SERVICE: House
OUTCOME: Settled
Issues: Customer services issues; Scope of cover
Mr and Mrs L held insurance on their house. Under this insurance, Mr and Mrs L also held cover with EQC Toka Tū Ake (EQC) for natural disaster damage.
In February 2023, following the Auckland flooding event, Mr and Mrs L notified the insurer that Mr and Mrs L had noticed cracking in the driveway. Mr and Mrs L made a claim to the insurer for the damage. In doing so, a claim was also lodged with EQC for land damage to the driveway and in other areas of the property, including the front lawn (the EQC claim).
The insurer assessed the damage and said that the driveway had pre-existing cracking and the damage just exacerbated it. Consequently, the insurer determined that the damage made no difference in the repairs already required to the driveway. Therefore, the insurer and EQC said that the damage was not covered under the Earthquake Commission Act 1993 (the Act), and Mr and Mrs L had not suffered a loss under the policy.
The case manager’s assessment
· The claim
The insurer declined the claim on the basis that the driveway already had pre-existing cracking, meaning the damage was not a direct result of earthquake and Mr and Mrs L had not shown they had suffered a loss under the policy.
This was in line with case law; [1] in order for the damage to the driveway to be covered by the policy, Mr and Mrs L would need to show that the new damage would have materially affected either the repairs which were already required, or Mr and Mrs L’s use of the driveway.
At the time Mr and Mrs L made the claim, they told the insurer that the driveway had pre-existing cracking. Mr and Mrs L thought they would receive a pro-rata payment for the damage caused by the Auckland floods. Mr and Mrs L were not claiming for the pre-existing cracking. Mr and Mrs L confirmed that the driveway was still useable. The insurer also confirmed that the repairs required for the pre-existing cracking would be the same as the repairs required for the damage.
Consequently, the insurer could decline the claim as outside the scope of cover provided by the policy.
The EQC claim was ongoing and, while EQC confirmed there was no claimable land damage to the driveway under the Act, a significant issue has arisen in relation to the landslip on Mr and Mrs L’s front lawn and EQC was in the process of finalising a settlement for this.
· Service issues
The EQC claim resulted in significant financial and personal harm to Mr and Mrs L, as a result of poor processes between the insurer and EQC and unnecessary delays. In addition, the insurer was not transparent in relation to the first assessor’s report, by failing to provide it promptly to Mr and Mrs L and by explaining carefully to Mr and Mrs L why it was not relying on the report. In addition, the insurer should have spoken to Mr and Mrs L before making enquiries about the property with real estate agents. This also showed a lack of transparency, particularly because Mr and Mrs L told the insurer when they made the claim, that there was pre-existing cracking to the driveway.
The insurer recognised that its service was not up to the required standards. As a result, it agreed to pay Mr and Mrs L $6,360. Mr and Mrs L agreed to settle the complaint on this basis.
Complaint No: 00228763
[1] Bligh v Earthquake Commission [2018] NZHC 2102 at [20]; Sadat v Tower Insurance [2017] NZHC 1550 at [254] and cases cited in both.