Inquiry finds EQC unprepared for Canterbury quake claims, says changes needed

Thursday, 9 April 2020

A public inquiry painting the Earthquake Commission (EQC) as well-meaning but wildly unprepared as it dealt with Canterbury earthquake claims has been labelled a 'highly political document' by EQC's former minister. 

The comprehensive 246-page report, tabled in Parliament on Thursday, made dozens of recommendations about clarifying EQC's role and improving how it dealt with claimants, assessed damage, managed repairs and settled disputes.  

* Did you share your EQC experience with the inquiry? Email reporters@press.co.nz

Ex-EQC and Canterbury Earthquake Recovery Minister Gerry Brownlee said some of the findings were 'a little less than reasonable', while EQC claimants who submitted to the inquiry said there was still no-one being held accountable for the hurt EQC caused. 

**READ MORE:

* EQC inquiry into handling of Christchurch earthquake claims wraps up

* Public submissions on EQC's performance critical of 'difficult' agency

* EQC inquiry unlikely to identify failures without investigative approach, group warns**

Former governor-general Dame Silvia Cartwright chaired the long-running inquiry, which began in November 2018.

Its findings included:

- EQC faced an 'overwhelming' job after the September 2010 quakes, made 'significantly worse' by further quakes, an 'absence of clear prior direction from Government', and inadequate internal systems. 

- There had been 'little to no' previous thinking on how to manage the repair of a large number of urban houses.

- EQC's lack of experience led to inadequate quality control, poor staffing decisions, uncoordinated planning and bad relationships with its claimants.

- Poor assessments of damage were the root of the problems and disputes homeowners faced in settling claims.

- 'Grave concerns' about the quality of Canterbury's housing stock, due to historic building methods like rubble-ring foundations and a lack of quality checks for quake repair work.

- EQC's reputation suffered 'serious damage' – 'some deserved, but much because it was simply unprepared for the role assigned to it'.

'On the whole, EQC staff, managers and governors were doing their best in difficult post-disaster circumstances, even if it may not have appeared that way to the public at the time,' the report says. 

MANAGED REPAIRS NEED A GUIDE

Cartwright recommended EQC's role in future natural disasters be clearly defined in law, including whether it would run any future managed repair programmes. 

She found a managed repair programme may still be best in future large natural disasters, but there needed to be a threshold for when it would be used and clear planning on how it would be staffed and run.

Guidelines on how to assess damaged properties were needed, and the role of EQC, contractors and and claimants clearly defined. 

Cartwright called for law changes to ensure claimants were more certain repair work had been done – and to an acceptable standard. She called for planning between EQC and the Government so it was clear who would be responsible for quality assurance in future events. 

'In Canterbury there is a real sense of uncertainty about the quality of the repair work done on homes and in some instances, whether the contracted work has been done at all and whether, as a result, homes are more susceptible to future natural disaster damage.'

$150K CAP SHOULD LIFT - OR GO 

EQC should commit to treating claimants with respect and dignity and try to ensure claimants always dealt with the same staff while settling their claim. 

She recommended EQC's liability cap of $150,000 plus GST was increased to the average cost of building a house in New Zealand, or removed, with EQC providing quake coverage to an individually-set level for each property. 

EQC needed to invest in its data management systems to ensure claimants could easily access their personal data. 

The report noted EQC had a programme to ensure it could manage future claims, which included investing in people and systems.

But Cartwright queried the assumptions driving the programme, asking whether the changes were being looked at from a claimants' perspective or an 'operational efficiency' perspective.

She raised concerns that a move to cash settlements could lead to 'a continuing legacy of unrepaired homes'.

BROWNLEE STANDS BY REPAIR PROGRAMME

Brownlee said he had not yet had a chance to read the whole document, as he did not receive a copy in advance, but the first few pages led him to think it was a highly political document. 

Some of the suggestions it made were 'a little less than reasonable', including that EQC had taken reputational damage and was subject to derision, which was 'wrong'

Brownlee said the 460,000 claims EQC dealt with were 'a hell of a lot' and while some people were unhappy with how they were treated, the vast majority had a good experience. 

He stood by the managed repair programme, saying people were being ripped off by 'quick and dirty operators' and the prospect of that across the entire housing stock was not acceptable. 

'If the cowboys had had their way … we would have a much bigger mess today.'

The programme helped control the price of building materials, and allowed people to complain if they were not satisfied with the work. 

The constant references to the quality of repairs did no service to Christchurch homeowners, as homeowners who had gone back to EQC had been looked after, Brownlee said. 

A statement from former EQC chief executive Ian Simpson said he supported the recommendations in the report, which would make for a 'stronger and more resilient New Zealand'. 

He said the quakes were the biggest emergency to confront the country since World War II and EQC learned many lessons. 

STILL NO ONE ACCOUNTABLE

Georgie Hanafin, who has been dealing with EQC for years as she tries to reach settlement for her on-sold house, said the report 'doesn't change anything for homeowners stuck in a dispute with EQC'. 

'I feel like a lot of money was spent for one person to basically say what thousands have been saying for the last six years.'

She felt the report did not go far enough and there was still no-one being held accountable for EQC's failings. 

Hanafin is still trying to reach settlement for her house. She said she had a case manager for a while but was now being passed from person to person again. 

Michele McCormack made a submission to the inquiry but said she did not want to read the report because she found the EQC process so traumatic. 

She knew people who had not submitted because it was too traumatic. 

McCormack said she found the submission process OK but did it in a hurry because she did not want to dwell on it. 

'I didn't want to give too much energy to it because I put so much energy into my EQC claim – but I wanted to be heard.'

Her submission said it was distressing to talk to a different person every time she called EQC, that information from previous phone calls was not stored in EQC's systems, and that she found the person who came to assess her two-bedroom Southshore flat was bullying. 

EQC APOLOGISES

EQC chair Sir Michael Cullen repeated 'an unqualified apology' for the commission's failings, saying the organisation did not do as well as it should have. 

'This has left a legacy of mistrust and hurt that we must continue to address and remedy.'

EQC had been working through some of the issues over the last two years and come up with five conclusions:

- Organisations that would respond to a natural disaster needed 'a full and clear understanding' of theirs and others' responsibilities. More advance planning was needed. 

- More effort should go into increasing the country's resilience to natural disasters.

- New Zealanders needed to be educated on what was reasonable to expect, and in what timeframe, after a natural disaster. 

- A full review of the EQC Act should clarify the definitions of terms used in the Act, as unclear definitions created 'very significant issues' between EQC and private insurers. 

- Clarity was needed on what directions ministers could give EQC, as the organisation was told to take on roles it was not equipped for (such as the managed repair programme) during the Canterbury quakes. 

Cullen said realistic timeframes were not set for EQC's quick response assessment programmes. The organisation's lack of coordination and communication led to 'confusion, frustration and distress, and trauma for homeowners who rightly felt let down'.

'At the same time, EQC staff, while committed to doing the right thing, were over-stressed, working long hours with inadequate systems and processes for the scale of the task they were faced with, and felt undervalued. In too many cases EQC failed both our staff and the people of greater Christchurch.'

EQC was finalising its operating model; 'that almost certainly means a system where New Zealanders have a single point of contact, likely to be with their private insurer, who will handle [that person's] claims from start to finish, with EQC reimbursing the costs to the insurer for which EQC is responsible'. 

GOVERNMENT RESPONSE

EQC Minister Grant Robertson said the Government would take time to consider the report's recommendations.

Many would need legislative changes to happen and would be included in a full review of the EQC Act next year, he said.  

Greater Christchurch Regeneration Minister Megan Woods said the inquiry gave a voice to people affected by the quakes.

She said the Government had already taken steps by setting up the Canterbury Earthquake Tribunal and Greater Christchurch Claims Resolution Service to resolve claims. 

It now needed to think about how similar services could be applied across New Zealand if other natural disasters occurred, Woods said. 

CLAIMANTS DRIVEN TO THE BRINK

More than 970 people shared their experiences in dealing with EQC as part of the inquiry. Their comments paint a picture of an insurer beset by incompetence, dysfunction and arrogance.

Cartwright said the feedback carried 'sufficient weight that it cannot be ignored'.

Many reported suffering high stress levels, with some coming 'close to mental breakdown', feeling suicidal and developing post-traumatic stress disorder.

Several people spoke of feeling 'powerless', 'hopeless', and not in control of their situations.

The 'non-adversarial' approach of the inquiry received criticism from advocacy groups, who said it risked failing to protect Kiwis against 'ongoing, limitless damage' by the agency in future natural disasters.

The inquiry was the first of its kind under the Public Inquiries Act 2013 and had all the powers of a Royal Commission.

As of the start of February, EQC had 1750 open claims from the Canterbury earthquakes, of which 12 per cent are subject to dispute. Claims for home needing re-repairs are still being received.

Another 420 open claims are awaiting settlement under the Government support package for on-sold over-cap properties.

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