First his home burnt, then businessman Evan Christian had to fight his insurer

Friday, 1 November 2019

After fire ravaged his beautiful Takapuna home, businessman Evan Christian found himself in a battle with his insurance company which he considers highlights the need for government action to clean up the insurance industry.

The first stage of Christian's battle has been with his insurer NZI over its plans to patch-repair and clean the property, which he considered not only fell well short of its obligations but left his family with a dangerously contaminated home.

His experience has also raised concerns about the reliability of valuations provided for the 'sum insured' policies which were widely implemented by insurers in the wake of the Christchurch earthquakes, requiring home owners to identify a maximum sum they could claim.

Faced with the challenge from multi-millionaire Christian, who paid for contamination-testing that proved carcinogens remained at high levels in the home even after the insurer's $35,000 clean-up, NZI has agreed to a confidential settlement.

Evan Christian on the bare foundation of his now-demolished home. He fought insurer NZI to get a fair payout after his home was damaged by fire.

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Now Christian plans to publish the details of the testing online so other New Zealanders with fire-damaged homes can use it if their insurers suggest using the same clean-up strategies on their homes.

'They wanted to paint over everything to keep the price down,' said Christian, who has three children.

CONTAMINATION FOUND

His house insurance was supposed to restore his home to the condition it was before the fire.

But the testing Christian commissioned from Christchurch-based K2 Environmental a year after the clean-up showed the ozone and 'thermal fog' treatments the insurer had used in his house had left him with a contaminated home.

Evan Christian inspects the damage to his home after the fire in May last year.

'It showed the toxicity of the home one year after the fire, and after the insurers had cleaned the place, and said it would be fine, was at a level 650 times above the safe levels for the chemistry in the home, the carcinogens in the home,' Christian said.

The report from K2 read: 'Persistent carcinogenic compounds, related to combustion products, were detected inside the house one year following the fire event. Their concentrations were above the maximum safe level.'

The experience has left Christian cynical about insurers, and calling for them to be regulated.

'The regulation is light-handed. There's nothing there. The courts are the regulators, and they are terribly expensive, and there are no penalties,' he said.

That ordinary policyholders at the most traumatic and financially devastated moments in their lives could find themselves facing a legal fight against well-resourced insurers was 'terrible for a consumer product'.

SUSPICIONS RAISED

'We are going to move as quickly as possible on this because New Zealanders need to have confidence their rights and interests are being protected,' Finance Minister Grant Robertson said of insurance law reform in January.

Fire investigators believe the blaze at Christian's waterfront home started when an e-scooter battery exploded early one morning in May last year.

The family fled in their nightwear, and firefighters were able to bring the blaze under control, saving the house, and preserving neighbouring properties from being set alight.

Christian became suspicious when NZI's appointed assessors arrived. To Christian, it appeared they were focused on finding signs of arson.

'They're looking to see if there's a way out,' said Christian. 'They are looking for if there were any doors left open. The first thing they look at is how can we get out of this one.'

Insurance law did not require insurance assessors to be independent of insurers, as they must be in the United States, Christian said.

The tone only changed when they learned the whole property was covered by cameras, Christian said, as they would have captured any images of supposed arsonists entering the property.

'We overheard the fire investigator calling NZI, and he said to NZI, 'Put your guns down. This is a genuine fire.'

LAWYERING UP

Christian said NZI used ozone and 'thermal fog' clean-up techniques in the damaged home, but when he researched the technologies, he became concerned they left cancer-causing soot and contaminants in the home.

The businessman said he was fortunate his wealth allowed him to hire scientists to evaluate NZI's remediations, and lawyers to stand up to the insurer, though lawyering up against an insurer is not easy.

'You find most of the best QCs are all working for the insurers,' he said.

After NZI, which is owned by IAG, settled with Christian, the fire-damaged home was demolished, and the site was being prepared for the rebuild.

NZI said its priority was the safety of its customers.

'We appreciate Mr Christian's concern about fire remediation methods used in New Zealand. Customer safety is always our primary consideration and we have consulted with the industry on this matter,' said NZI spokeswoman Joanne Perry.

'The use of commercially generated ozone is widespread in the treatment of building and vehicle fires in New Zealand, and NZI relies on the assurance of fire remediation experts regarding the products used.'

But, she said: 'NZI is always assessing the appropriateness of methods used to remediate property damage.

'We will happily review the tests undertaken by Mr Christian. Our number one priority is the safety of our customers.'

UNFAIR FIGHT

Christian believed people lacking his resources, and business acumen, would struggle to fight an insurer they believed was not treating them fairly.

'You are toast, you are out of money. You have to take what you offer,' he said.

Those offers come as 'full and final settlements', and they include confidentiality clauses preventing people from speaking out.

Only Christian would not be gagged.

Even rooms which flames never reached were damaged.

'I can say anything I want, except I can't disclose the amount they paid me. We were really rigorous on that, that I could keep talking.'

SHAREHOLDERS VS POLICYHOLDERS

'We weren't all that suspicious at the beginning,' Christian said. 'We assumed they had our best interests at heart.'

But, he said, directors of insurance companies were driven by a pure profit motive, and faced limited penalties if caught acting in bad faith.

'There are no penalties in insurance. When an insurer acts in bad faith, the worst they have been penalised- and it was terrible what they did- they got pinged $5000.

That's the case in which Tower was found by the High Court not to have acted in good faith when it withheld a report that said a Christchurch man's home could not be repaired, but had to be rebuilt, when the insurer was intent on repairing it.

Earlier this year the High Court in Christchurch found insurer Southern Response engaged in misleading and deceptive conduct through a policy of producing two differing detailed repair/rebuild assessments for customers' homes, with only the lower-cost one being revealed to customers.

Christian, a professional director, said insurers must face meaningful penalties and proper regulation.

The fire at Evan Christian's home was believed to have begun when a lithium battery in an electric scooter exploded in the early morning.

'I sit round these board tables with the traditional board guys, it's a big factor. They hate bad press, and they hate penalties because it hits their bottom line. Everything else is about shareholder value.'

DELAY, DENY, DEFEND

Christian's researches led him to McKinsey's famous 'Delay, Deny, Defend' advice to US insurers AllState in the 1990s.

'McKinseys came up with the idea to turn claims departments, which used to be independent within insurance companies, into profit centres,' Christian said.

'Once it became a profit centre that was the end of the customer as number one. The shareholder became number one.'

In his book Delay, Defend, Deny, American Author Jay M Feinman said: 'No longer would each claim be treated on its merits. Instead, computer systems would be put in place to set the amounts policyholders would be offered, claimants would be deterred from hiring lawyers to help with their claims, and settlements would be offered on a take-it-or- litigate basis.

'If Allstate moved from 'Good Hands' to 'Boxing Gloves,' as McKinsey described it, policyholders would either take a lowball offer from the good hands people or face the boxing gloves of extended litigation.'

He believed the influence of delay, defend, deny had reached New Zealand.

SIGNS OF ACTION

Despite insurers' action in Christchurch, including botched repairs, Christian did not yet believe politicians saw insurance reform as important.

With only 3000 or so house fires a year, he said: 'It's not a big vote-winner.'

But following a damning report by the Reserve Bank and Financial Markets Authority on the life insurance industry, Cabinet agreed in January to fast-track new consumer protection laws following a damning report on the insurance sector. Changes would include banning unfair contract terms, and limit the reasons insurers could decline claims.

In parallel, the government was planning to introduce new conduct laws, to be policed by the FMA, requiring banks and insurers to treat customers fairly.

'We will consult with the public and industry on these changes, but we are going to move as quickly as possible on this because New Zealanders need to have confidence their rights and interests are being protected,' said finance minister Grant Robertson said in January.

NEW BATTLE BEGINS

The settlement with NZI was not the end of Christian's battle with insurers.

His policy, like those of most New Zealanders, was a 'sum insured' policy, where Christian had to nominate the maximum amount the insurer had to pay on any claim.

Sum insured policies were introduced after the earthquakes in Christchurch revealed what a poor job insurers had done of modelling rebuild costs on people's homes.

Instead of expert insurers, ordinary homeowners became the people who had to estimate the sums their homes would be insured for.

Most people select their sum insured after using online calculators provided by the insurers, which carry heavy legal disclaimers warning users that they agree not to sue the providers of the calculators, if their sum insured turned out later to be too low.

Christian paid valuations company Seagars to assess the cost to rebuild his home. It's reinstatement valuation of $3.5m.

The rebuild was now set to cost in the vicinity of $7.5m, leaving Christian facing a big shortfall.

Seagars director Ian Colcord told Christian by email in June that Seagars 'refutes any responsibility for your alleged under-insurance shortfall'.

'We stand behind our work and are fully satisfied that our 2017 valuation was correct and accurate at the date of the valuation'.

Seagars was contacted for comment.

Christian was now preparing to take a legal claim, and lock horns with Seagars and its unnamed professional indemnity insurer.

It would, he believed, begin a fresh experience of deny, delay, defend.

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