An insurance policy constitutes the rights and entitlements for the policyholder under the insurance contract. The courts have long insisted that the parties are to be confined within the four corners of the contract in which they have chosen to enshrine their agreement. Nowhere in my contract with State Insurance or in your contract will you find reference to the MBIE Guidelines – they are neither provided for or even anticipated. The Guidelines were
‘dreamt up’ in 2010.
Clearly a private insurance policy standard provides for a higher threshold than the MBIE Guidelines. The Guidelines are in direct conflict with the underlying standard in the insurance policy of reinstatement “to a condition as similar as possible to when it was new” or words to that effect.
History of the Guidelines: The Department of Building and Housing published guidance on the repair and reconstruction of houses damaged by the Canterbury earthquakes in 2010. The guidelines were conceived in association with EQC, an engineering advisory Group and the Ministry of Building, Innovation and Engineering (MBIE). The guidelines provide Guidance on repair and replacement of not only foundations but also chimneys, roof structure, wall structure, roof and wall claddings and outbuildings.
The DBH document was issued as a guidance document under section 175 (chief executive may publish guidance information) of the Building Act 2004.
The Act states “Any information published by the chief executive under this section—
(a) is only a guide; and
(b) if used, does not relieve any person of the obligation to consider any matter to which that information relates according to the circumstances of the particular case“.
It must be noted that the methods and solutions presented in the Guidelines are not mandatory and as (b) above indicates, must be considered in light of a private insurance contract. Although these guidelines may be indicative of possible solutions to damaged dwellings they cannot and do not override the provisions of any insurance policy where damage is deemed to be above the quantum covered by EQC. EQC cover per dwelling is $100,000. It is to be noted that the Guidelines do not provide adequate solutions for the repair of much of Canterbury’s older housing stock e.g. rubble foundations. The repair solutions recommended for foundations do not take into account the land bearing capacity of the ground upon which the foundations sit, yet land capacity is a critical consideration for any repair methodology later adopted. Simply put, the guidelines have enabled insurance companies to employ people with little knowledge of engineering to make judgement calls about foundation repairs and other structural repairs.
The EQC Act clearly states that the insurance of any residential building, residential land, or personal property under Section 22 (i.e. voluntary insurance against natural disaster damage) shall be subject to the conditions set out in Schedule 3, unless as “otherwise provided in the contract of insurance”.
The relevant provisions of the EQC Act 1993 are s2, 18, s22, s27, s30 and Schedule 3 of the Act. The Guidelines arguably relate to the Act in that they created a method of reducing the possible cost of repairs in the event of a major natural disaster. One might argue that they are enforceable only by EQC and only in respect of repairs which are under the EQC ‘cap’.
Schedule 3 of the EQC Act (s9, Replacement of Property), states that EQC does not have a responsibility to replace or reinstate exactly or completely, but “only as circumstances permit and in a reasonably sufficient manner” unless the property is insured against natural disaster damage for its replacement value to a specified replacement sum which exceeds the EQC cover in which case the property will be treated as though it had never been insured under the EQC Act.
It appears that the MBIE Guidelines were created to enable EQC to replace and reinstate property only to a level it sees as being to a “reasonably sufficient manner“. There is currently a class action planned against EQC to test this standard of repair. The EQC Act makes it clear that any property insured above the EQC caps are to be dealt with under the auspices of the applicable private insurance contract. There was never an intention or instruction to extend the use of the MBIE Guidelines to private insurance contracts that exceed the EQC cover limits.
Since the implementation of the Guidelines, they have undergone several revisions – all of the revisions have led to a lowering of the level of the EQC insurance policy requirements for ‘under- cap’ EQC repairs (i.e. less than $100,000 worth of damage) as well as a lowering of the standards set out in the Building Code and have resulted in successive reductions to the standards set out in the building code.
The MBIE Guidelines contradict the requirements of the Building Act 2004 and are not part of legislation or the manufacturer’s specifications for particular products associated with repairs thereby denying insured policyholders their rightful entitlement under the Building Act and their insurance policy.
In the Building Code it states that all damaged and subsequently repaired elements shall comply with Clause B1 (Structure) and B2 (Durability) of the Building Code 2004 to substantially the same extent as they complied when they were new. This shall be established by rational analysis (i.e. specific engineering consideration). All replaced or newly introduced structural elements shall fully comply with B1 (Structure) and B2 (Durability) of the NZ Building Code. Demonstration of compliance of replaced and new elements shall be by rational analysis (i.e. specific engineering consideration). All structural work requiring consent must comply with the NZ Building Code.
One has to come to the conclusion that the private insurance industry has conveniently, mistakenly or negligently adopted the use of the Guidelines to all property, under EQC cap and over EQC cap properties (I.e. properties that have sustained more than $100,000 worth of damage and which revert to a private insurance contract for repairs).
The Guidelines were never intended to supersede the wording of private insurance policies, but to provide EQC with the flexibility of repairing under cap properties in a “reasonably sufficient manner“. This is likely to be the subject of a legal class action as the general feeling it that there should be no distinction between the level of repairs to damaged property. As matters stand it logically will result in a different standard of repair for under-cap and over-cap repairs’. This is hardly an equitable situation. This point can be further strengthened by reference to wording within the Guidelines themselves e.g. on page 5 of Part A : Section 2: Foundation Assessment Criteria and Approaches in Revised Guidance on Repairing and Rebuilding Houses Affected by the Canterbury Earthquakes relating to Foundation Assessment Criteria and Approaches it clearly stated:
“Some insurance policies may require a higher standard of reinstatement than suggested by column 2 of table 2.3″. 
Clearly that the Guidelines themselves have left provision for the need to take private insurance contracts above the EQC cap into account.
In our particular situation over the last four years State Insurance has used the MBIE Guidelines and their various revisions to down-grade a repair/rebuild strategy – each time to a ‘looser’ and cheaper standard in engineering terms – this is both incorrect and in bad faith. I am interested to hear whether other policyholders have had similar experiences? As a result we are beginning to see more and more of the problems http://www.stuff.co.nz/the-press/news/66816055/Shoddy-quake-repairs-revealed I predicted early last year (see https://thechristchurchfiasco.wordpress.com/2014/05/18/my-next-prediction-a-man-made-disaster-in-christchurch-part-i/.
 EQC Act 1993 s27
 p 14 & 15 DBH Guidelines