The recent atrocities in Christchurch with the Mosque attack brought home to BBCL the need to consider the potential impact of terrorism on Body Corporates.
Virtually every current Body Corporate policy has a terrorism exclusion from the material damage portion of the policy. If the Body Corporate has a concern regarding terrorism, whether for any specific reason or simply to ensure full coverage, additional cover can be obtained upon request. Should you feel that this is an omission from your current cover please contact your account manager.
Christchurch’s unique situation has brought a number of challenges to our Christchurch Body Corporates. The impact of Mother Nature has been both random and at times unjust. Equally the insurance industry and its associated broking fraternity have responded in a variety of different fashions. The catastrophic events suffered in Christchurch illustrate so clearly that the laissez faire attitude to insurance that many encompassed was shared not only by owners but also by many in the related industries.
One of BBCL’s Body Corporates has suffered huge challenges as a result of impreciseness in documentation relied on by the Body Corporate. This documentation was supplied by its broker and the insurer. This sadly has resulted in two lawsuits against both the insurer and the broker which have only caused further heart-ache to owners.
February 22 2011 saw the total complex declared an economic loss. To this day the Insurer still will not accept that (despite 50% being demolished under an order from CERA) and the remainder requiring temporary strengthening to leave it habitable pending a controlled deomolition.
The BC relying on a replacement valuation looked to design a replacement complex for its central Christchurch site only to be advised that the replacement cost is nearly double the replacement valuation it received. The extent of cover under the policy was disputed and an issue has also arisen as to whether or not EQC payments acted as an excess under the policy or not. A simple reading of the policy document would suggest it does however when confronted with the claim the insurer alleged it did not.
The issue of whether EQC’s payments acts as an excess has now been resolved by a full bench of the High Court in Auckland and the Body Corporate is delighted to have received the judgment issued by Justice Courtney which has affirmed that a clear reading of the policy does in fact apply.
The end result is that instead of being limited in recovery to the valuation estimate the Body Corporate is able to recover both that plus the EQC pay-out of $6.8 million plus GST. The total sum will certainly go a long way towards the cost of rebuild, if not completely, and will come as a huge relief to the 68 owners affected.
Managing claims of such scale and then preparing for rebuilding as required by the 2010 Unit Titles Act required a significant vote of faith by owners and their hardworking Committee in BBCL and the supporting professionals. BBCL share’s the owners delight at the successful High Court award and looks forward to progressing with the Body Corporate a complete rebuild over the coming years.
Whilst the position in terms of the impact of Christchurch’s quake on the New Zealand insurance market remains cloudy, it appears the insurer’s response will resemble post 9/11 where rates were increased virtually overnight and significant excesses have applied.
Most insurers to date have increased their earthquake rates drastically, as much as 70% for Auckland, despite being rated as the lowest statistical earthquake zone. Buildings will also be rated upon their age, with increases of up to 20% on buildings pre-1935 likely.
Most significantly, is the excess structure will change from a minimum percentage of loss to a minimum percentage based on site value. As a result, the current excess of 1% of loss may end up being many percent of actual loss – e.g. If a site was valued at $10 million and the percentage of site value is 2.5%, then the excess would be $250,000 for an earthquake, whether or not the extent of loss was $250,000 or $5 million.
The only thing that is certain is that costs will increase significantly, and only time will reflect the actual impact on premiums and budgets. We will keep you updated.
BOUTIQUE BODY CORPORATES LTD
Level 2 Ascot Central
7 Ellerslie Racecourse Drive
Phone: 09 524 9785
0800 4 BODYCORP
0800 426 392 677