Insurance law reform in place for natural hazards

With recent natural weather events and hazards heavily impacting the property market across New Zealand, the current Earthquake Commission Act 1993 (EQC Act) has faced major overhauls and is now being replaced by the Natural Hazards Insurance Act, effective from 1 July 2024.

While this new Act will not apply retrospectively to Cyclone Gabrielle-related damages, the core changes provide for industry-wide reform supporting damage to residential buildings and land from 1 July 2024.

Summary of the Changes

• Renaming the Earthquake Commission to the Natural Hazards Commission (Toka Tu Ake) to reflect the broader range of natural hazards which the scheme provides cover for;
• Broadening the definition of ‘natural disasters’ to include landslides, storm surges, and subsidence events;
• The cap on residential buildings cover will increase from $150,000 (plus GST, per dwelling, per event), to $300,000 (plus GST);
• Provision of further rules and guidance on making several claims on mixed or multi-use designated buildings, with clarity around claims relief for damaged retaining walls, bridges and culverts;
• Revised standard of cover for buildings being on a ‘replacement cost basis’, rather than the previous standard of ‘replacement value’.
• Restrictions around land claims which are to be measured by the actual loss suffered, notwithstanding any claim being capped at the market value of the land; and
• Establishment of the New Zealand Claims Resolution Service, an independent tribunal to assist with dispute resolution which is modelled from similar services established following the Canterbury Earthquakes.

The new Act retains some of the core aspects of earlier legislation, namely:

• Continuing to apply to residential buildings and land only;
• Provides cover only to those who have a private insurer for their residential buildings; and
• Broadly covers the same types of natural hazards and risks to residential buildings such as earthquakes, landslips, volcanoes, tsunamis and hydrothermal activity; although adds cover for flood and storm damage to land.

Furthermore, a unique aspect of New Zealand’s natural disaster insurance scheme is that the government is responsible for the first line of insurance cover, whereas the private insurer would be responsible for the top-up cover.

While the new legislation provides clarity and greater structure for claims arising from natural hazards, seeking experienced independent legal advice to support you in navigating these insurance contracts can make all the difference.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.