How do you go about proving your loss? Of late people have been asking questions about how to go about this and who they should be employing in order to assist them in proving the damage to their property. There is no substitute for you obtaining your own legal opinion, which I advise, but in my opinion the issues are these:
The onus is on the insured to show that the event in question (an earthquake) was covered by the policy and that claimable loss has been suffered. The standard of proof is on the balance of probabilities, which means more probable than not.
As examples: in Loughlin v Tower Insurance Limited (2013) 17 ANZ Insurance 61-996, Tower failed to establish on the balance of probabilities that the Low Mobility Grout (LMG) repair they were recommending could be carried out for $390,000. The LMG repair was too uncertain and a payment based on it could not be regarded as representing the actual cost of repair. Based on the information available, no reasonable insured or insurer would have committed to carrying out actual repairs in this way. Hence, Tower Insurance Limited was in breach by attempting to fulfil its obligations under the contract through provision of a payment that did not meet the contractual standard of full replacement value. In contrast, in the recent judgement of Jarden v Lumley General Insurance (NZ) Ltd  NZHC 1427 the plaintiffs evidence was considered inadequate and unpersuasive in proving on the balance of probabilities that the damage was earthquake related. In satisfying the burden of proof the homeowner is required to establish the existence and cause of the damage.
This naturally leads to the question: How do I adequately prove my damage/loss?
Hiring the right professionals is key to ensuring that you, the policyholder, adequately prove your damage. Providing the professionals you employee with the right set of instructions is also key. If you are ‘over-cap’ your policy wording and the standard that the words represent form one of the vital aspects of those instructions. One of the more unclear aspects of insurer behavior to date is how, in fact, they instruct the experts they employ to assess the reparability of properties, ie. what standard the expert is to use to assess the damage. Often, we know that insurers have not only predetermined that a repair is possible but have instructed their experts to assess and scope repairs to the MBIE guidelines – a lower standard than the building code and not the insurance policy standard.
So which professionals should you be using to adequately prove your loss and how should you be instructing them?
It is a difficult decision to make as there are so many professionals out there with different skill sets: builders, cadastral surveyors, surveyors, engineers, building surveyors, pool specialists, quantity surveyors, concrete specialists, weather-tight specialists, underfloor heating specialists and the list goes on. Your decision as to who you choose will in part be determined by the nature of your damage. Below I have listed some key professionals. You should discuss with the professionals whether their skills-set fits your needs. Where appropriate, you should also instruct them that you only want assessments that are carried out to the insurance policy standard.
Surveyors might be your first port of call. Land surveyors determine property boundaries and prepare maps and survey plots. Cadastral surveyors are a branch of surveying which is concerned with the survey and demarcation of land for the purpose of defining parcels of land for registration in a land registry i.e. in the establishment and re-establishment of ‘real property’ boundaries. This involves applying both the spatial-measurement principles of general surveying and legal principles such as respect of neighboring titles. The Surveyor-General sets the rules, standards and guidelines and audits the work of surveyors. See: http://www.linz.govt.nz/land/surveying#sthash.m3Ues20o.dpuf http://www.surveyors.org.nz/. In the earthquake context a surveyor, cadastral or otherwise, measures “the numbers”, i.e. how much the house has sunk, the floor tilt present, the verticality of walls, width of cracks in foundations, and the amount of lateral spreading etc. and also whether your boundaries have moved or not.
Reports likely to cost aprox: $10,000 -15,000 plus GST
Geotechnical engineers report on the ground conditions. Geotechnical engineering is the branch of civil engineering concerned with the engineering behavior of earth materials and uses principles of soil mechanics and rock mechanics to investigate subsurface conditions and materials. They also determine the relevant physical/mechanical and chemical properties of these materials; evaluate the stability of natural slopes and man-made soil deposits; assess risks posed by site conditions; design earthworks and structure foundations as well as monitor site conditions. This is often a pre-requisite before repairs can be scoped after earthquake damage as foundations and the bearing quality of the ground are often affected. A responsible insurer will usually ensure that this work is carried out at the outset of scoping of repairs.
Reports likely to cost aprox: $10,000 -15,000
In the earthquake context a geotechnical engineer might determine and designs the type of foundations (shallow or deep), earthworks, and/or pavement subgrades required for the intended man-made structures to be built or repaired upon. See http://www.nzgs.org/about/. Geotechnical engineers will often use the services of other Geophysical specialist companies who carry out foundation/subfloor inspections, moisture assessments, Multichannel Analysis of Surface Waves (MASW) and Ground Penetrating Radar (GPR), Shear wave velocities, Depth to bedrock, Void/cavity location, Vibration monitoring, Pile length and integrity testing and subsurface information on liquefaction areas and other post-earthquake ground information.
Reports likely to cost aprox: $10,000
Structural Engineers have the task of formulating the repair and rebuild strategy. They deal with the analysis and design of structures that support or resist loads. Structural engineers must ensure their designs satisfy given design criteria, predicated on safety (e.g. structures must not collapse without due warning) or serviceability and performance. Structural engineering theory is based upon applied physical laws and empirical knowledge of the structural performance of different materials and geometries. When employing an engineer make sure they are Chartered Professional Engineers (CPEng). This is a statutory title under the Chartered Professional Engineers of New Zealand Act 2002, which establishes a register of Professional Engineers whose competence is up-to-date. See https://www.ipenz.org.nz/ipenz/
A structural engineer can assess the structural damage and uses the results from the surveyor and geotechnical engineers to come up with a repair strategy or rebuild strategy to the correct standard based upon your insurance policy entitlement. Be sure they have a copy of the relevant policy wording from your insurance policy.
Reports likely to cost aprox: $20,000
Building Surveyors are professional building consultants who have extensive knowledge and experience in construction and building related matters i.e. ‘building fabrics’. They generally work on the design and development of new buildings as well as the restoration and maintenance of existing ones. Their area of expertise encompasses: Building defect or building failure investigation and reporting; Inspection and premises condition reporting; Interpretation and reporting on construction compliance issues; Members who have completed specialist courses in weather tightness have [Certified Weathertightness Surveyor] alongside their name. See http://www.buildingsurveyors.co.nz/ .
Reports likely to cost aprox: $15-20,000
Quantity Surveyors are also professionals working within the construction industry. They are concerned with construction costs and contracts. They measure and estimate the cost of resources for repair or rebuilds on residential or commercial projects. See http://www.nziqs.co.nz/ These are the professionals who will price any agreed scope of work.
Reports likely to cost aprox: $6000-8000
An experienced builder may also be able to cost a repair or rebuild as they often have experience in ‘real-world pricing’, but without a set of complete drawings of the works proposed they are likely to provide a ‘guesstimate’ only.
Reports likely to cost aprox: $5000-6000
And then there is the lawyer. I believe that it is vital to have the right legal representative who really knows the insurance business. The reality is that there are very few of this breed in Christchurch. The costs of legal representation are very expensive, I will not put a figure on it as it varies from case to case. But choose your representative very very carefully.
You will see above that the costs for the expert reports alone, could be in the region of $90,000. But do not lose heart – it could be that you will require only one of these reports to prove your loss.
So who pays for all these reports?
The answer to this question will be dependant upon your Insurance policy wording and the decision you intend to take regarding the property. As an example let’s use the relevant segment of my policy wording.
I’m insured with State Insurance/ IAG and my policy reads “if you have a loss that is covered by this policy and you repair or rebuild the home, we’ll pay… the following costs, as long as they were necessarily and reasonably incurred: (a) architects’, engineers’, surveyors’, building consultants’, legal and council fees“…
Well that would seem reasonable enough. However to date, of the professionals we have had onsite only a tiny fraction of the costs have been paid by the insurer. This is not an unfamiliar story. Many of the people who talk to me about such matters have requested the insurer pay for a particular report required by both parties to progress the claim e.g. a survey or a geotechnical report. The evidence that I have collected suggests that many insurers are simply refusing to pay the costs for particular professionals. This has a knock on effect for the home owner – how is the homeowner going to prove their loss if the insurer wíll not assist with the funding of the reports. And let’s face it, many of these reports are expensive and particularly in the case of geotechnical reports, have the potential to provide bad news that the insurer really does not want to hear………..
Under these circumstances it is hard for the policyholder not to come to the conclusion that this is simply another tactic by the Insurance industry to prevent homeowners from being able to adequately protect themselves and thereby losing out on their full entitlement. As I read through judgments such as Jarden v Lumley General Insurance (NZ) Ltd I wonder whether the judiciary has any idea of the financial burden placed on policyholders who are having to fund these expert reports in order to prove the full extent of the damage to their properties.
Certainly, it would appear that this is an area that requires a change in the legislation ensuring that the insurance industry is more transparent in the contractual wording around what it will or will not pay for. Alternatively a legislative change or clarification is required in the actual extent of the burden of proving loss for the policyholder. The logical conclusion, once again is that it is only justice for the wealthy – justice for those who can afford to pay for the required reports to progress their claims in an honest manner, based on accurate information.
It is becoming clear that the insurance industry’s reluctance to do so is simply another one of the facets of ‘deny, defend, delay’- which seems to be the standard operating creed of the Insurance industry. Inadequate accurate technical information invariably weighs to the advantage of the insurer and always results not only in ‘low-ball’ offers and poor ‘repairs’, but also contributes to future problems with Christchurch’s housing stock.