower – Recapitalisation was required
Lumley – Recapitalisation was required – IAG
since purchased
AMI Put Funds into Government Bonds – between 750 – 1.5 billion

Insurers not in Distress - IAG

Insufficient reinsurance arrangements by EQC, AMI,
Tower and Lumley and possibly others have turned the
EQ response into a giant exercise in ‘cash flow
management’ for them.
IAG have tucked themselves in behind the pack to
maximise its profits and purchase some of those in
distress (AMI/Lumley).

What does it all mean for YOU?

Predictions:
1. EQC will continue to minimise its claim liability for buildings and land in
order not to ‘trigger’ its Crown guarantee – but claims will continued to
be passed to private insurers.
2. Southern Response will continue to minimise its claim liability for
buildings in order not to breach the ‘already triggered’ $1bln Crown
guarantee.
3. IAG will continue to try and stay out of the limelight, hiding behind the
spotlight on EQC and Southern Response.
4. EQC and Private Insurers’ tactic will be to minimise their risk via cash
settlement of remaining claims.
5. ‘Delaying’ and ‘controlling the process’ are the primary tools in their
arsenal to achieve that objective.

Bevan Craig – Underfoot Services

We are being told we can be
glued back together again
Left on a repair site

The Reality of cracked
Foundations and slab issues
In Christchurch
Bevan took us on a history of foundations

Pre 1970 foundations
Site rubbish and blocks in the foundation – common practice

River run | Stones in Foundations

Trying out testing on River Run | Stones used today

Like humpty dumpty the above foundations
and slab issues cannot be glued back
together again

How the justification for these foundation and
slabs being glued together is being sold as a
robust repair strategy – when in my view, it is
not…..

THROUGH QUOTING OF
MBIE GUIDELINES

Who Was Involved in Creating the Guidlines

Guide Line Status – It is a Guide

Or is it???
The Foreward States that “it gives solutions…that WILL reduce the risk of
injury….

The reality is the Canterbury Guidelines have
empowered unqualified people to assess damage
and make judgement on structural repairs based on
the size of a crack in the cosmetic plaster surface
covering the foundation not the actual foundation
itself !

US Example of When to Call…..

There are NO concrete epoxy
crack repair standards for the
building industry in NZ

Who has allowed this to
happen

We did not realise that it is our
responsibility under our policies to
prove our loss, not EQC or the
Insurance companies

There were more behind these bushes

To Get an Accurate Costing
You Need Accurate Facts
• A QS can only calculate based on the
information they are given.
• Inaccurate base information will give inaccurate
costings.
• Accurate base information needs to be
obtained by the expert.
Key Summary Points

Who is the Expert?
• They need to be able to determine earthquake
damage in their area of expertise.
• Each Claim should have input from Experts,
even if it is to confirm there is no damage.
• In some cases, significant damage has been
missed because an expert did not assess.

Purpose of Earthquake Assessments?
• Not to inflate damage to favour the owner
• Similarly, not to minimise damage to favour the
Insurer
• It should be to tell the truth and show all of the
Earthquake Damage.
• The Assessment should only stop when no
more earthquake damage is found.

Advantages of an Independent Expert
• If Insurer and Insured can agree on the Expert
and their report – it takes out a massive area of
contention in the claim
• There should be nothing to worry about in
knowing the truth.
• If there is no damage, then that is known.
• If there is damage, then that is also known.

In the Perfect World
• Insurer and Insured agree on who will carry out
the assessments. Insurer covers the experts
costs.
• The aim being to get an accurate, truthful
report that both parties can agree to.
• The Experts outline their findings, and justify
their findings in their report. All statements are
justified with detailed explanation.

What do you do?
• If the Insurer has already done the assessments
and you don’t agree with them
• If the Insurers have not yet commenced with
the assessments
• If you don’t have any money to fund your own
assessments

Three Scenarios
• Insurer and Insured agree to independent
assessments so that they can work together
and hopefully avoid litigation
• If you have the funds, engage your own experts
• If you simply don’t have the funds. What do
you do?
• CIAS, RAS, Advocates?
• But they need to have access to independent
experts!

Standard of Assessments
• The Assessor has to know what standard they
are assessing to.
• Is it the Mud Huts in Africa Standard?
• Is it to the ‘Life Safety’ standard?
• Or, is it to the Insurance Policy Standard.
• The Engineers and other Assessors need to
know this – and work to this.

Order of Assessments (sort of…)
• Surveyor (the Measuring Stuff).
• Structural Engineer (and Geotech Engineer)
• Intrusive investigations (slab coring,
voids, moisture, mould)
• Weather-tight Specialist
• Builder and other Trades
Then the
• Quantity Surveyor
• Solicitor

Summary
• If you are not satisfied with the assessment –
call in the Experts and get the right assessment.
A $10,000 report can make a $1,000,000
difference
• If you cannot afford the Experts?
Some General Information…..

General Information
• MBIE Guidelines are not your Insurance Policy
and most likely are not to the Policy Standard.
• Assessments should be based on your Policy
and Earthquake Damage not the MBIE
Guidelines
• Re-leveling – what does that mean?
• ‘Historic’ and ‘Pre-Existing’ – please explain

More General Information
• Flood zones and Building Settlement (Rout)
• Localised Settlement
• EQC IFV Land Claims
• Building Consents – no worse than before the
alteration or repair began – not to an ‘As New’ standard
• Consent Exemptions

Still More General Information
• Failed Repairs, due to
• Poor workmanship
• Poor Assessments
• EQC Undercap – there seems to be a trend of
overcap claims now becoming undercap

Finally
• Don’t Give Up.
• Talk to Someone – Ask for Help
• Your Insurance Policy is the legal contract which
specifies the standard. The MBIE Guidelines
are not the contract.

Zoran Rakovic
Chartered Professional Engineer

NZ Building Act 2004
• Section 121 – “dangerous buildings” - cannot be occupied.
• Earthquake damage can render house “dangerous” under
S121.
• However, most of the houses left standing are not classified as
“dangerous” under S121. You most likely own a house in this
category.
• NZ Building Act 2004 does not require you to carry out any
structural earthquake repair.

Your options
• Do nothing
• Repair

Repairing a building
• Repair must be done to a particular, well defined standard.
• Standards of repair range from “tart up”, over reinstatement to
“when new”, reinstatement to “as new” and ultimately full
rebuild.

Who defines standard of repair
• Standard of repair is defined by the Owner of the house.
• If the house is insured, and the Owner does not want to put in
additional funds, the standard of repair is limited/prescribed by
EQC Act 1992 and/or terms and conditions of the insurance
policy.
• Engineers, project managers and the like cannot and shall not
define the standard of repair.

“Independence” of Engineers
• Often you hear that the Engineers are NOT given wording of
the policy in order to keep them “independent”.
• This is inappropriate, as Engineers work to a brief, and brief is
defined by the Owner.
• Therefore, Owners tell Engineers what standard of repair is to
be achieved. Usually this is done by giving Engineers your
insurance policy.

Briefing of Engineers
• Best document is on ACENZ website, called “Guideline on the
briefing and engagement for consulting engineering services”.
• This document clearly states that quality of work is defined
by Owner, through brief.
• Make sure that your or your insurer’s Engineer has clear brief
which is aligned with EQC Act 1992 and/or terms and
conditions of your insurance policy.

Building consents
• City Council ensures that, if building consent is lodged, that the
proposed works comply with NZ Building Act 2004.
• Council does not know, nor they have ability to police, if the
works comply with EQC Act 1992 or terms and conditions of
your policy.
• The fact that there is building consent granted for repairs to
your home, does not mean that the repairs meet EQC Act 1992
and/or terms and conditions of your policy.

Your right to access Engineers
• Engineers working on your home employed by third parties
(i.e. EQC or your insurer) have duty of care to you.
• You have the right to access the Engineers (by phone, email,
or to meet them), and they cannot refuse to answer your
queries and concerns.
• Your primary concern is to ensure that Engineers are working
to EQC Act 1992 or under terms and conditions of your
insurance policy.

Accessing Engineers
• The best way is to phone them and request a meeting.
• At the meeting, table your insurance policy and make it clear
that you are the Owner, and that you want to ensure that
they have appropriate brief.
• Request acknowledgement in writing that they have received
your insurance policy and that they will be working to meet its
terms and conditions.
• If you do not have this confirmation, seek advice from your
advocate.

HARRISONS
QUANTITY SURVEYORS
Independent. Always.
“RANDOM to RESULTS”
Helping you make the right decision

About me
• Managing Director of Stewart Harrison Limited t/a HARRISONS Quantity
Surveyors
• Registered Quantity Surveyor (Reg. QS)
• Member of the New Zealand Institute of Quantity Surveyors (MNZIQS)
• NZIQS National Marketing Committee member
• NZIQS Insurance Working Group member
• Secretary of the Canterbury Branch of NZIQS
• Member of the New Zealand Institute of Builders (MNZIOB)
• Home owner (with AMI and lately State)

Food for Thought…
Measurement is the first step that leads to
control and eventually to improvement.
If you can’t measure something, you can’t
understand it.
If you can’t understand it, you can’t control it.
If you can’t control it, you can’t improve it!

Food for Thought…
The best way I know of to
win an argument is to start
by being in the right.
If I were to agree with you
then we would both be
wrong.

Food for Thought…
The most important tactic in an
argument, next to being right…
…leave an escape hatch for your
opponent, so that he can
gracefully swing over to your
side without an embarrassing
loss of face.

The many “deals” suggested by the
Insurers
• Repair
• Replace
• Buy another house
• Build another house but on a different site
• Build to Budget
• Cash

Those Options cont.
• What it all boils down to is the need to know the accurate cost to repair or
rebuild your existing house that satisfies the current
NZ Building Code, no more – no less
• It is a rare event indeed when the Insurer has the number close to acceptable
the first time around
• M.A.S. for example do not “build to budget” but instead tell you what the
“betterment” items are in your new house and what your contribution toward
those costs is
• Insurers will tell you that you cannot have a heavy brick veneer due to the
increased size (read cost) of foundations
• You must know your true cost to rebuild. Then you can make an informed
decision. End of story.
Who can do that for you?

THE ROLE OF THE PQS
• Be a financial member of a recognised national body, such as NZIQS,
providing you with certainty that you are dealing with a professional
governed by rules and regulations
• Provide independent & professional advice
• Have an understanding of Geotechnical and Structural Engineering
reports
• Ask relevant and pertinent questions to geotech and structural engineers
• Provide accurate estimates using clear and concise industry recognised
formats
• Be able to discuss/argue “scope” with your Insurer
• Be able to negotiate “costs” with your Insurer
• Always act professionally and with integrity

DRA, DRRA, BIR, SOW……..
• Whatever they call them they’re a fantastic document, when correct
• Some are better than others (Vero vs SR)
• They capture everything in your house from the gross floor area to the finish
on your toilet roll holders
• You must insist on these being accurate. You should not ever accept “oh that,
yeah that’s included”
• And that is where there usefulness ends
• However, some Insurers will then add pricing to them
• Those that do have now provided you with a price that for all intents and
purposes includes for all the non-compliant items in your house, such as your
single glazed aluminium or timber windows that must now be double glazed
• Of course they then tell you it’s included but the priced “scope” says
something completely different

THE REPAIR ESTIMATE
• Why is your house deemed a repair?
• Most likely due to damage which is over the EQC cap but is less than the
replacement cost
• Is an engineers report important?
• Yes, it’s probably the most vital cog in the wheel
• Without one everyone is simply guessing as to the structural damage and the
method to repair that damage
• Insist on your Insurer providing you with their engineers report
• If they can’t provide one how are they able to substantiate their estimate!
• It must be signed by a Chartered Professional Engineer or CPEng
• The above applies to a similar degree for Geotech also
• The estimate then needs to be considered against the replacement cost to determine
which is the cheaper option for the Insurer

THE REPLACEMENT ESTIMATE
• Why is your house deemed a replacement?
• Most likely due to the significant damage which makes it uneconomic to
repair
• That simply means the Insurer will always take the cheaper option
• Is an engineers report important?
• Not so much as the house is a rebuild
• If enhanced foundations are considered then a geotech & structural report
will determine the new foundation system required
• The estimate then needs to be considered against the repair cost to determine
which is the cheaper option for the Insurer

THE ESTIMATES – Repair or Replacement
• The QS role: -
• Visit site, take photos, measure up the house or check the house does not
differ from the plans provided
• Don’t be alarmed if this takes an hour or a day, every house is unique
• Review the geotech and structural reports provided
• Provide a draft estimate for your review and comments
• Provide a final estimate to you
• You can then decide whether to forward that estimate to the Insurer
• Defend / clarify the estimate with the Insurer or most likely their PMO
• Negotiate, argue, agree to disagree, escalate to the Insurer if possible

• The Insurers Job: -
• Save money
• Provide the least amount of information as possible
• Keep you uninformed and in the dark
• Convince you they are right – (you should question their qualifications, scope, method, price)
• Talk you out of engaging your own professionals
Remember
• They do not want to repair your house
• They do want to give you CASH
• They want you to take over the RISK
Don’t ever believe insurers don’t know the true costs as they provided that to the
reinsurers years ago.
Anything less than that number is PROFIT!

• Can’t agree?
• Move past the PMO – agree to disagree
• You could simply be talking about $5 per hour on the hourly
rate, or 10% vs 15% on margin, or timber windows vs aluminium
ones etc
• Escalate to the Insurer
• Seek an interim payment on the “agreed” portion
• Discuss your options with your lawyer on the “disagreed” portion
• Listen to those around you and their experiences
• Listen to the advice you are given, there is little point in spending
10k to get 15k

Specified Sum Policies
• This is an estimate to replace your house, detached structures, driveways,
decks, paving, fencing etc
• From the Insurers point of view they will pay UP TO that amount and it
is the MOST they will pay
• For those out there who think you are safe with a specified sum policy,
think again
• What we going through now with the Insurers is no different to what we
will go through after another event using a specified sum, they will pay
the least amount they possibly can
• This is why it is so important to not be under insured
• This is why it is so important to know your risk and what the cost of that
risk is.

Specified Sum Policies – What to Insure!
• Your house
• Site and Ancillary items such as: -
• Detached garage or work shop or garden shed
• Driveways, pathways, paving, decking
• Pools and tennis courts
• Demolition of these items
• Design, engineering and local authority fees, and any others
• Inflation
• Your loss will occur on the last day of the policy, so there is a years worth of inflation
• You have to consider the time to demolish, design, consent and tender your replacement house
• You have to consider the construction period
• With this information you can make an informed decision as to how you see your risk
• Consider the risk between a fire vs an earthquake - is your driveway or fence or swimming
pool at risk in a fire? Can you repair your own fences?
• The Insurer is passing the responsibility onto you.
• You need to be informed

Specified Sum Policies – Enhanced
Foundations
• The Insurer is demanding that we include enhanced foundations
• My questions to the Insurers are: -
• What are we insuring for - earthquake, fire, flood, slip, an aeroplane crashing on us?
• If for a seismic event, then please tell me how we allow for enhanced foundations prior to
it?
• How do we engage intelligent people such as geotech and structural engineers to design
special foundations for our houses before the seismic event has even occurred!
• (Granted certain parts of Christchurch and the rest of the country will be different
because we mostly know where the damaged land areas are located in Christchurch or
where known peat areas are for example)
• Surely the Policy must respond, and it does under “compliance costs”

Questions and Answers
• Summary to follow

WHAT AM I SEEING?
• The Insurers are definitely getting better
• They are better to deal with
• They know they need to have professionals engaged at some level
• SR now has an “independent” PQS panel (we declined the offer to remain
independent)
• They have better people working for them than they did three years ago
• Those people are more experienced and better qualified
• The Insurers are accepting our estimates as a start point more often
now, although they then use the red pen to reduce them! But it’s a
better position than trying to get them to double their number

This is complex
‘We don’t know what we don’t know’
http://www.gcalawyers.co.nz/innovation-expertise-results/

The answer!
‘for every complex problem, there is an answer
that is clear, simple and wrong!’

Constraints on progress
Decision fatigue
General anxiety disorder
We trust people
Easier to go with the flow
It’s cheaper to leave it to the insurer

What can we do?
Ask those who know - experts
It’s a collaboration and it’s multi-disciplinary
– Lawyer,
– geotech engineer,
– structural engineer,
– quantity surveyor,
– registered surveyor

Navigator
• Lawyer should provide strategic direction
• In isolation, a QS or engineers report can’t help
• Expert’s roles must be aligned with the particular policy

Understand the process
It’s not what your insurer puts before you
You must prove your damage!

What should happen
Claim made
Loss adjustor or assessor
Assessment report
Expert reports as required
Repair steps specified
Contracts let to repair or rebuild

What actually happens
Assessors – often not qualified
Reports – constrained by the brief
Expert reports – not obtained
Repair steps – limited, inappropriate or wrong
Repair contracts – often long delay
Arguments

Why it breaks down
CONFLICT
For you - TIME, COST & HASSLE
For insurer - DELAY, DENY, DEFEND

Dispute resolution
Key objectives
– Repair
– Rebuild
– Receipt of an indemnity payment in the interim
Matters in support
– The law
– The contract – policy & schedule
– Facts – ability to prove your damage
– Experts

Actual progress
Negotiate
– Timeframe
– terms
File proceedings
– As an individual
– Where applicable, as a class action

Benefits of class action
A Plan & strategic direction
Unity – focus - support
Cost minimised
Protection against adverse court costs
Leverage
– Strength in numbers
– Ability to ‘see it through’
– Media
– Political
Overcomes “delay, deny, defend”

Summary
Complex problem
Get expert advice
Cost may be repaid many times over
Cost may be recoverable
Decisions made on facts
Pathway is clear
– Negotiate and settle
– Litigate and achieve your entitlement

• Roger Bourke – Visible Skies
• Cam Preston – Financials
• Bevan Craig – Underfoot
• Adrian Cowie – Topografo
• Zoran Rakovic – Structura
• Stewart Harrison – Harrisons QS
• Dean Lester – Insurance Advisor
• Grant Cameron – GCA Lawyers
• David Hutt – CCC
• Ken Pope – RAS
• Malcolm Macmillan - MBIE
• Sarah Miles – ChCh Insurance Fiasco |Claimant
• Lorraine Guthrie - CIAS
• Lester Bryant – Asset Sure Quality Surveyors
• Chris Fleury – Pro Claims
• Warwick Shaffer and Other – EQC Claimants Group
• Sarah Marsh – SBS and Claimant
• Kay and John Parry
• Ian Campbell
• Jake Preston and Friends – Media and Sound
PRESENTERS SUPPORT

TIME CAN BE A FRIEND
PROVE LOSS
BE WARY OF OUT OF POLICY
SETTLEMENTS
CANNOT DO IT ALONE – NEED
TO ENGAGE EXPERTS
KNOW THE CONSENT PROCESS
CONSULTANTS MUST KNOW
YOUR POLICY
(AND SO DO YOU)
MONITOR QUALITY
WORK TOGETHER
BE DECISIVE
IN MY POLICY IT SAYS >>
IT DOES NOT SAY >> IN MY
POLICY.

Insurance forum august 2014

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