Southern Response to close after seven years of bailouts, protests, legal action and spying

Sunday, 11 August 2019

A Crown-owned earthquake claims company that impacted the lives of thousands of Cantabrians will shut down in December.

Southern Response – set up by the Government when insurer AMI failed in in 2012 – has been winding down, with open claims now below 400. All outstanding business will to be passed on to a 'receiving agency' when it effectively closes at the end of the year.

Tens of millions of dollars of unresolved cases are yet to be settled, but payouts have been guaranteed.

Earthquake Commission (EQC) Minister Grant Robertson said a 'clear bottom line' for the Government was settling claims to 'help people move on with their lives, and we will see that through'.

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Southern Response has resolved 8262 claims so far. Some 379 are still being contested, while a $300m lawsuit alleging around 3000 homeowners were underpaid on insurance settlements remains in the air.

The organisation offered welcome relief for many as it rescued claims left in limbo by AMI after the Canterbury quakes.

The Government has since pumped more than $1.5 billion, repeatedly topping its original $500m pot after it became clear it would not be enough.

But it drew anger after being slow to settle cases and pushing back against homeowners, and last year was heavily criticised after it emerged it had employed a security firm to spy on claimants, the fiasco forcing the resignation of former chairman Ross Butler.

Southern Response announced its closure as it outlined its performance expectations for the financial year ahead, saying by the end of 2019 it will have completed most of its work other than a 'minor proportion of very complex claims and litigated claims'.

Between 250 to 300 cases are expected to remain unresolved by the time Southern Response winds down, worth an estimated $173 million.

After transferring its remaining operations to a receiving agency, likely to be either EQC or fellow Crown-run scheme the Greater Christchurch Claims Resolution Service (GCCRS), it is assumed Southern Response will 'cease operating under its current model', the report says.

'It will continue to exist as a legal entity which retains ultimate responsibility for the discharge of obligations to policy holders.'

Robertson said Southern Response had made 'great progress' in resolving claims over the past year, many through GCCRS, which was launched in October.

'At this point as the process begins to wind down it makes sense to look at the appropriate organisational arrangements,' he said. 'No final decisions have been made yet on those.

'Any new arrangement will retain all of Southern Response's responsibilities and liabilities to claimants. We would also be seeking as smooth as possible a transition for claimants.

Cam Preston, an accountant who became a high-profile Southern Response critic while disputing his own quake claim, said he was extremely grateful of taxpayers stepping in to help.

But he questioned why AMI's directors had been allowed to escape with little scrutiny and urged the Government to learn from past mistakes.

'I think the Government needs to learn from the $1.5b of taxpayers' money that it has had to pay to bailout that last board of directors of AMI Insurance, and it needs to supervise the insurance sector far more carefully and rigorously than it has, otherwise we're doomed to repeat the same thing again.'