Landmark Leaky Home Decision Could Open Door for Hundreds of Claims

A lawyer says hundreds of leaky-home owners could seek to overturn rejected compensation bids after a landmark Supreme Court decision.

In a judgment released today, the court clarified the start time for the 10-year period people have to make claims to the Weathertight Homes Tribunal.

It is now clear that the time starts when a code compliance certificate is issued by a local council, rather than when construction of the property ended.

Auckland couple John and Helen Osborne successfully argued for that at New Zealand’s highest cort, the Supreme Court, where they took their claim against Auckland Council.

Mrs Osborne said the house, which they still live in, was “an absolute nightmare” while it was leaking.

“I’m absolutely overwhelmed. I can’t believe we’ve finally had a yes. We’ve never had a yes in the seven years we’ve been trying to get compensation,” she told One News.

The Osbornes’ lawyer, Tim Rainey, told Newstalk ZB today the judgment meant there were potentially 369 claimants previously deemed ineligible who could push for a re-hearing.

“We believe the tribunal or the [Ministry of Business, Innovation and Employment] should be reviewing all of its eligibility decisions and remaking those decisions applying the correct standard and the correct law.”

He said the time difference between building completion and the issuing of compliance certificates could be anything from days to two or three years. But, no matter how long it was, being on the right side of the limitation was important for potential claimants.

There was no need to be sympathetic toward councils who could now have to settle on matters of admitted negligence when they previously hid behind a “procedural excuse”, Mr Rainey said.

Home Owners and Buyers Association of NZ president John Gray said the organisation was seeking legal advice over what courses of action were available to home owners previously denied the chance to make a claim in the same circumstances as the Osbornes.

The decision would not help owners of homes built in the 1990s and early 2000s anyway, he said, as they would be outside the 10-year period however it was judged.

Mr Gray said the association would like legislation amended to make the time limit for claims 15 or 20 years.

The Osbornes’ trouble with their 1996 Remuera home began shortly after they bought it in April 1997. That month, and in February 1997, code compliance certificates were issued.

Failed repair attempts were carried out between July 1997 and 2002, and the Osbornes filed a claim with the tribunal in February 2007.

However, only matters related to later repairs were deemed by the tribunal as eligible for claims. A year ago the couple had spent $500,000 fully repairing their home, where they still live.

Previously the Osbornes had sought a judicial review of the tribunal decision but the High Court upheld the tribunal’s decision.

The Court of Appeal declined to hear the case, but last year the Supreme Court decided it would pick it up.

Its judgement said the Osbornes and the council reached a conditional settlement after the hearing, subject to the Supreme Court not releasing its decision.

But the court decided to make its judgment public because “the case raised questions of public importance”. The Osbornes and the council will now have to go to the tribunal if they can’t reach another settlement.

The Supreme Court also ruled Auckland Council must pay the Osbornes $25,000 in costs.

In a statement today, the council said it would not comment on the decision until it had the chance to consider the full written judgment.

“The council’s offer to the Osbornes is now null and void and the claim will go back to the tribunal. This is not to say the claim is not capable of settling on different terms at a later date but all the building parties of both the original works and the unconsented repairs will be included in the resolution of the claim.”

The statement said Auckland Council had settled 1124 leaky home claims and had another 85 yet to be settled, involving 2170 dwellings or units.

A statement from the Ministry of Business, Innovation and Employment said it was considering the judgment and what, if any, implications it had on eligibility decisions under the Weathertight Homes Resolution Services Act.

– NZ Herald

Lloyd’s pays out $4.2b for NZ quakes

Insurance giant expects to pay further $1.6b and vows to stay committed to Canterbury and New Zealand.

Global insurance giant Lloyd’s has paid out $4.2 billion for the Canterbury earthquakes, expects to pay a further $1.6 billion and remains committed to New Zealand.

On his first trip here, Lloyd’s chairman John Nelson yesterday told the Insurance Brokers Association of the enormity of reinsurance and insurance payouts because Lloyd’s insures the Government’s EQC Earthquake Commission and provides reinsurance to the country’s biggest insurers.

“Over half of New Zealand’s $40 billion of economic losses in 2011 following the earthquakes in Christchurch were picked up by international insurers. Lloyd’s has played its part,” Nelson said.

“To date, for both the 2010 and 2011 earthquakes, Lloyd’s has paid a combined $4.2 billion in reinsurance and insurance claims so far. We expect that the total cost of the events to the Lloyd’s market may reach $5.8 billion and of course we are a prominent reinsurer of the EQC,” he told the brokers at SkyCity’s convention centre.

“I want to reiterate in person today our total commitment to support the physical recovery of Christchurch following the two earthquakes and also restate our promise to support, in whatever way we can, the wider impacts the earthquake has had on the New Zealand economy.”

New Zealand insurer Vero yesterday released a report on the Canterbury earthquakes showing it got 31,050 claims for $4.8 billion.

Nelson, head of Asia Pacific Kent Chaplin and Lloyd’s New Zealand general representative Wellington-based Scott Galloway will today visit Government ministers and EQC chiefs and tomorrow fly to Christchurch to tour the city with the Canterbury Earthquake Recovery Authority.  Nelson will give a lunchtime address at the Canterbury Club, then visit the upper South Island around Picton later this week.  He expressed sympathy for Canterbury earthquake victims struggling to get resolution from the disasters, including insurance payouts.

“A lot of frustration, a lot of frustration and that’s something we have little control over,” Nelson said emphasising Lloyd’s position behind retail insurers as reinsurers.  “The frustration is born out of the processing of claims and establishing liability because there were two earthquakes in quick succession,” he said. “I have huge empathy, huge, of course, of course, and we have done everything we possibly can to be ready and quick with our money.  “I know the frustration and if I was a resident of Christchurch, I would feel that very much but in the scheme of other major catastrophies worldwide, New Zealand should take some credit for how it was handled.”

He also paid tribute to New Zealand’s insurance industry.

“The basic structure you have got is a good one but I’m sure there will be lessons learned where improvements can be made,” he said, adding that Lloyd’s gross written premium income from New Zealand was the 47th largest out of about 200 countries.  The business has been operating here for about a century.  Lloyd’s reinsures New Zealand giant IAG, which sells under the NZI, Lumley, State and AMI (New Zealand) brands.  “We cover some of New Zealand’s greatest assets – your national airline, your education system, your earthquake commission, your thoroughbreds, your Tall Blacks and many of your All Blacks,” Nelson told the brokers.

Lloyd’s has also provided insurance for medical workers visiting West Africa for the Ebola outbreak and the ill-fated cruise ship Costa Concordia.  For Lloyd’s, 2011 was one of its worst years because of the Japanese tsunami, floods in Thailand and Queensland and the Canterbury earthquakes, Nelson said.  A spokeswoman said the previous Lloyd’s chairman, Lord Peter Levene, visited here immediately after the 2011 earthquakes and representatives from Lloyd’s syndicates have visited on a regular basis since.

Lloyd’s NZ premiums from:
*Property: $370m
*Casualty: $48m
*Aviation: $21m
*Marine: $15.8m
*Energy: $9.8m
*Accident & health: $9.7m
*Motor vehicles: $5m
[Source: Lloyd’s]

– NZ Herald

Stamford Now Includes Renovation and Re-Clad Projects in Their Policy Range

Many New Zealand home owners undertake major renovation projects to bring their home into the 21st century and we recognise that these projects deserve the protection of our warranty just as much as new homes.

The re-cladding of leaky homes and apartments is also set to gather momentum as homeowners and body corporates settle their claims with government, localcouncils and the original contractor, become “cashed-up” and ready to tackle the problems with their homes. The last thing any of these owners need is for the re-clad project itself to go wrong, as many already have, and to find themselves back at square one.

Owners of leaky buildings and others carrying out extension or renovation projects can now obtain a 10 year warranty from Stamford to cover the new works.

In conjunction with HOBANZ and re-clad specialist surveyors, Maynard Marks,Stamford Insurance has devised a new policy which will incorporate a rigorous design and materials appraisal, intended to ensure that these projects achieve their objective – a sound, weather tight home which will carry a new 10 year warranty. It will provide closure to the problems of leaky homes and give owners what they need most – peace of mind.

The warranty is transferrable to a new owner, making it likely that the current owner should be able to sell the property at a more attractive price.

HOBANZ, the Home Owners and Buyers Association of New Zealand is a not-for profit organisation dedicated to helping the owners of leaky buildings to obtain appropriate compensation and then advising those owners on how to best undertake the renovation project. They have unrivalled expertise based on lessons learned the hard way and have built a network of trusted providers to ensure that projects are executed to the
highest standards.

One thing is certain – there are no short-cuts worth taking when dealing with a leaky home or apartment building. Do it once and do it right is the golden rule.

So whether you are undertaking a renovation, an extension or a re-clad, Stamford can now provide a 10 year warranty for your project.

For more information contact Stamford Insurance direct or HOBANZ

$40M Solar Power Project in the Cook Islands Covered by Stamford

Stamford Insurance using its construction insurance expertise and connections in the London market.

Local underwriters were unable to provide the cover required for the project which is being largely funded by the Government of New Zealand under its Overseas Aid programme for the Pacific Islands.

“New Zealand is working in partnership with the Cook Islands’ Government to boost renewable energy use across the islands. The goal is to provide efficient, reliable, safe,affordable, and sustainable electricity,” said High Commissioner Joanna Kempkers.

The Cook Islands Government has set ambitious targets for 50 per cent renewable energy by 2015 and 100 per cent by 2020.

The energy initiatives in the Cook Islands are part of a wider programme of sustainable energy initiatives across the Pacific that the Ministry of Foreign Affairs and Trade is supporting through the New Zealand Aid Programme.

Stamford worked closely with Auckland broker, Penberthy, to place the Contract Works programme, insuring the interests of the respective governments, the main contractor and their nominated sub-contractors.

Director Duncan Colebrook said “We are proud to be associated with such a prestigious project and pleased to be able to deliver competitive terms when no other local company could step up. It demonstrates once again our understanding of the construction industry and our ability to deliver quality and value in insurance”

When Is A Builder Free of Liability for Defects?

When is a Builder Free of Liability for Defects?

The first thing to realise is that it has nothing to do with what appears in the Building Contract.

Building Contracts may specify anything from 90 days to 12 months and many people, including many builders, mistakenly believe that once the defects period expires, the owner has no further rights or remedies, but that is not correct.

Four different laws give the homeowner the right to have defects remedied for up to 10 years. These can be found in the Building Act, the Consumer Guarantees Act, the law of contract and the tort of negligence.

So builders who think they can ‘contract out’ of these liabilities need to think again.

Every residential building contract since 30 November 2004 automatically contains the warranties in section 397 of the Building Act. The same applies to any sale agreement by a spec builder or residential developer to his purchaser.  Those warranties basically say there won’t be any (major) defects in the building, and those warranties can’t be avoided by exclusion clauses or limitations of liability. Furthermore, the benefit of those warranties passes to subsequent owners.

There is a similar set of warranties under the Consumer Guarantees Act and only the original homeowner can enforce them not only against the builder but also any subcontractor or supplier who was actually responsible for the defect.

Then the builder can be liable in negligence for workmanship or materials that didn’t meet minimum standards.

The normal limitation period is 6 years from when the defective work was done, but if you don’t discover the defect until later on, you get an extension under the Building Act. This means a builder potentially remains liable for rectifying latent defects for between 6 and 10 years after the original building work was done.

Stamford is the only insurer able to offer the builder indemnity from these defects liabilities after just 2 years.


Broker Launches Revolutionary New Product

Insurance Business New Zealand – 9 July 2014

A recent entrant to the market here hopes a new 10 year warranty product will prevent crises such as the leaky building problems that have blighted the New Zealand building industry from happening again.

Ex-pat Brit Duncan Colebrook of Stamford Insurance has the sole rights in New Zealand to the new Lloyd’s-backed product which can cover single residential homes, apartments, and commercial buildings, including re-clads of leaky homes.

“It is high time homeowners could obtain a guarantee backed by an ‘A’ rated insurer of international standing,” says Colebrook.  “We saw a gap in the market and persuaded Lloyd’s to give us coverholder status here”.

He said previous policy offerings were seriously flawed: “Whilst many builders offer their own guarantee or provide a third party guarantee from someone like Master Build, the leaky building situation has shown that much broader and more secure cover is needed for current and future homeowners.”

Colebrook says the product was based on a UK model and tweaked to suit New Zealand specifications.

“We’re having to be more flexible regarding the types of products and materials used, and design in New Zealand is quite different from the UK.  We cover defects arising from faults and design or specification so we had to pay close attention to new design concepts that are common here that don’t apply to the UK and incorporate them into the underwriting thoughts and process.  It’s quite possible that the leaky building problems could have been avoided if this had been brought in sooner,” he added.

The warranty is transferrable to new owners if a property is sold on within the 10 year policy term and approved builders will have the option to seek indemnity from any claims made against them after two years giving additional protection not currently available in the market.

Colebrook, who is part of the Insurance Advisernet network, hopes to tap into the group to make the product available around the country.

“We are hoping this product will help revolutionise the way buildings are guaranteed in New Zealand for future generations and remove the need for government intervention.”

by Maryvonne Gray

Lloyd’s Underwrites NZ Warranty

The New Zealand Herald – 15 April 2014

One of the world’s biggest and oldest insurers is underwriting a new building  warranty insurance scheme being launched in New Zealand.

Duncan Colebrook, of Auckland’s Stamford Insurance, said the 325-year-old Lloyd’s of London was behind the new scheme which he hopes will capture about 15,000 houses annually, or around half the new-build market.

Colebrook said he had been an insurance broker for nearly 40 years, migrated from Britain three years ago but was horrified by our leaky building crisis and is pitching his scheme towards developers and builders, not home-owners.

“Most of New Zealand’s builders presently use the Master Build Guarantee, but ours is an insurance policy issued by Lloyd’s, an insurer licensed in New Zealand with an ‘A’ rating which means it has substantial reserves. Our 10-year policy will be honoured for the full 10 years and backed by Lloyd’s,” he said.

Lloyd’s announced a profit before tax of 3.2 billion ($6.1 billion) for the year to December 31, 2013.

Colebrook said the insurance would protect against defects due to design or specification, meet the costs of alternative accommodation if a place has to undergo major repairs, give technical advice and a professional claims  management service.  Structural defects include weather tightness.

Colebrook said a house of around $300,000 would cost around $2,200 to insure under the scheme and “right now, we’re looking at [possibly] hundreds of apartments”, he said, naming a list of clients.

The scheme was similar to those operating in Britain for many years.  “Because we are insurance professionals, we approach the market with a very different perspective,” Colebrook said.

Asked about exposure to the leaky building crisis, Colebrook said risk would be balanced with reward.  “It’s all about trying to control the front end by carefully selecting builders and ensuring certain things happen,” he said.

Auckland lawyer Adina Thorn said the Master Build Guarantee had been the  subject of concern for a number of reasons.  “On closer analysis, the cover from these types of policies is far more limited than might appear. The difficulty is that really the insurer holds most of the information,” she said.

But the Master Build Guarantee claims it is New Zealand’s leader, backed by  more than 100,000 houses and renovations since 1991.  “We have the largest and the most competitive range of guarantee products in  the market. Our guarantees are the most comprehensive products available and  only a Registered Master Builder can offer them to you,” says the Registered  Master Builders Association of New Zealand.

Insurance Cover Now Offered for Earthquake Prone Buildings

Owners of unreinforced masonry buildings built before 1935 have had a difficult time in the last 12 months as insurers try to balance their books in the wake of the Christchurch earthquake. A number of property insurers have pulled out of the market entirely and those who remain have slammed owners with massive premium hikes and restricted cover.

Even in Auckland full cover based on the reinstatement value of such buildings is proving difficult to obtain. Owners of buildings which have a rating of less than 34% of the New Building Standard are in many cases being offered indemnity cover only, which can be equal to less than 40% of the full replacement cost.

Now all that could change with a new initiative from insurers keen to step in and provide full cover against all perils, including earthquake and other natural disasters, at realistic premiums on properties in Auckland, Northland and the Waikato.

Stamford Insurance, a specialist broker, is now able to offer cover with Lloyd’s of London on unreinforced masonry buildings. The sum insured can be based on the re-building cost of the property and cover can also include loss of rent insurance.

Stamford has been working with several syndicates for months to negotiate the new cover and now anticipates strong demand from owners, their financial partners and mortgagees.

A spokesman for the company said “The Lloyd’s market has a reputation for stepping in where others fear to tread and has been the world’s leading specialist insurance market for many years. Lloyd’s has an A+ rating from Standard & Poor’s (Very Strong) and will satisfy the most demanding clients in terms of security.”

To be eligible for consideration, full details of the risk must be submitted, including a recent seismic engineer’s report and current valuation. That information is assessed locally and then sent directly to London for a quotation, so at the moment cover is only available where the reinstatement value exceeds $10M. In theory there is no upper limit. It is hoped to extend the scheme to lower value properties later in the year.