About the Claim

EQC used diminution of value (DOV) as a measure of loss for almost all land claims where there was increased liquefaction vulnerability (ILV) and/or increased flooding vulnerability (IFV).  Based on EQC's submissions to the Public Inquiry it settled over 23,000 claims for ILV and/or IFV, with over 11,000 in the green zone and over 12,000 in the red zone.

The average land claim values where DOV was applied were just:

• $21,238 for ILV where the building remained in place
• $11,584 for ILV where the building has been or will be removed
• $20,809 for IFV where the building remained in place
• $20,705 for IFV where the building has been or will be removed

These average land claim values are far less than the cost to actually reinstate the land.  In the case of the representative plaintiffs, EQC should have paid the land cap being $160,000 (it paid just over $20,000).  Many other land claims where DOV was applied will likely be similar in scale.

The Earthquake Commission Act 1993 does not say that DOV can be used as the measure of loss for land claims.  In fact the Earthquake Commission Act 1993 is relatively clear on how claims should be paid.  The relevant sections of the Act are below.

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Land covered

Land that is covered is defined in the Earthquake Commission Act 1993, s2(1) as:

• the land on which the building is situated
• all land within 8 metres in a horizontal line of the building
• that part of the land which is 60 metres, in a horizontal line, of the building and constitutes the main access way (or part of the main access way), or is land supporting such access way
• all bridges and culverts (situated in any of the above)
• all retaining walls and their support systems within 60 metres, in a horizontal line, of the building which are necessary for the support or protection of the building or any of the first 3 bullets above

Cap for land claims

Land claims do not have a single cap amount as building claims do, but it is not difficult to determine what the cap is.  S19 of the Earthquake Commission Act 1993 sets the land claim cap as the sum of:

The smallest dollar value of the 3 options (under s19(a)):

• the value of the minimum lot size of the operative district plan (this is known by EQC as in most cases they would have got a valuer to complete a valuation asking for this to be included)
• an area of land of 4,000 square metres (in most instances this is not applicable)
• the area of land actually lost or damaged (slightly more complicated as you have to know what land is damaged and also the value per square metre, although EQC have notional rates for this following the Canterbury earthquake sequence)

Plus, the indemnity value of bridges, culverts and retaining walls (under s19(b)).

ILV and IFV are both site wide land damage.  Therefore, in most cases (if EQC determined you had ILV and / or IFV) the cap will be the minimum lot size of the operative district plan (bullet 1 above).

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DOV

As advised by their lawyers at the time, Chapman Tripp, EQC essentially created a new way to value this land damage which they called diminution of value (DOV).  By using DOV, EQC wiped $1.5 billion dollars off their liability for land claims.

This class action seeks to have EQC pay the full cost to reinstate the land impacted up to the value of the cap.  It says EQC was wrong to pay a substantially lesser amount calculated using its DOV methodology.

EQC says that it has fulfilled its statutory obligation by paying for the land damage based on its DOV methodology.  It says this claim is a direct challenge to the High Court declaratory judgment in Earthquake Commission v Insurance Council of New Zealand Inc in 2014.  We believe that the declaratory judgment contains a number of errors which need to be corrected, and if need be, challenged through to the appropriate Court.

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