Earthquake Claims for Multi Units
EQC and Insurers postponed dealing with what they termed “multi-unit” claims. These claims are now emerging and raise many issues. They use the term “multi unit” to refer to physcially connected properties. These properties can be unit titles within a body corporate, cross-leased properties or physically connected units on separate titles. The primary reason for the delay in the resolution of multi unit claims is that EQC postponed its assessment of them.
With a body corporate there is a single insurer and usually a single sum insured. There will be issues with the apportionment of the sum insured between units when there is insufficient cover to pay for reinstatement. If the sum insured is insufficient then valuers/body corporate secretaries may have issues.
With cross leased properties there will likely be separate insurers and in some cases no insurer(s) of some units. The terms of the cross lease will set out out each owner’s obligations in relation to damaged unit(s) and insurance. Usually insurance money is required to be spent on reinstatement. Owners need to be careful to understand obligations under the lease before entering into settlement(s) with insurer(s).
There is apparently a written agreement between insurers as to how multi units are to be handled when there are multiple insurers. I have not seen a copy of the agreement. I understand that the insurer with the greatest exposure takes charge. Where the entire complex/all units are damaged beyond economic repair then insurers will try to have the complex rebuilt. However, each owner has separate rights under their insurance policy with their particular insurer. These rights cannot be overridden by the agreement between insurer(s).
So, with the AMI policy, as an example, the insured has the choice whether to buy another property or build elsewhere in addition to the choice to build on site. A choice to build/buy elsewhere then affects the rebuild of all units. I expect that multi unit claims will create many disputes that will necessitate court involvement. Cross lease disputes will be particularly messy.