Gerry Brownlee says Southern Response ordered to behave in a 'fair and reasonable manner'

Monday, 19 August 2019

Former Canterbury Earthquake Recovery Minister Gerry Brownlee says he was not aware Southern Response was holding back some rebuild cost information from its customers. 

He says the Crown-owned earthquake claims company was told to behave in a fair and reasonable manner, and was not told to try to keep down the costs to the Government. 

A High Court judgment released last Friday found Southern Response engaged in misleading and deceptive conducts and misrepresented Karl and Alison Dodds' entitlements by producing two different detailed repair/rebuild assessments (DRAs). The assessments outline the estimated costs of rebuilding or repairing a customer's home.

The Dodds settled in December 2013 based on an abridged DRA that showed it would cost about $895,000 to rebuild their Huntsbury home. A second 'office' DRA, which the Dodds never saw, included extra items and estimated their rebuild would cost about $200,000 more.

**READ MORE:

* Southern Response engaged in misleading and deceptive conduct, High Court finds

* Government-owned Southern Response facing multimillion-dollar legal action**

Insurance advocate Ali Jones called for an inquiry into Southern Response, saying she believed the DRA issue was far more serious than the court judgment suggested. 

'There needs to be visibility on the way they have behaved over the last eight years before the 'closed' signs go up at the end of the year.'

Earthquake Commission Minister Grant Robertson said the Government had not considered an inquiry.

Brownlee, who was a shareholding minister for Southern Response from its inception in 2012 until October 2017, said the insurer's day-to-day workings were not something the shareholding ministers were familiar with. 

He said they gave Southern Response a letter of expectation saying the Government 'wanted them to behave in a fair and reasonable manner with their claimants'.

'How they were operating was as any other insurer would operate as far as we were concerned.'

Brownlee said Southern Response were under full monitoring from Treasury, with officials 'regularly' working alongside Southern Response in the financial side of the business. 

The company was not told to keep the costs to the Crown down, he said.

'They were obviously, with Treasury in there, mindful they were spending public money and that they had to do that in a way that got best results for not only the policyholders but the taxpayers who were paying.'

Brownlee said he did not think Southern Response was acting in bad faith, but was not reflecting on the judgment of the courts.

Southern Response was set up by the Government when insurer AMI failed in 2012 because it was unable to meet its Christchurch earthquake obligations. 

Brownlee said results would have been 'unbelievably' worse for claimants if the Government had not taken on AMI's massive liability.

To date, the Government has put more than $1.5 billion into Southern Response. It is due to shut down in December, and has fewer than 400 open claims left.

Last week's High Court judgment is expected to be precedent-setting, with thousands of others likely in the same position. Some have estimated Southern Response's potential liability to be about $300 million. 

Southern Response has 20 days to decide if it will appeal the judgment. 

Robertson said Southern Response and its board had advised him it was considering the judgment and whether to appeal.

'I have asked for official advice on the judgment and its potential ramifications for the Crown, but I will await Southern Response's decision before I make any further comment.'

The company's policy of producing two DRAs is the subject of several other cases working through the court process, including a class action being represented by Grant Cameron, of GCA Associates.