The first earthquake in September 2010 caused some damage which fell within the New Zealand Earthquake Commission (“EQC”) coverage cap. Repairs were completed and EQC paid for the costs in full.
The February 2011 earthquake cause more significant damage which the assessor estimated at $300,000, but the Insurer’s Project Managers estimated at $151,465.98. The client did not accept the Project Managers estimate and felt that the scope of works did not cover all the damage.
The matter dragged on with the client feeling that the Insurer were deliberately stalling. 18 months later, in November 2012, the client was so feed up from living in a damaged home and the stress of ‘fighting’ their insurer that they sold the house ‘as is’.
The Insurer then advised that in this situation, the client was only entitled to an indemnity settlement which the client accepted on understanding the policy conditions on being able to claim the cost of reinstatement even though they felt they had no choice but to get their lives back on track. The issue then was what was a fair indemnity settlement.
A pre loss valuation of the property was completed that had the Replacement Value at $1,040,000 and the Indemnity Value at $740,000. The Insurer then took the novel approach of taking this 28.8% difference and applying it to the repair cost to establish the indemnity settlement on the repairs. The net result of this was that once the EQC contribution and the policy excess were deducted, the client owed the insurer $8,485.34. The client was not happy with this and tried to argue their case. It was going nowhere.
LMI heard about the case recently from a broker, who during a visit to his office, asked if we could get involved. We subsequently reviewed the clients file (as well as the Insurer’s and their Project Managers files which the client had obtained under the Privacy Act) and, on 24 June 2013 Tony Howie of LMI wrote to the Insurer on the clients behalf pointing out their error in calculating the indemnity settlement and recommending settlement at estimated market value pre-loss less what was achieved and commission. The Insurer referred Tony’s letter to their legal department who agreed with the logic of Tony’s calculation.
The Insurer had their Disputes Resolution Manager meet with the Insured last week and Tony got a call from them last week advising that they were proposing to settle the claim as LMI had recommended plus reimburse our fee which was not technically covered by the policy and was unsolicited.
The clients latest response in an email to Tony reads: “I am stunned they are not looking to prolong the pain! Would you like to send me your final invoice and I will pay that. Thank you so much for your assistance in achieving this great outcome.”
“I don’t think they will ever be a fan of [insurer's name withheld], but at least this has helped to reduce the negative feelings I have to the insurance industry.”
It is disappointing that a client felt is necessary to sell up their family home which has so many good memories for them. It just shows the damage that can occur when claims can and do go off the rails if they are not carefully managed. What is pleasing is that once a detailed explanation of the true measure of Indemnity was spelt out to this insurer they met the claim as calculated in full.
Like so many claims we do, it would have been much better had LMI been appointed much earlier to keep this claim on the rails and the claim settled years ago. Had we done so, I genuinely doubt the client would have found it necessary to sell their home.
Having said this, as I said, claims do go off the rails, but in this case, once the error was pointed out, this insurer did do the right thing with a personal visit, apology and agreement to meet the fees incurred to obtain the right advice.
I would end by thanking Tony for his work on this matter and to remind readers that LMI have a team of experts like Tony in 7 offices around Australia and New Zealand. Visit www.LMIGroup.com to learn more.