insurance forum august 2014

We Didn’t Know Enough

Insurers Leading with PMO’s Did Not Work

We Can’t Do This On Our Own

We Need Good Quality (HONEST) First Tier Information

Consultants | Contractors Must Understand Our Policies

We Must Understand Our Policy

We Must Try to Be Pragmatic and Unemotional with Insurers

We Have to Be Prepared to Prove Our Own Loss

The Planning Meeting

Know Your Responsibilities as a Post Disaster Home Owner

Be Confident About Talking to Your Insurance Policy

Fight the Barriers of Indecision

Retain the Value of your Homeand Protect Its Integrity

Take Ownership of the Consent Process

Know How to Get Started (or Restarted)the Right Way

When to Mediate or Litigate

• Roger Bourke – Visible Skies• Cam Preston – Financials• Bevan Craig – Underfoot• Adrian Cowie – Topografo• Zoran Rakovic – Structura• Stewart Harrison – Harrisons QS• Dean Lester – Insurance Advisor• Grant Cameron – GCA Lawyers

• David Hutt – CCC

• Ken Pope – RAS

• Malcolm Macmillan - MBIE

• Sarah Miles – ChCh Insurance Fiasco |Claimant

• Lorraine Guthrie - CIAS

• Lester Bryant – Asset Sure Quality Surveyors

• Chris Fleury – Pro Claims

• Warwick Shaffer and Other – EQC Claimants Group

PRESENTERS SUPPORT

DISHONESTY

MISINFORMATION

CONFUSION

ISOLATION

INDECISION

LACK OF EXPERIENCE

POOR QUALITY LOSS EXPENSE

The Claimant Experience

TIME CAN BE A FRIEND

PROVE LOSS

BE WARY OF OUT OF POLICY SETTLEMENTS

CANNOT DO IT ALONE – NEED TO ENGAGE EXPERTS

KNOW THE CONSENT PROCESS

CONSULTANTS MUST KNOW YOUR POLICY

(AND SO DO YOU)

MONITOR QUALITY WORK TOGETHERBE DECISIVE

IN MY POLICY IT SAYS >>IT DOES NOT SAY >> IN MY

POLICY.

Let’s Change the Experience

The Project Management Process

Initiating Planning Executing Closing

Appropriate and Timely Communication | Education | Training

Monitoring and Controlling

Prove LossScopesInspectionsContractsCosting AssessmentsMeeting SchedulesTimelinesBudgetsDesign

Detailed PlanningRisk ManagementRoles & ResponsibilitiesResource Allocations

Doing the Do Reviewing against goals, budget, timelines.Defect ListsDebriefClose out documentation and reportingHandover

Understand the Project Management Process







Appropriate and Timely Communication | Education | Training

Hand Out Provided



Appropriate Communication





Hand Out Provided

CAM PRESTON – INSURANCE COMMENTATOR

Talking to performance of a range of insurers

Analysis of Current Progress

1. Target Settlement Dates

2. Claim Settlement Progress

3. Financial Drivers

Cam Preston

1. Target Settlement Dates

1.1 Target Settlement Date - Southern Response1. September 2011 Press Release from AMI:

2. December 2012 Quote from Peter Rose in The Press:

3. May 2013 Press Release from Hon Gerry Brownlee:

4. February 2014 Press Release from Southern Response:

5. July 2014 Southern Response’s latest Statement of Intent published 7 July 2014:

1.2 Target Settlement Date – IAG (State, NZI, Lantern, BNZ, ASB)1. December 2012 IAG Press Release:

2. June 2013 The Press 12 June 2013::

3. July 2014 Question to IAG:

1.3 Target Settlement Date– Tower

May 2014 Article in NBR:

2. Claim Settlement Progress

The Reports Insurers Used to Provide

June Survey? “The latest survey was conducted on 1 July and then takes about 4-5 weeks to formalise returns, CERA to go through verification/review process etc. So I’m expecting release around 8 August”

-ICNZ

What they provide now!

2.1 Claim Settlement Progress

Southern Response


Southern Response v IAG

Looking very similar!


All Reporting Insurers

Other Insurers? We asked them

Vero, Lumley, Westpac, FMG, MAS, Ansvar:

“Ask CERA we give them our data”

They Said….


EQC

Q: “Your news release and website state that EQC has 15% of properties with a building left to settle or approx. 25,631 properties. Your website states that approx. 11,980 of these will be settled via the EQR home repair programme. How many of the remaining 13,651 properties are in dispute or joint review with private insurers?”

A:

Actual numbers are more telling than percentages

3. Financial Drivers

EQC Cost SummaryTotal Cost of Canterbury Earthquakes: $12.5blnLess: Reinsurance recovered overseas: $4.5blnLess: EQC Disaster Fund: $6.0bln

Equals Crown bailout required: $2.0bln

A $2 Billion Shortfall

Where did the $2.bil shortfall (GAP) go? Who paid for it? The homeowners?

Bridging “The Gap”

A difference in opinion between Treasury and EQC??

Insurers in Distress:EQC - $2bln taxpayer guarantee “untriggered”AMI - $1bln taxpayer guarantee “triggered”Tower – Recapitalisation was requiredLumley – Recapitalisation was required – IAG since purchased

AMI Put Funds into Government Bonds – between 750 – 1.5 billion

Insurers not in Distress - IAG

Insufficient reinsurance arrangements by EQC, AMI, Tower and Lumley and possibly others have turned the

EQ response into a giant exercise in ‘cash flow management’ for them.

IAG have tucked themselves in behind the pack to maximise its profits and purchase some of those in

distress (AMI/Lumley).

What does it all mean for YOU?

Predictions:

1. EQC will continue to minimise its claim liability for buildings and land in order not to ‘trigger’ its Crown guarantee – but claims will continued to be passed to private insurers.

2. Southern Response will continue to minimise its claim liability for buildings in order not to breach the ‘already triggered’ $1bln Crown guarantee.

3. IAG will continue to try and stay out of the limelight, hiding behind the spotlight on EQC and Southern Response.

4. EQC and Private Insurers’ tactic will be to minimise their risk via cash settlement of remaining claims.

5. ‘Delaying’ and ‘controlling the process’ are the primary tools in their arsenal to achieve that objective.

Bevan Craig – Underfoot Services

Christchurch the next

Creaking Home Disaster

We are the cracked City

Who is Who?

We are being told we can be glued back together again

Left on a repair site

The Reality of cracked Foundations and slab issues

In Christchurch

Bevan took us on a history of foundations

The crack on the outside

The other side of the crack

Pre 1970 foundations

Site rubbish and blocks in the foundation – common practice

Old blocks in foundations

River run | Stones in Foundations

More of the same

1970 - 1980 Foundation

River Run | Stones

Trying out testing on River Run | Stones used today

Like humpty dumpty the above

foundations and slab issues cannot be glued back together again

How the justification for these foundation and slabs being glued together is being sold as a

robust repair strategy – when in my view, it is not…..

THROUGH QUOTING OFMBIE GUIDELINES

Who Was Involved in Creating the Guidlines

Guide Line Status – It is a Guide

Or is it???

The Foreward States that “it gives solutions…that WILL reduce the risk of injury….

The reality is the Canterbury Guidelines have empowered unqualified people to assess damage and make judgement on structural repairs based on the size of a crack in the cosmetic plaster surface covering the foundation not the actual foundation itself !

A Surface Crack?

What lay beneath

US Example of When to Call…..

In New Zealand

US Example

Back to New Zealand

There are NO concrete epoxy crack repair standards for the building

industry in NZ

Who has allowed this to

happen

You and I Have

We did not realise that it is our responsibility under our policies to prove our loss, not EQC or the

Insurance companies

On the Inside

Foundation realities in Christchurch

Fully Repaired Foundation

Not Behind the Bushes

There were more behind these bushes

Guess Who you Are?

To Get an Accurate Costing

You Need

Accurate Facts

• A QS can only calculate based on the

information they are given.

• Inaccurate base information will give inaccurate

costings.

• Accurate base information needs to be

obtained by the expert.

Key Summary Points

Who is the Expert?

• They need to be able to determine earthquake

damage in their area of expertise.

• Each Claim should have input from Experts,

even if it is to confirm there is no damage.

• In some cases, significant damage has been

missed because an expert did not assess.

Purpose of Earthquake Assessments?

• Not to inflate damage to favour the owner

• Similarly, not to minimise damage to favour the

Insurer

• It should be to tell the truth and show all of the

Earthquake Damage.

• The Assessment should only stop when no

more earthquake damage is found.

Advantages of an Independent Expert

• If Insurer and Insured can agree on the Expert

and their report – it takes out a massive area of

contention in the claim

• There should be nothing to worry about in

knowing the truth.

• If there is no damage, then that is known.

• If there is damage, then that is also known.

In the Perfect World

• Insurer and Insured agree on who will carry out

the assessments. Insurer covers the experts

costs.

• The aim being to get an accurate, truthful

report that both parties can agree to.

• The Experts outline their findings, and justify

their findings in their report. All statements are

justified with detailed explanation.

What do you do?

• If the Insurer has already done the assessments

and you don’t agree with them

• If the Insurers have not yet commenced with

the assessments

• If you don’t have any money to fund your own

assessments

Three Scenarios

• Insurer and Insured agree to independent

assessments so that they can work together

and hopefully avoid litigation

• If you have the funds, engage your own experts

• If you simply don’t have the funds. What do

you do?• CIAS, RAS, Advocates?

• But they need to have access to independent

experts!

Standard of Assessments

• The Assessor has to know what standard they

are assessing to.

• Is it the Mud Huts in Africa Standard?

• Is it to the ‘Life Safety’ standard?

• Or, is it to the Insurance Policy Standard.

• The Engineers and other Assessors need to

know this – and work to this.

Order of Assessments (sort of…)

• Surveyor (the Measuring Stuff).

• Structural Engineer (and Geotech Engineer)

• Intrusive investigations (slab coring,

voids, moisture, mould)

• Weather-tight Specialist

• Builder and other Trades

Then the

• Quantity Surveyor

• Solicitor

Summary

• If you are not satisfied with the assessment –

call in the Experts and get the right assessment.

A $10,000 report can make a $1,000,000

difference

• If you cannot afford the Experts?

Some General Information…..

General Information

• MBIE Guidelines are not your Insurance Policy

and most likely are not to the Policy Standard.

• Assessments should be based on your Policy

and Earthquake Damage not the MBIE

Guidelines

• Re-leveling – what does that mean?

• ‘Historic’ and ‘Pre-Existing’ – please explain

More General Information

• Flood zones and Building Settlement (Rout)

• Localised Settlement

• EQC IFV Land Claims

• Building Consents – no worse than before the

alteration or repair began – not to an ‘As New’ standard

• Consent Exemptions

Still More General Information

• Failed Repairs, due to

• Poor workmanship

• Poor Assessments

• EQC Undercap – there seems to be a trend of

overcap claims now becoming undercap

Finally

• Don’t Give Up.

• Talk to Someone – Ask for Help

• Your Insurance Policy is the legal contract which

specifies the standard. The MBIE Guidelines are

not the contract.

Zoran Rakovic

Chartered Professional Engineer

NZ Building Act 2004

• Section 121 – “dangerous buildings” - cannot be occupied.• Earthquake damage can render house “dangerous” under

S121.• However, most of the houses left standing are not classified as

“dangerous” under S121. You most likely own a house in this category.

• NZ Building Act 2004 does not require you to carry out any structural earthquake repair.

Your options

• Do nothing• Repair

Repairing a building

• Repair must be done to a particular, well defined standard.• Standards of repair range from “tart up”, over reinstatement to

“when new”, reinstatement to “as new” and ultimately full rebuild.

Who defines standard of repair

• Standard of repair is defined by the Owner of the house.• If the house is insured, and the Owner does not want to put in

additional funds, the standard of repair is limited/prescribed by EQC Act 1992 and/or terms and conditions of the insurance policy.

• Engineers, project managers and the like cannot and shall not define the standard of repair.

“Independence” of Engineers

• Often you hear that the Engineers are NOT given wording of the policy in order to keep them “independent”.

• This is inappropriate, as Engineers work to a brief, and brief is defined by the Owner.

• Therefore, Owners tell Engineers what standard of repair is to be achieved. Usually this is done by giving Engineers your insurance policy.

Briefing of Engineers

• Best document is on ACENZ website, called “Guideline on the briefing and engagement for consulting engineering services”.

• This document clearly states that quality of work is defined by Owner, through brief.

• Make sure that your or your insurer’s Engineer has clear brief which is aligned with EQC Act 1992 and/or terms and conditions of your insurance policy.

http://www.acenz.org.nz/home.aspx

http://www.acenz.org.nz/home.aspx

Building consents

• City Council ensures that, if building consent is lodged, that the proposed works comply with NZ Building Act 2004.

• Council does not know, nor they have ability to police, if the works comply with EQC Act 1992 or terms and conditions of your policy.

• The fact that there is building consent granted for repairs to your home, does not mean that the repairs meet EQC Act 1992 and/or terms and conditions of your policy.

Your right to access Engineers

• Engineers working on your home employed by third parties (i.e. EQC or your insurer) have duty of care to you.

• You have the right to access the Engineers (by phone, email, or to meet them), and they cannot refuse to answer your queries and concerns.

• Your primary concern is to ensure that Engineers are working to EQC Act 1992 or under terms and conditions of your insurance policy.

Accessing Engineers

• The best way is to phone them and request a meeting.• At the meeting, table your insurance policy and make it clear

that you are the Owner, and that you want to ensure that they have appropriate brief.

• Request acknowledgement in writing that they have received your insurance policy and that they will be working to meet its terms and conditions.

• If you do not have this confirmation, seek advice from your advocate.

HARRISONSQUANTITY SURVEYORS

Independent. Always.

“RANDOM to RESULTS”Helping you make the right

decision

About me

• Managing Director of Stewart Harrison Limited t/a HARRISONS Quantity Surveyors

• Registered Quantity Surveyor (Reg. QS)• Member of the New Zealand Institute of Quantity Surveyors

(MNZIQS)• NZIQS National Marketing Committee member• NZIQS Insurance Working Group member• Secretary of the Canterbury Branch of NZIQS• Member of the New Zealand Institute of Builders (MNZIOB)• Home owner (with AMI and lately State)

Food for Thought…

Measurement is the first step that leads to control and eventually to improvement.

If you can’t measure something, you can’t understand it.

If you can’t understand it, you can’t control it.

If you can’t control it, you can’t improve it!

Food for Thought…

The best way I know of to win an argument is to

start by being in the right.

If I were to agree with you then we would both

be wrong.

Food for Thought…

The most important tactic in an argument, next to being right…

…leave an escape hatch for your opponent, so that he can gracefully swing over to your side

without an embarrassing loss of face.

The many “deals” suggested by the Insurers•Repair •Replace•Buy another house•Build another house but on a different site•Build to Budget•Cash

Those Options cont.• What it all boils down to is the need to know the accurate

cost to repair or rebuild your existing house that satisfies the current NZ Building Code, no more – no less• It is a rare event indeed when the Insurer has the number

close to acceptable the first time around• M.A.S. for example do not “build to budget” but instead

tell you what the “betterment” items are in your new house and what your contribution toward those costs is• Insurers will tell you that you cannot have a heavy brick

veneer due to the increased size (read cost) of foundations• You must know your true cost to rebuild. Then you can

make an informed decision. End of story.

Who can do that for you?

THE ROLE OF THE PQS • Be a financial member of a recognised national body,

such as NZIQS, providing you with certainty that you are dealing with a professional governed by rules and regulations• Provide independent & professional advice• Have an understanding of Geotechnical and Structural

Engineering reports• Ask relevant and pertinent questions to geotech and

structural engineers• Provide accurate estimates using clear and concise

industry recognised formats• Be able to discuss/argue “scope” with your Insurer• Be able to negotiate “costs” with your Insurer• Always act professionally and with integrity

DRA, DRRA, BIR, SOW…….. • Whatever they call them they’re a fantastic document,

when correct• Some are better than others (Vero vs SR)• They capture everything in your house from the gross floor

area to the finish on your toilet roll holders• You must insist on these being accurate. You should not

ever accept “oh that, yeah that’s included”• And that is where there usefulness ends• However, some Insurers will then add pricing to them• Those that do have now provided you with a price that for

all intents and purposes includes for all the non-compliant items in your house, such as your single glazed aluminium or timber windows that must now be double glazed• Of course they then tell you it’s included but the priced

“scope” says something completely different

THE REPAIR ESTIMATE• Why is your house deemed a repair?

• Most likely due to damage which is over the EQC cap but is less than the replacement cost

• Is an engineers report important?• Yes, it’s probably the most vital cog in the wheel• Without one everyone is simply guessing as to the structural

damage and the method to repair that damage• Insist on your Insurer providing you with their engineers report• If they can’t provide one how are they able to substantiate their

estimate!• It must be signed by a Chartered Professional Engineer or CPEng

• The above applies to a similar degree for Geotech also

• The estimate then needs to be considered against the replacement cost to determine which is the cheaper option for the Insurer

THE REPLACEMENT ESTIMATE

• Why is your house deemed a replacement? • Most likely due to the significant damage which makes it

uneconomic to repair• That simply means the Insurer will always take the

cheaper option• Is an engineers report important?

• Not so much as the house is a rebuild• If enhanced foundations are considered then a geotech &

structural report will determine the new foundation system required

• The estimate then needs to be considered against the repair cost to determine which is the cheaper option for the Insurer

THE ESTIMATES – Repair or Replacement• The QS role: -• Visit site, take photos, measure up the house or check

the house does not differ from the plans provided• Don’t be alarmed if this takes an hour or a day, every

house is unique• Review the geotech and structural reports provided• Provide a draft estimate for your review and comments• Provide a final estimate to you• You can then decide whether to forward that estimate

to the Insurer• Defend / clarify the estimate with the Insurer or most

likely their PMO• Negotiate, argue, agree to disagree, escalate to the

Insurer if possible

THE ESTIMATES – Repair or Replacement

• The Insurers Job: -• Save money• Provide the least amount of information as possible• Keep you uninformed and in the dark• Convince you they are right – (you should question their qualifications,

scope, method, price)• Talk you out of engaging your own professionals

Remember• They do not want to repair your house• They do want to give you CASH• They want you to take over the RISK

Don’t ever believe insurers don’t know the true costs as they provided that to the reinsurers years ago.

Anything less than that number is PROFIT!

THE ESTIMATES – Repair or Replacement

•Can’t agree?• Move past the PMO – agree to disagree• You could simply be talking about $5 per hour on the hourly rate, or 10% vs 15% on margin, or timber windows vs aluminium ones etc

• Escalate to the Insurer• Seek an interim payment on the “agreed” portion• Discuss your options with your lawyer on the “disagreed” portion• Listen to those around you and their experiences• Listen to the advice you are given, there is little point in spending 10k to get 15k

Specified Sum Policies• This is an estimate to replace your house, detached structures, driveways, decks, paving, fencing etc• From the Insurers point of view they will pay UP TO that amount and it is the MOST they will pay• For those out there who think you are safe with a specified sum policy, think again• What we going through now with the Insurers is no different to what we will go through after another event using a specified sum, they will pay the least amount they possibly can• This is why it is so important to not be under insured• This is why it is so important to know your risk and what the cost of that risk is.

Specified Sum Policies – What to Insure!• Your house• Site and Ancillary items such as: -

• Detached garage or work shop or garden shed• Driveways, pathways, paving, decking• Pools and tennis courts

• Demolition of these items• Design, engineering and local authority fees, and any others• Inflation

• Your loss will occur on the last day of the policy, so there is a years worth of inflation• You have to consider the time to demolish, design, consent and tender your replacement house• You have to consider the construction period

• With this information you can make an informed decision as to how you see your risk

• Consider the risk between a fire vs an earthquake - is your driveway or fence or swimming pool at risk in a fire? Can you repair your own fences?

• The Insurer is passing the responsibility onto you. • You need to be informed

Specified Sum Policies – Enhanced Foundations• The Insurer is demanding that we include enhanced foundations• My questions to the Insurers are: -

• What are we insuring for - earthquake, fire, flood, slip, an aeroplane crashing on us?

• If for a seismic event, then please tell me how we allow for enhanced foundations prior to it?

• How do we engage intelligent people such as geotech and structural engineers to design special foundations for our houses before the seismic event has even occurred!

• (Granted certain parts of Christchurch and the rest of the country will be different because we mostly know where the damaged land areas are located in Christchurch or where known peat areas are for example)

• Surely the Policy must respond, and it does under “compliance costs”

Questions and Answers

• Summary to follow

WHAT AM I SEEING?

• The Insurers are definitely getting better• They are better to deal with• They know they need to have professionals engaged at some level• SR now has an “independent” PQS panel (we declined the

offer to remain independent)

• They have better people working for them than they did three years ago• Those people are more experienced and better qualified• The Insurers are accepting our estimates as a start point more often now, although they then use the red pen to reduce them! But it’s a better position than trying to get them to double their number

This is complex

‘We don’t know what we don’t know’

http://www.gcalawyers.co.nz/innovation-expertise-results/



The answer!

‘for every complex problem, there is an answer that is clear, simple and wrong!’

Constraints on progress

Decision fatigue General anxiety disorderWe trust peopleEasier to go with the flowIt’s cheaper to leave it to the insurer

What can we do?

Ask those who know - expertsIt’s a collaboration and it’s multi-disciplinary – Lawyer, – geotech engineer, – structural engineer, – quantity surveyor, – registered surveyor

Navigator

• Lawyer should provide strategic direction • In isolation, a QS or engineers report can’t help • Expert’s roles must be aligned with the particular policy

Understand the process

It’s not what your insurer puts before you

You must prove your damage!

What should happen

Claim made Loss adjustor or assessor Assessment report Expert reports as requiredRepair steps specified Contracts let to repair or rebuild

What actually happens

Assessors – often not qualifiedReports – constrained by the briefExpert reports – not obtainedRepair steps – limited, inappropriate or wrongRepair contracts – often long delayArguments

Why it breaks down

CONFLICT

For you - TIME, COST & HASSLE

For insurer - DELAY, DENY, DEFEND

Dispute resolution

Key objectives– Repair – Rebuild – Receipt of an indemnity payment in the interim

Matters in support– The law– The contract – policy & schedule – Facts – ability to prove your damage– Experts

Actual progress

Negotiate – Timeframe– terms

File proceedings – As an individual – Where applicable, as a class action

Benefits of class action

A Plan & strategic direction Unity – focus - supportCost minimisedProtection against adverse court costs Leverage– Strength in numbers – Ability to ‘see it through’ – Media– Political

Overcomes “delay, deny, defend”

Summary

Complex problem Get expert advice Cost may be repaid many times overCost may be recoverable Decisions made on facts Pathway is clear – Negotiate and settle– Litigate and achieve your entitlement

• Roger Bourke – Visible Skies• Cam Preston – Financials• Bevan Craig – Underfoot• Adrian Cowie – Topografo• Zoran Rakovic – Structura• Stewart Harrison – Harrisons QS• Dean Lester – Insurance Advisor• Grant Cameron – GCA Lawyers

• David Hutt – CCC• Ken Pope – RAS

• Malcolm Macmillan - MBIE

• Sarah Miles – ChCh Insurance Fiasco |Claimant

• Lorraine Guthrie - CIAS

• Lester Bryant – Asset Sure Quality Surveyors

• Chris Fleury – Pro Claims

• Warwick Shaffer and Other – EQC Claimants Group

• Sarah Marsh – SBS and Claimant

• Kay and John Parry

• Ian Campbell

• Jake Preston and Friends – Media and Sound

PRESENTERS SUPPORT

WHAT NOW?

TIME CAN BE A FRIEND

PROVE LOSS

BE WARY OF OUT OF POLICY SETTLEMENTS

CANNOT DO IT ALONE – NEED TO ENGAGE EXPERTS

KNOW THE CONSENT PROCESS

CONSULTANTS MUST KNOW YOUR POLICY

(AND SO DO YOU)

MONITOR QUALITY WORK TOGETHERBE DECISIVE

IN MY POLICY IT SAYS >>IT DOES NOT SAY >> IN MY

POLICY.

We Didn’t Know Enough

Insurers Leading with PMO’s Did Not Work

We Can’t Do This On Our Own

We Need Good Quality (HONEST) First Tier Information

Consultants | Contractors Must Understand Our Policies

We Must Understand Our Policy

We Must Try to Be Pragmatic and Unemotional with Insurers

We Have to Be Prepared to Prove Our Own Loss

insurance forum august 2014

Education

claim settlement progress

project management process

target settlement dates

planning meeting

iag press release

planning executing

insurance policy

target settlement date