13 November 2024

A High Court decision has provided clarity around what insurance claims advocates, who are paid a percentage fee, can claim, when it comes to the Natural Hazards Commission’s On Sold Programme (OSP).

Christchurch company Proclaims Management, appealed an August 2023 District Court finding against them which found they were not entitled to a $51,083.36 ‘success fee’ based on an OSP settlement. The Judge in that [1]case, Judge Tuohy, said that if Proclaims had established a claim, a fair payment would have been “no more than $500”.

Proclaims appealed that decision and lost.

Christchurch based claims preparer, Dean Lester, says the decision provides clarity in the area of percentage fee agreements relating to homeowners’ insurance claims.

“In this case, there were two areas under consideration by the courts,” he says. “One was about fees payable with regards to the insurance claim made under the EQC (now NHC) Act, before it was put ‘over cap’ and into the OSP. The next part of the case was around fees Proclaims asserted they were entitled to once the claim went to the On Sold Programme (an ex-gratia-based payment process) – which is what happens when a claim is deemed over cap and the cap payment of $100,0000 plus GST is paid to the homeowner.”

Lester says the appeal judge (Preston) is very clear that the EQC (NHC) Act is an insurance response, and the OSP is an [2]ex gratia response to resolve a situation of possible negligence.

“This finding by the judge provides clarity that Proclaims isn’t entitled to their success fee relating to OSP settlements, and any other homeowners in similar circumstances could be entitled to a refund if they have paid Proclaims or have entered into the same agreement with a similar company,” says Dean Lester.

What is most important is that ‘On Sold’ homeowners understand there are two options open to them – follow the OSP pathway as it was laid out four years ago and supported by your own experts or engage a lawyer. The On Sold Programme was set up with two objectives[3] – to “support a fair, timely, and enduring resolution” and “reduce the risk and potential cost of litigation for both EQC and affected Canterbury residents.”

“Clearly we all want to avoid litigation if at all possible so ensuring the OSP works effectively, as it was designed to, is absolutely key to ending this rolling maul of costs, as Associate Finance Minister David Seymour said last week,” Lester says.

He adds that the recent decision has brought about a clarity which is extremely helpful. It highlights the difference between the BAU (business as usual) part of the EQC/NHC claims handling and the OSP which he says at present they are sometimes confused about.

“I have been working with claimants who believe they’re in the OSP but have not been paid a cap payment which essentially means they are in the BAU (business as usual) part of the EQC/NHC process. EQC/NHC has an unchanged obligation to fulfil the requirement under the EQC/NHC Act as an insurance response if the claim has not been paid cap at which time it can move to the OSP.”

[1] NZDC 12924 Proclaims & Ors vs Bately and Cox

[2] An ex gratia payment may be made to someone who has been harmed, even though there is no legal requirement to pay them

[3] https://www.treasury.govt.nz/sites/default/files/2019-11/ocp-4190360.pdf SCHEDULE 1 - OBJECTIVES

© Scoop Media