21 April 2021

Defective EQ repairs: What next?

Wynn Williams Lawyers


Wynn Williams is a renowned law firm in New Zealand, offering a full range of legal services with a team of skilled lawyers. Established in 1859, the firm is known for its expertise, straightforward advice, and strong client relationships. Recognized in prestigious legal directories, Wynn Williams is proud of its heritage and commitment to honest, experienced guidance for clients. Offices are located in Auckland, Christchurch, and Queenstown.
Owners of poorly repaired homes have no insurance pathway to recover the cost of poorly performed EQ repair costs.
New Zealand Real Estate and Construction
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For some time, we have been predicting another wave of litigation, specifically claims against professionals, arising out of the 2010/2011 Canterbury earthquakes. Unfortunately, our predictions seem to be coming to fruition.

Why are we seeing an increase in EQ related liability claims?

In July 2019, the Supreme Court confirmed (Xu v IAG New Zealand Ltd [2019] NZSC 68) that EQ claim assignees are only entitled to be indemnified under the assigned claim. This means that assignees of house claims are only compensated for their actual loss; usually the reduction in market value of the property due to the EQ damage or depreciated replacement or repair costs, which allows for the age and condition of the property. (The recovery on assigned claims will often be dependent on the age of the property with less depreciation applying to newer properties, so assignments are still advisable.) This can leave new homeowners out of pocket, with no access to EQC or the original home insurer.

In August 2020, EQC sent a mail-out to 44,000 homes purchased since 2011, advising the homeowners of the EQC on-sold programme. While about 6,000 homeowners lodged applications for repair funding with EQC through the programme, thousands of owners may be ineligible for the programme or missed the 14 October 2020 cut-off date.

Unless the Courts confirm EQC owes subsequent owners a duty of care when assessing and repairing earthquake damage, which is not limited by the statutory "cap," owners of poorly repaired homes have no obvious insurance pathway to recover the cost of repairing missed or poorly performed EQ repair costs.

We are seeing homeowners increasingly looking to those involved in the "repairs" and/or the property transaction for relief; engineers, builders, architects and the Council, where a building consent was obtained, building inspectors, real estate agents, solicitors and the vendors themselves.

Since 2011 we have developed significant technical expertise in earthquake engineering and building issues. Recently, we have been involved in defending numerous 'scattergun" type claims, involving a multitude of defendants involved in an EQ repair, rebuild or transaction We have defended claims against architects, engineers, building surveyors, property inspectors, solicitors and real estate agents.

What should you do if you're caught by the "scattergun"?

If you discover an EQ related circumstance which might reasonably give rise to a claim against you, or if a claim is threatened or made against you arising out of your involvement in repairing or transacting an EQ damaged property, your first step is to notify your professional indemnity insurance insurer (and broker).

You should provide all information and assistance your insurer requires and you must act as a prudent uninsured until cover under your insurance policy is confirmed, meaning take reasonable steps to reduce future risk or damage in a cost conscious manner without admitting liability or prejudicing the insurer's position. It is really important that you take these steps, as failing to do so could result in your insurer declining your claim.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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