Just when we think Mother Nature has it all out of her system for now, she strikes again. The recent 7.8 magnitude quake has upended not only the landscape, but, once again, many lives and livelihoods.
It serves as a reminder to us all, we live in “The Shaky Isles”, and we all need to be prepared for the worst to strike at a moment’s notice. Living so close to the Alpine Fault, are we really ready?
Before joining us at Aspiring Law, our Family Law specialist, Gillian Stuart, had settled in Christchurch, after coming here from her native Scotland. She and her husband lived through both the September 2010 and the catastrophic February 2011 earthquakes, experiencing it through the lenses of both residents and business people.
Here, Gillian gives some insight into what they went through, what they learned and what we can all do in terms of preparing personally and business-wise should disaster strike.
When the first of Christchurch’s quakes struck in September 2010, my husband and I owned a café/bar.
Like many businesses, the damage was such we had to close the doors for around a week to allow for the Christchurch City Council to check the building and for the clean-up.
The Boxing Day tremor of 2011 meant another few days’ closure.
When the worst of all the quakes struck on February 22, 2011, our building was destroyed. Our café’s doors were closed for good.
Our family home was also quite seriously damaged by both the major earthquakes, starting in September 2010, and the endless subsequent aftershocks.
Knowledge is power, so I thought I would share with you some of my experiences from the perspectives of a lawyer, a business person and also a resident having lived through the ongoing trauma of dealing with the earth’s unpredictability, together with EQC and insurance companies.
My overarching advice? Do your research, and prepare the very best you can.
Preparing your business for a disaster
If you are renting, check the terms of your lease and make sure that you know your rights and obligations. After the Christchurch experience, the Auckland District Law Society (which produces agreements for use throughout the country) changed its standard lease forms. It’s really important you’re au fait with the fine print to ensure you understand what your rights are should the worst happen, and can plan accordingly.
In February 2011, many businesses in Christchurch found themselves within excluded “red zone” areas. Some business properties weren’t damaged at all, but couldn’t trade as they were in the no-go CBD “red zone”. Other properties could open, but had no customers due to a myriad of other earthquake-related reasons.
The lesson? Understand your lease and also, understand your insurance cover.
Many business owners had continuation insurance (also known as “loss of profits” or “business interruption” insurance) but felt they were no better off than those who didn’t, due to the stipulated stand-down period or the fact some businesses could open but had no customers, due to their location. By the time the policies kicked in, many businesses were no longer financially viable.
If you have continuation insurance you must understand exactly how it operates and what you are covered for and, more importantly, what you are not covered for.
The government brought in relief for payment of employees in Christchurch and have done so again in Kaikoura. In the recent Kaikoura earthquake, which has also affected Wellington, the government relief scheme excluded a significant number of the capital’s businesses. Many insurers have imposed hefty excess provisions making it too expensive for some businesses to claim under those insurance policies.
Have you adequately insured your stock and business chattels? Many hospitality businesses in Christchurch discovered that the contents of the likes of freezers were specifically excluded under their policies.
You need to know the nuts and bolts of any insurance policy you sign and make sure that it covers your particular circumstances. Write a list of what is important to your business and then check that off against the policy. If you’re not sure, contact the insurance company or your broker and get written confirmation of the precise details of your insurance cover. The excesses on your policy are often what can make or break a business. It’s common to see an excess of between 5 and 10 percent of the sum insured, together with a stand-down period. Does your policy actually exclude or limit your cover if the damage is caused by an earthquake? I know several business owners in Christchurch who were very disappointed and shocked to find out exactly what their business interruption insurance didn’t extend to.
Pre-earthquake, many hadn’t spared a thought to the day-to-day practicalities that quakes of the scale experienced by Christchurch would bring. If the same fate struck here, is your IT backed up somewhere off-site, for example? How are you going to retain important files, records, documents? Do you actually have a disaster plan that your staff are familiar with? Do you have up-to-date contact details for all staff members?
Preparing at home for a disaster
I hope everyone by now knows insurance in New Zealand is on a “sum insured” basis, as opposed to “full replacement” insurance and understands the difference. The onus has been moved to the house owner to make sure that they have adequately insured their property. It is essential that you understand what you’ill need your insurance to cover in the event of the worst happening.
It’s not a question of just materials and labour to rebuild your home. There are a plethora of “hidden extras” that need to be understood, scoped and factored in. In the event that your house requires a total rebuild, insurance needs to cover the cost of demolition, as well as architect’s costs, council fees and everything that you’d expect starting a build from scratch. Post Christchurch, I know of many people who had grossly underestimated demolition costs, and several who were left with empty pockets as a result.
Others were left shocked about where EQC draws the line on payouts – it covers damage to your house, your land and your personal property. It does not, however, extend to damage to paths, driveways, fences and swimming pools.
Many, arguments took place between EQC and insurance companies as to who was responsible for what. My own insurance claim for my home finally settled in April this year … after five years of “discussions” with my insurance company. It took 18 months arguing with our insurers about what was actually holding up our house – and that was even with us having an engineer write to the insurance company and tell them. As a result, 18 months after the February 2011 quake, the insurance company panicked, and we then had our emergency repairs completed. Most policies provide you an allowance for the costs you will have when you are out of your house having it repaired. What they fail to advise is that emergency repair costs are often deducted from that allowance.
Your private insurance covers paths, driveways, fences and swimming pools. Private insurers do not insure land; these claims are dealt with by the EQC’s land team. Land, however, covers retaining walls, bridges and culverts. The EQC cover for land damage is limited to indemnity value. It is essential that claims are lodged within the three-month time limit for making EQC claims. If you do not do so your claim may be declined. In Christchurch, due to the number of aftershocks, it was common to see numerous claims, each relating to a different “event”. In that situation, EQC then apportions the damage to each separate earthquake claim.
If your property is damaged or lost as a result of a natural disaster, take legal advice at an early stage to help avoid the very many pitfalls that are potentially out there. It’s also essential that, once you have had your property repaired, you make sure that you have received and retain all of the proper documentation as, when you come to sell, that paperwork will be needed. Banks will require purchasers to provide that information setting out the extent of the damage and how it was fixed. Not having the documentation available can impact on the sale value.
A common feature of many claims in Christchurch was that, once a full investigation of damage had been completed, EQC decided that the amount of the claim was more than the statutory cap, and transferred the claim to the private insurer. When that happened. the claim went back to square one and the negotiations started afresh with somebody new – the private insurance company. It is, therefore, very important to get detailed information of the damage and the resultant repair costs at an early stage. The sooner you find out whether you are under or over cap the better.
On a practical note if you have no electricity or water what are you going to do? How are you going to cook? Do you have a supply of batteries? The sale of wind-up torches rocketed in Christchurch post quakes. If you have to leave your house in an emergency, do you know where all your important documents are kept? If you had five minutes to get out what would you grab, and where is it?
Some of the lessons from Christchurch have been incredibly harsh, and many are still suffering. If there is a positive that can come out of the fallout from such a cataclysmic event this, it is that others can be enlightened and have what many Cantabrians didn’t – forewarning, the chance to put in place strong contingency planning and make informed decisions.
Last updated 19 December 2016