The High Court has ruled the Earthquake Commission can settle thousands of claims by Christchurch people whose homes have been made vulnerable to flooding by paying out loss of value to land.
Residents affected include those living in the Flockton Basin, where some have had to abandon their homes because of repeated flooding.
The decision follows a hearing in October this year after the commission sought a declaratory judgment to test the way it hopes to settle 13,500 land claims.
Read the full decision here.
It wanted the court to approve the formula it has chosen to compensate residents in a bid to head off any future legal action.
In today's decision, Justice Kos found increased flood vulnerability was like a natural disaster damage to land, which the commission should compensate for by remediation or payment.
The judge said where a house had subsided with the land, and the land and building had become vulnerable to flooding, this was damage to the land but not to the building.
He also found that sometimes, but not always, EQC could compensate by paying the loss in the value of the land, rather than reinstating the land.
The High Court did not approve the proposed policies of EQC as "lawful" or consistent with the EQC Act but did find that it was proper for the commission to develop and publish guidelines for the settlement of flood vulnerability claims.
EQC is obliged to either repair damage, or make the proper payment and homeowners are entitled to sue EQC in the same way that they would sue an ordinary insurer.
What it means for homeowners
Flockton Cluster Group lawyer Duncan Webb said the commission had largely got what it wanted but not quite a free pass, and there were three key areas the commission would be concerned about.
Dr Webb said the court did not approve the policy but simply said it was proper for EQC to have one.
This meant that it was still open for owners to challenge the detail of the policy itself, such as how it measures flood vulnerability, or how it calculates the amount of compensation, he said.
Secondly, Dr Webb said, the court said settling claims by paying compensation on the basis of a loss of value is proper in "appropriate circumstances" such as where repair of the land is not feasible, or the land has been sold. Where the owner intends to repair the land then the cost of repair will be the proper measure.
Thirdly, the commission can be sued like an ordinary insurer. That means that they must act as if the EQC Act were an insurance policy and it must be followed strictly. EQC must not only act reasonably, it must act correctly.
But some people living in the Flockton Basin say the decision will not help many of those who need to lift their homes due to increased flooding.
Spokesperson Jo Byrne said people would be disappointed the court said they had not suffered house damage if the house and the land had both dropped.
"The limits of the land cover will actually limit the amount of cover people get to lift houses," she said.
"TC3 houses in this area, you're probably looking at $100,000, so a lot of people are going to be left in a very bad situation."
Good result for customers
EQC chief executive Ian Simpson said the ruling was a good result for many of its customers because it supported its approach to settling complex land claims.
The decision cleared the way for EQC to assess and make payments where land repair was not feasible or consentable, Mr Simpson said.
It planned to start settlements as soon as possible next year, he said.
Insurer Southern Response, which was one of the defendants to the proceedings, said in a statement there would be no changes to its current policies until it had determined what the judgment could mean for customers.