Insurer IAG New Zealand Ltd is encouraging lawyers, real estate agents and lenders to be "highly proactive" in advising homeowners selling earthquake damaged homes with an open insurance claim to check with their insurer before putting their home on the market.
"This will help provide more certainty when engaging with prospective new homeowners over the sale of their property," IAG says.
The Australian-owned insurer says it has received a number of queries regarding future cover and the assignment of claim entitlements when ownership changes on a damaged home.
"In many instances, vendors or purchasers have got in touch with us just prior to their settlement date to discover that the new homeowner will not be eligible for all the rights covered under the vendor's insurance policy including any claims proceeds," it says.
IAG says it is important that vendors and purchasers understand:
Basis of Assignment: If a vendor chooses to sell their property without repairing or rebuilding it, the purchaser can only receive an assignment of a claim for the loss of value caused by the damage or the loss of the home, rather than the cost to repair or rebuild it.
Ongoing insurance: The new homeowner may have difficulty obtaining insurance for the damaged home. They may only get cover for a reduced value, or not get any cover at all, IAG says.
It says solicitors, real estate agents and lenders in earthquake-affected regions should ensure vendors have obtained a copy of the relevant "Notice for Purchasers" document for their region from their insurer to provide to prospective purchasers, based on the type of damage they have.
"This is important so that prospective new homeowners understand their entitlements and whether an open claim is going to be assigned to them. Where claim entitlements are to be assigned, this will need to be done at the same time as ownership passes from one party to the other."
IAG says if a vendor has accepted a full and final settlement, the claim cannot be re-opened.
If an IAG claim is assigned to the purchaser it won't necessarily provide that purchaser with the ability to claim for newly identified damage at replacement value.
IAG says assessments are prioritised based on customer need: "determined by factors such as the habitability of the home and the age and health of occupants".
"We can certainly look to prioritise the assessment of a home due to be sold, however we cannot guarantee the assessment will be able to be immediately arranged and completed. Assessment timeframes also vary depending on details such as property location and type of damage, so it is important that vendors contact us early to ensure as much as possible that we have adequate time to properly assess the damage and claim."
IAG says if the insurer has not had the opportunity to fully assess the damage to the home, additional information provided by an independent, qualified assessor may be required to support an application for new insurance by a prospective homeowner.
It says the majority of claims resulting from the Kaikoura earthquake will be settled by the end of 2017, and "Canterbury claims are 97.5% complete".
EQC claims on IAG policy
IAG is acting on behalf of EQC to assess and settle EQC claims in accordance with the Earthquake Commission Act 1993. IAG says if a property with an EQC claim is being sold before the claim has been settled, the vendor will need to agree with the purchaser who the EQC claim, or agreed aspect of the claim (either land, home or both) should be settled with.
"If both parties agree that any outstanding claim is to be settled with the purchaser, the vendor needs to transfer the claim to the purchaser. Without the EQC claim being assigned it cannot be settled with the purchaser."
IAG says general inquiries by solicitors should be directed to firstname.lastname@example.org. Vendors looking to sell homes should direct inquiries to the IAG earthquake claims team via the contact details they have already been provided.