"Highlighting the inadequacies of the way in which the earthquakes of 2010-2012 were handled by the insurance industry! "

Are the insurers morally liable? – Guest post by Herman Meijburg


In modern societies the moral principle of ‘do-no-harm’ is well established. Harm to the individual not only invades a person’s private domain but can have lasting life changing consequences for the individual concerned. Harm may well pose restrictions on a person’s well-being or ability to live life according to their own design. In our modern societies “to avoid harm” is a well-established moral “rule of thumb” in the interaction amongst people and organizations in any given circumstance.???????????????????????????????

Nevertheless “harm” does happen and comes to us all, in many shapes and forms. The big earthquakes in recent times here in Canterbury have caused harm to many. In the wake of those first shocks that rocked the City and its surrounds, Cantabrians lost their lives, thousands were harmfully wounded by falling debris, hundreds of thousands lost a safe place to live, many lost their assets and cherished heirlooms. Ongoing aftershocks destabilized the population mentally causing great distress and affecting how we feel about ourselves. Irreversible harm was done to prized relationships as some of us grieve over the loss of cherished companions, as we cope with permanent disabilities affecting our daily routines and activities. Many were out of work and lost their incomes. In those early days for most Cantabrians the “harm” done by the earthquakes was visible, accessible and experienced on a daily basis. The personal stories of many Cantabrians give a heartbreaking account of the extent of the harm experienced during the initial earthquakes and the subsequent series of aftershocks.

But harm is not only experienced as a consequence of natural disasters – harm is also inflicted upon people, by people. It is here that the moral principle of doing no harm comes into play. I know of a rescue worker who worked tirelessly on the site of the collapsed CTV building. He was engaged in a desperate attempt to help save the lives of those buried under the rubble. When he returned home after an exhausting 16 hour shift, he discovered that his home had been broken into and that others had robbed him of his electronic devices and an expensive collection of art materials. This home invasion required police investigation and prosecution, but the act itself must also be condemned on moral grounds because the buglers overstepped the rule of thumb not to inflict unwarranted harm on others. Morally speaking it was a despicable act.

Harm can also be done by the application of existing regulations, council policies, the enforcement of law or the handling of claims by insurers to name a few. Some of those institutionalized approaches are put in place to protect the interest of individuals or the common good of the community at large. To protect an elderly couple, who were adamant that they needed to stay in their collapsed property for the reason that everything they ever possessed was buried there under the rubble, Civil Defense nevertheless ordered them to leave the premises immediately for their own safety. The safety concerns of the representatives of Civil Defense and the risks to be averted by ongoing earthquakes were so significant that they overruled all other concerns and pleas by the habitants to let them stay where they were. However by doing so, Civil Defense unintentionally yet inevitably caused the elderly couple a tremendous amount of harm.

In similar fashion one can be sure that the many section 124 notices that have been issued have caused many Cantabrians harm. Those notices fundamentally disrupt the lives of those affected homeowners. Yet another example of how third parties intrude in the lives of Cantabrians in a harmful way is the reoccurring phenomenon of the “shoddy repairs” to earthquake damaged homes. On discovering that these shoddy repairs not only harm the value of the property but ultimately affect the home owner as they need to once again goes through the agony of having their asset properly fixed.

Finally, how about the assessment of the damage to a property by a loss adjuster or a structural engineer employed by the insurers, that proves to misrepresent the true nature of that damage and thus results in an underestimate of the costs of reinstatement, which in turn, may come to haunt the homeowner financially later on and may well have to ‘fork out’ the additional costs of the repair/rebuild!

So far we have demonstrated that “harm” can be inflicted upon people by a disaster out of their control, “harm” can be inflicted on individuals by other people, “harm” can be inflicted by authorities through existing policies or regulations. We have also alluded to the fact that harm can be inflicted by people who work for organizations like the insurers, implying these organizations themselves and the way in which they operate in any given circumstances can cause individuals harm and are, in doing so, in fact, violating one of the core moral principles of modern society.

The moral notion of doing no harm cannot only be compromised in an individual sense between persons, but also in the corporate sense, between persons and institutions. When the lives of people, recruited for a clinical trial by a pharmaceutical company, are adversely affected by side-effects, this becomes a serious breach of the no-harm principle. Although these side effects may not be anticipated by the company, the company is still held liable and must compensate for the harm inflicted. It stands to reason that all proposed clinical trials by the industry are ethically assessed before they can be executed. Today the do-no-harm principle is generally accepted by the industry and by most non-pharmaceutical industries as well, especially those industries which are consumer based. If organizations are found negligent in failing to take this principle into account while dealing with their clients, they fully understand that this will affect the way their customer base feel about the way the company operates and treats its’ clients. Companies don’t want to go there; it is a matter of survival in a truly competitive market. An example: over time the “deny, delay, defend” strategies in the tobacco industry have come to haunt them. Tobacco companies are now paying huge sums of money in compensation for the harm done to smokers worldwide. On top of that they have lost the esteem and confidence of the general public.

Many Cantabrians are now taking their insurers to Court. This is a very telling development. It reflects a situation that Cantabrians believe, that after four and a half years of struggling, they haven’t had a fair, honest and transparent solution to their claim from their insurance company. Instead what they have experienced is that their lives have been put on hold and that they suffered avoidable hardship. Many reports in the media reveal that clients feel fooled, abandoned and victimized by insurer’s tactics of delay, deny, defend. For some, the whole process was too hard to bear and they have opted out often accepting inadequate settlements as a way of no longer having to deal with this ordeal which has so adversely affected their lives. There are still 22,000 unsettled claims statistically equating to the disruption to some 50,000 lives.

Interestingly, the moral “no-harm” principle has become key to the libertarian way of thinking about how we deal with each other and how we go about doing business in our modern western societies. We can no longer go about our ways just as we wish. It is no longer “freedom for all”. To do no harm is the trade-off for exercising unlimited freedom. Today we accept that, in a moral sense, there are boundaries we need to accept in the way in which we treat each other and go about doing business. These self-imposed boundaries are legitimate and need to be respected. It is for the common good. When we, when companies, when insurers, for whatever reason,  no longer abide by these self-imposed rules and these principles we live by are abused, we find ourselves on very shaky ground. It threatens the very fundamental norms upon which our societies are built and what we consider to be abuses of our human rights.

In conclusion and in light of the above, taking the insurance companies to Court for poor performance after the Christchurch earthquakes may well have a solid moral justification too. Given the present situation the insurance companies have themselves created, I too hold them morally liable.

West Melton, February 22, 2015

Author: Sarah-Alice Miles

Love to write, create and watch the clouds move across the sky - these days in the Netherlands. 'Art allows us to find ourselves and lose ourselves at the same time'.

4 thoughts on “Are the insurers morally liable? – Guest post by Herman Meijburg

  1. I would argue, yes, Insurers could be held morally liable. Whilst companies must comply with applicable laws in order to legally operate, this alone may not be sufficient, as a social licence to operate based upon society norms can be as important to the success of the business as legal norms. If insurance companies continue to harm large numbers of Canterbury residents, by their business practices, they risk sowing the seeds of their own future demise. Whether that be by way of regulatory, legal, commercial, or consumer responses.


    • Yes Steve I fully agree with your comment. Actually it is why I raised the issue. Much thinking and arguing goes on about the legal implications. I am of the opinion that the present legal debate is about the interpretations and the implications of the contract between the insurance companies and their customers. This includes the discussions about the Building Code, MBIE guidelines, consents and the like. It even includes the debate around the “good faith” issue, which is also often mentioned, but must be interpreted as part of the contractual agreement between parties. In the first instance “good faith” is not a moral issue as such. It might become one if there is a breach of that contractual obligation between parties.
      The moral debate is in part a debate about the underlying values that shape common understanding in society what is key to the way we relate to each other as citizens and thus how we perceive how companies go about doing their business. It is very concerning to experience that some insurance companies have strategies in place that harm their customers. It is my personal opinion that in the end it will backfire and do their businesses more harm than good. Some executive decisions should have never seen the light of day. Once again thank you for your comment.


  2. Currently negotiating with State Insurance, I was struck by the sixth paragraph of the guest post by the Guest post by Herman Meijburg “Are the insurers morally liable?”. That paragraph reads “Finally, how about the assessment of the damage to a property by a loss adjuster or a structural engineer employed by the insurers, that proves to misrepresent the true nature of that damage and thus results in an underestimate of the costs of reinstatement, which in turn, may come to haunt the homeowner financially later on and may well have to ‘fork out’ the additional costs of the repair/rebuild!”

    It encapsulates my repeated experience with State, and earlier, with the EQC. In each case, the insurers have disregarded my own engineers excellent and thorough reports (and my own carefully worded good faith claims) and produced inferior and inaccurate versions of their own by way of their own “expert assessors” and contractors who, without exception, provide their opinions, carefully disassociated from any responsibility, with reports shot through with inaccuracies and omissions.

    The lead-up to meetings with State to settle questions of meeting their contractual obligations follows a now familiar pattern where personable university graduates with good degrees are used initially to soften-up the policy-holder with optimistic (and, I believe, honestly stated opinions) to be followed at the penultimate meetings by an older male “heavy” who dissipates the good-will generated with veiled threats and bromides such as … “The company (IAG State) is running out of money to settle Claim such as this”, … “All such Claims as yours must bee settled by (an imminent date” … “(the Insurer) will hand over all responsibility for repairs / rebuild to you, the policyholder, and further, not be responsible for any subsequent failure of the repair made” … and so on.

    It is of interest therefore, that within a few weeks of hearing such claptrap fro IAG / State I was able to read in “The Age” newspaper in Melbourne on February 19, (page 23, Results / Businessday) that “In New Zealand, IAG netted a margin of 19.2 per cent thanks to the lack of natural disasters during the period (2014). The article, which also informed readers that such an “underlying margin” is “a key indicator of insurers profitability” and that it had “hit 13.3 percent or the period”. New Zealand thus provided the best results of those quoted. A picture of destruction in Christchurch was labelled “After the big claims of the Christchurch earthquakes, New Zealand was benign for IAG in 2014” … not at all what I was advised by the (State) Senior Claims Adjuster.

    All in all the Christchurch earthquake disaster appears to have been good business for IAG /State. Apart from anything else it provided the grounds for simultaneously increasing its premiums while at the same time reducing its contractual responsibilities contained in its policies. Good business indeed … but bastardry in the Australian vernacular.

    It is my firm belief, formed slowly over the past four years, that older citizens are targeted for such treatment in the belief that they will capitulate there easier and simply accept what the insure offers … despite such offers being based on “desk-top studies” which largely disregard the actual Claims conscientiously made and documented by the policy holder. While this is bastardry (an Australian term which should be recognised by both IAG / State, as Australian companies) of a high order, further bastardry (based on my own observations) appears to operate in the prioritisation of Claims for settlement based on the hierarchy of wealth and influence of claimants.

    Such behaviour, commonly experienced, is deeply corrosive of community standards where fondly held beliefs as to the probity of the judiciary, the professions, and systems of governance established to ensure fair play and to protect the individual against the exercises of asymmetrical market-place power are now seen to have failed and to have been corrupted. A consequent loss of faith in our ability to maintain a just and productive society must follow … so let us not blame others for their declining standards of behaviour, descent to use of drugs and sense of community responsibility.

    Foreign-owned insurers such as IAG / State, in abandoning “good faith principles” in their dealings with individual policyholders in New Zealand who placed their trust in them, is sending us a signal which invites a commensurate reaction.


    • Thank you for your response Mr Crawford, you provide me and the readers with an example of a “lived in” experience. An experience which is all too familiar with those claimants whose properties were seriously affected by the Canterbury earthquakes. If you were able to attend the recent meeting as organised by claimants for claimants in the Transitional Cathedral on February the 23rd, you will have observed you are not alone in that struggle. It may be small comfort to you and your circumstances, but nevertheless it is of some relief to know that there are many others out there who are prepared to keep the insurers on their toes.
      You raised two matters that I would like to comment on. The first is that you mention that you have the feeling that ageing citizens/claimants are targeted because they are likely to capitulate sooner. I am of the opinion that insurance companies are learning fast that this is not true. And in my opinion that has to do with the fact that the ageing generation is of the “old school”. Let me explain what I mean. I was 69 when the first earthquake struck the area where we live. Our home sustained considerable damage and we needed alternative accommodation immediately; in that respect we have depended upon alternative accommodation ever since. But that is another story. It was my belief that in that time of great need insurers would do what we had paid them to do: to help to get us back on our feet by putting us back into a situation similar to where we were before the earthquake. To my surprise I was in for an unexpected experience. That experience has now lasted for nearly four and a half years. Soon I will be 74. How do I survive those years. By trusting my common sense, by relying on my education, by “employing” my professional career as a theologian and philosopher. I was born during the Second World War and educated in the fifties and sixties and what I learned in those decades was that one can only build relationships and go about doing business if, in your dealings with others, you were trustworthy, transparent and fair. That was an essential part of my professional package as well. I also learned that these were tools others were keen to use as well. And in doing so we were able to create a post- war society which was sustainable and participatory. Now I believe that, consciously or subconsciously, the now ageing generation carries this package with them and makes them very resilient in times of need. Probably more resilient than expected by todays’ generations. You and I don’t cave in easily. And if we have to stand tall, we will stand tall against those who insured our homes and belongings. Over the past four and a half years I have seen many reports in the media of how the elderly have stood up for themselves, giving EQC and the insurers a hard time in cases where those organizations try to steer us in directions we experience as out of step with the norms and values we learned to hold high.
      Secondly I would like to say something about that “good faith” clause in the insurance policy that is often referred to as basic to our agreement with our insurers. The term is part of the legal framework of the policy. It is an obligation for parties involved to act in good faith. In the first instance one may be tempted to think about it in terms of mutual “trust”. In their dealings parties need to trust each other. It sounds as though good faith, in the sense of trust, represents some kind moral notion. In a legal sense good faith is not a moral notion, but in the contractual sense it protects the insurers against fraudulent behavior of the insured. So actually it is not trust that underpins the notion of good faith, but mistrust on part of the insurers. In the policy, under the heading of good faith, insurers are protecting their own interests. The proof that you and I are not fraudulent lies on us, the insured. That is why in the process of getting our claims resolved we often feel as though we have to defend our take on the matter. That is why, when we get our own experts to help us prove the real extent of the damage and provide these reports to our insurer, the insurer send their own experts to check our reports out. The fact alone that the insurer drafts their own reports, leaves us with the feeling that our efforts have been in vain and are besides the truth. No doubt part of the reason why insurers will not pay for the work done by your and my experts. Of course the insurer will never tell you that. The good faith clause in the policy with many elderly insured is a cause of misunderstanding between the parties, because parties come from two different worlds. You and IAG/State come from two different worlds. A very confronting experience for the ageing generation and hard to bear. I sympathize with you James.


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