Much has been written about the pros and cons of accepting Cash Settlements for Earthquake Damage. Almost all of writers have focussed only on whether you would be able to get the scoped repairs actually completed for the settlement amount. That is, will the cash settlement amount be enough to get the scoped repairs completed.
But there is a much larger, and more serious issue at stake, which to date has not been covered.
The issue is this:
What happens if the EQC and/or the Insurance Company carry out an assessment that does not identify all of the earthquake damage? Any cash settlement is then based, not on the actual damage, but only on the damage as they have reported it.
Let’s take an actual recent example.
A Burwood property, two-storey house, built in the 1990’s. Concrete slab, timber framed. EQC issue a cheque of $45,000.00 stating that this is the final cash settlement amount for the earthquake damage.
The client questions the scope and assessment methodology, and EQC, true to form, cannot produce any documentation outlining their calculations; no assessment data; no floor level survey; nor detailed costings.
When the owner engages professionals to assess the property, it is found to be out of level by over 50mm, with over 50% of the ground floor sloping steeper than a grade of 1 in 200. The house has also settled by over 200mm on it’s own footprint, and settled over 350mm in total.
In summary, in order to get the house back to the state required in the insurance policy, it would almost certainly need to be rebuilt. Not being a Valuer or Quantity Surveyor, a guess at the rebuild cost would be around $650,000.00.
A quick calculation shows that the EQC ‘final cash settlement’ is short by over $600,000.00.
It can clearly be seen that the argument of whether the $47,000.00 will cover the scoped repairs is irrelevant. What is more at stake is the incorrect assessment which has allowed EQC and the Insurance Company to immediately save $600,000.00 on this one house.
Is this a deliberate strategy by both EQC and the Insurers? Absolutely.
How many houses have been wrongly assessed by insurance companies? Who knows. But a guess would be easily over 10,000.
Has your house been incorrectly assessed? Well, if you have had a cash settlement based only on the assessments carried out by your insurers, then there is a very high probability you may be missing out on what you are legally entitled to.
This amounts to a ‘Windfall’ for the Insurer. They know it. And they love it.
The key advice is not to immediately accept what the reports prepared by the Insurers ‘Professionals’, but to get your own independent advice and the insurer should be paying for this independent advice!
Written by Adrian Cowie
Registered Professional Surveyor