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Archived Updates

2015 Updates

April 2015 Cash settlement and pre-construction payment
February 2015 EQC caps and land claims
January 2015 Shared property and external works


Cash settlement and pre-construction payment

 April 2015

Cash settlement – what does it mean?

You may have seen in the media recently that many claims for earthquake damaged homes in Christchurch will now be paid out on a cash settlement basis.

Full and final cash payments are generally made where:

  • you don’t intend to repair or rebuild your property and/or
  • you may prefer to sell it on an ‘as-is-where-is’ basis; or
  • you intend to significantly alter your property.

Where this option is applied to a claim, the payment will cover the costs to repair the earthquake-related damage to your home. This is subject to the limits of cover provided by your policy, and the costs need to be both reasonable and necessary – and in some cases this may mean you are only entitled to indemnity value. As part of the process we’ll work with you to agree the cash settlement amount.

An alternative settlement option to a full and final cash payment is a pre-construction payment.

How is a pre-construction payment different?

A pre-construction payment is best suited for a reinstatement project that is likely to go ahead. It means that you’ll be able to manage the repair or rebuild of your property with cash in hand, up-front. We’ll continue to support your project to completion, and if we need to cover further costs under the terms of your policy, we’ll do so.

We set the amount of the pre-construction payment taking into consideration information provided by your lead consultant, such as a scope of damage, detailed design or tender, and it’s designed to cover the cost to repair the earthquake damage to your property to a condition substantially the same as new.

How does a pre-construction payment work?

In a pre-construction payment arrangement, you and your lead consultant will manage the design and tender process for your project, and we’ll set the payment amount according to the stage of the reinstatement process you’re at. For example, if you already have a scope of damage or detailed design, we’ll complete an assessment based on the estimated costs to complete the work. If you’ve already gone through the tender process, we’ll base the payment amount on that tender information.

In either case, based on the scope of earthquake damage and approved reinstatement methodology, the work is measured and priced by a Beca quantity surveyor applying up-to-date market rates. Where a payment is based on an estimate, we’ll adjust the amount once a tender has been accepted and the costs are more certain. This adjustment could mean that we pay you an additional amount, or sometimes it may mean that you need to return some of the initial payment to us.

What if construction costs more than expected?

We understand that additional costs can arise during construction. After a pre-construction payment is made, you can still ask us to pay you an additional amount to cover any further costs to repair earthquake-related damage discovered during your repair works.

Please be aware we’ll need to approve these costs before they’re incurred. We’ll work with you to verify whether the additional costs are reasonable and necessary to repair damage caused by the earthquakes, and you’ll need to be prepared to start the repair work without unnecessary delay.

We’ll also need to approve any changes to your project’s scope, repair methodology or materials, because these changes could impact the costs detailed in the scope of damage. If you choose to significantly alter the scope of your project, we may opt to offer you a full and final payment instead.

Working together

You may be aware that our programme partner Beca gives us technical advice to determine what costs are covered by your policy. To ensure that you get the benefit of up-to-date market rates, Beca has recently reviewed building industry trends in Christchurch and has combined this with their knowledge of the pricing we’ve seen in the tenders we’ve received. This also gives us confidence that the rates we’re using are fair and reasonable.

We’ve found that a collaborative approach between you, your lead consultant and our MAS/Beca EQ team has been most successful in moving construction projects forward.

We hope this update has been useful.

If you have any questions, please contact us on 0800 800 627 or email us at

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EQC caps and land claims

Your claim is currently under the EQC cap – what happens if your claim goes over-cap now?

Once EQC has confirmed that your claim is over-cap, we will review the EQC scope with you on site to ensure all earthquake-related damage has been captured. We will then cost the repair of the damage and we may make a pre-construction payment of the estimated cost to cover the earthquake-related damage. This will enable you to proceed with repairing your home.

You can be assured that we will continue to support your project after this payment is made and will remain available to help you determine what you’ll need to do to effect the necessary repairs. Please be advised any EQC payments you have received will be deducted from the pre-construction payment amount.

Your claim is under the EQC cap – what about your external works claim?

EQC will continue to manage your claim to repair your house. You will need to contact us about your claim for damage to your driveways, paths, fences and other insured structures on your property that are not covered by EQC.

We will assess the cost of these repairs and may make a pre-construction payment, depending on the timeframe for EQC to repair your house and any other complexity that may be associated with the repair, for example, a shared boundary fence or retaining wall.

Please contact us to arrange a site visit with Beca and an external works contractor to assess the earthquake-related damage and scope the repair works if you have not already.

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Shared property & external works

The Insurance Council has set up a shared property project and all the major insurers have been involved in its implementation. As a smaller insurer, we are not a signatory to this project, but we are cooperating with the Insurance Council and other insurers on shared property issues.

Many claims remaining in our programme are complicated by shared property. Below we answer some common questions about how this complexity can affect your claim.

Your home is in a multi-unit building and is on a cross-lease title. Why are insurance claims on these properties more complex?

Reinstating multi-unit buildings or shared properties is more complicated because all affected parties and their insurers must be in agreement. These properties may involve several insurers, EQC, tenants and owners who may live out of town.

If your home is on a cross-lease title, you must meet the terms of your lease. Cross-leases usually require you to get the consent of all the other lessees of dwellings on the property before starting any work. Of course, they also need your consent if they intend to carry out works on their property.

The work that your property needs may affect other parties’ property where:

  • it may cause consequential damage to a neighbour’s property.
  • those carrying out the work on your property need access to your neighbour’s property.
  • the repair works impact other parties’ property, for example, if floor re-levelling or enhancement to a shared foundation is required.

The assessment of damage may also be different between buildings and each building may need an independent assessment.

Your shared driveway, fence or retaining wall is damaged. How do we manage your claim for your share of the repair work?

The complexities of shared properties often go beyond the buildings. All parties must cooperate to finalise claims for any other shared property such as a driveway, fence or retaining wall, taking the relevant title documents and legislation into account.

We will assess shared boundary situations on a case-by-case basis. In general we will meet our obligation under the policy for damage to shared driveways, fences and retaining walls by paying you for your share of the cost to repair the damage. This allows you to agree with your neighbour how and when you will engage contractors to carry out the agreed repairs.

Please note coverage under the policy is limited to within the boundaries of the property and within 60 metres of the dwelling.

We hope this update has been useful.

If you have any questions, please contact us on 0800 800 627 or email us at

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