With recent severe weather events impacting New Zealand’s property market, the Earthquake Commission Act 1993 (EQC Act) has undergone major reforms and will be replaced by the Natural Hazards Insurance Act, effective from 1 July 2024.

Although the new Act won’t apply retrospectively to Cyclone Gabrielle-related damages, it introduces significant changes to support residential building and land damage claims starting from 1 July 2024.

Key Changes in the New Act

1. Renaming and Broader Coverage:

– The Earthquake Commission will be renamed the Natural Hazards Commission (Toka Tu Ake) to reflect its expanded scope covering a wider range of natural hazards.

– The definition of ‘natural disasters’ now includes landslides, storm surges, and subsidence events.

2. Increased Coverage Cap:

– The cap on residential buildings cover will rise from $150,000 (plus GST, per dwelling, per event) to $300,000 (plus GST).

3. Improved Claims Guidelines:

– The Act provides detailed rules and guidance for multiple claims on mixed or multi-use designated buildings.

– Clarifies claims relief for damaged retaining walls, bridges, and culverts.

4. Revised Standards of Cover:

– Buildings will now be covered on a ‘replacement cost basis’ rather than the previous ‘replacement value’ standard.

5. Land Claims Restrictions:

– Land claims will be measured by the actual loss suffered, with claims capped at the market value of the land.

6. New Zealand Claims Resolution Service:

– Establishment of an independent tribunal to assist with dispute resolution, modeled after services created following the Canterbury Earthquakes.

Core Aspects Retained

– The Act continues to apply to residential buildings and land only.

– Coverage is available only to those with a private insurer for their residential buildings.

– The Act covers the same types of natural hazards and risks such as earthquakes, landslips, volcanoes, tsunamis, and hydrothermal activity, and now includes flood and storm damage to land.

Unique Aspects of New Zealand’s Scheme

– The government remains responsible for the first line of insurance cover, with private insurers providing top-up cover.

Seeking Legal Advice

While the new legislation offers greater clarity and structure for natural hazard claims, obtaining experienced independent legal advice can be crucial in navigating these insurance contracts effectively.

Leading law firms offer fixed-price Initial Consultations to help clients quickly understand their options and ensure they are well-informed about the new insurance framework.