And it’s happening right under your nose.
For me, throughout the post-earthquake phase, probably the most critical and cynical practice that I have witnessed taking place right across the city during the course of the settlement of insurance claims, is that of the intentional use of the MBIE Guidelines by the insurance industry (and their complicit ‘independent experts’) as opposed to the standard implicit in the contractual wording contained in most homeowners’ insurance policies – the Building Code. The industry may be saving itself billions of dollars at the expense of a naïve, trusting or uninformed but vulnerable population.
The insurance industry has either conveniently or negligently extended the use of the MBIE Guidelines to scope repairs for the reinstatement of property to include properties which are over the EQC cap.(i.e. properties that have sustained more than $100,000 worth of damage). See my previous post https://thechristchurchfiasco.wordpress.com/2015/03/01/mbie-guidelines-sarahs-view-on-the-matter/. This behaviour often results in a devastating consequence for the policyholder.
I have watched this travesty take place in the assessment of my own property claim with State Insurance/IAG and in the statistics I am gathering. I believe they have sought to systematically reduce the value of the ‘repair’ scope by hundreds of thousands of dollars-worth of damage by the use of the Guidelines, all the while asserting that they are assessing the property to the ‘policy standard’.
The way it appears to work is this – In the initial phases, an insurer may send an engineer or a loss-adjustor to the property. This person commences scoping your property based upon the MBIE Guidelines – no discussion takes place with the homeowner, no explanation of the MBIE Guidelines is presented and the work required to ’repair’ your property is established to that standard. The standard falls outside the Building Act 2004. Unless the homeowner is alert, he/she will not even pick up on what is taking place right under their noses. The truth of the matter is – the MBIE Guidelines set a minimum standard of repair, for the Earthquake Commission (EQC) to use for ‘under-cap’ damaged properties under of the Earthquake Commission Act 1993 but they fall outside the Building Act and Building Code. They are not the law nor are they policy standard in the case of a claim against the insurer. It is not obligatory on the insurers to do this so why do they do it?
Using these lesser standards will mean that aspects of homeowners’ repairs may be seriously compromised as MBIE solutions produce different, cheaper and less robust methodologies of repair and the statistics show this to be over-whelmingly the case. This brings me to the next point – we are already seeing the consequences of MBIE repairs. All over the city repairs are failing. The quality of the housing stock in the City has been seriously compromised, and there will be another round of major battles between homeowners and insurers, including EQC, as homeowners try to recover from the loss of equity in their properties (perhaps collectively) and to rectify ‘failed repairs’.
Differences in quality arising from the MBIE Guidelines can be seen in ‘remediation’ of concrete slabs or piles, differences in the bracing requirements for the building, acceptance or not of packing under bracing plasterboard sheets, quality and/or replacement of wall linings, the extent of structural analysis and design used for the reinstatement, use of inferior ‘repair’ strategies such as epoxy resin injection or low mobility grout in cracks and under slabs, the amount of slab replacement required or considered acceptable, what constitutes a ‘when new’ construction tolerance and the list goes on and on. Even whether or not the local authority is required to inspect that the work meets the Building Code, is up for grabs…… Every one of these differences affects the quality of the homeowner’s ultimate repair, their settlement amount and ultimately, the future quality, desirability and value of their property. All the while the insurers are saving money. The consequences are dire as evidenced by this article: http://www.stuff.co.nz/business/71021676/eqc-foundation-repair-shortcomings-revealed
Also worth noting is the fact that not content with shafting you once, over the last three and a half years the MBIE Guidelines have been revisited on three separate occasions – each time to a ‘looser’ and cheaper standard in engineering terms and insurers have instructed their engineers in some instances (as has my insurer, State Insurance/IAG) to down-grade their initial assessment and scope in line with the MBIE downgrades also – in bad faith. They have done this while also maintaining that their assessment is to the policy standard. We can certainly conclude that it is a ‘double standard’. By scoping a repair to the cheaper MBIE standard, the property may also remain ‘under-cap’ or an insurer can avoid the cost of a ‘rebuild’ by claiming that the repair cost is far less than the rebuild – when often, if assessed correctly, a proper repair would be far more expensive.
The obligations of the private insurance industry are referred to in the MBIE guidance document. It states:
“8.1.2 The following are the obligations of private insurers:
- The reinstatement requirements of the private insurer will depend on the terms of the contract between that insurer and the insured person.
- These obligations can vary between insurers and even between different policy wordings provided by the same insurer. For example, it is understood that one insurer provides two different policies which respectively require it to:
- repair the building to the state it was in before the damage or pay the cost of repairing, allowing for depreciation and wear and tear, or
- repair or rebuild or to an ‘as new’ condition. “
For those of you who have not yet had repairs carried out my suggestion would be that you make sure that you understand the standard of reinstatement required for your property. Print off the relevant segment of your policy and hand it to any professional who comes anywhere near your property and make sure they know that you know.
As shown clearly in the attached video from the Ministry of Business, Innovation and Employment – the guideline document is not mandatory and the contracts with insurers at the time of the earthquakes take precedence once the EQC cap is exceeded. The MBIE guidance does not replace or supersede any private contractual agreement between the owner and insurer. Be sure that the tolerances for floors and walls referred to in any repair strategy are to the Building Code not the MBIE Guidelines.
Many of the engineers working for insurers, often working for construction companies that have ‘partnered’ with the insurer, seem to be under the misapprehension or (more likely) the instruction that figures provided in the MBIE Guidance across the technical categories (TC1, TC2, & TC3) are indicative of whether a structural repair may be or is, necessary. This is incorrect. The figures prescribed in the document were not intended to be prescriptive. These figures do not indicate if a repair should or should not be undertaken in accordance with the home owner’s insurance policy, they are there to merely supply ONE methodology for how one might go about that repair should it be undertaken. Your insurance policy probably requires something better. You need to ask the question why would your insurer choose the cheapest route rather than the correct route to repair your property? Bad faith?
Here is a clip which explains the position of the MBIE Guidelines and its position within the legal frame work.