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Hon Lianne Dalziel
MP for Christchurch East
Sunday, April 29, 2012
Brooklands Community Centre
Anfield St Booklands
Brooklands Red Zone Update
Since the last time I spoke there has been little progress on the call for transparency – other than the Minister now thinks that the Anglican Church should be more transparent than the government. He only announced the release of the information CERA had on the Cathedral, because the extended Official Information Act deadline was about to expire next week. So they released it the same day as the new DBH guidelines for the Green Blue zones were released guaranteeing that it wouldn’t hit the front page.
I want to say something about this attitude that responding to Official Information Act requests amounts to transparency. It doesn’t.
Transparency is when you release the Cabinet papers at the same as the decision – and their contents come as no surprise because of the level of consultation with major stakeholders that occurred before decisions were made. There has been no consultation – just pronouncements to the media after all the decisions have been made behind closed doors.
And we have to fight for every scrap of information we receive, and even then, so much is still left undisclosed that people start to think that there is more to it.
John Key stood outside this hall on September 12, 2010 and promised to stand by you. He has repeated that promise many times over.
But what he has done is left all the decision-making to his Minister of Canterbury Earthquake Recovery, who refuses to engage with anyone. His idea of collaboration is to tell the council that he is going to make an announcement about Brooklands that afternoon while they are on the bus on their way out here for morning tea – completely oblivious that Brooklands was to be red-zoned.
I have now written to the Prime Minister and asked him to intervene.
Last Tuesday I sent him a letter and enclosed the legal opinion that Dr Duncan Webb, a partner at Lane Neave, prepared for me. He did this on a pro bono basis so I could circulate it at no cost to the advisers who are helping my constituents. It says that subject to the wording of the policy that the proper approach for insurers is to accept that properties in the red zone are constructive total losses.
This is regardless of the extent of actual damage which has occurred to the house, on the basis that the houses are no longer able to be occupied.
If this opinion stands up in court, (and I have already been contacted by a lawyer to say he has another one that says the same), this would solve the problem of insurers reassessing their rebuilds as repairs, which I know is such a problem out here.
But it is just an opinion at this stage – the insurers have an alternative view. But it is sufficient to say that there is a case to answer.
There is only one place this can be tested and answered and that is the court. The government agreed that the insurers could test the meaning of the Earthquake Commission Act on an agreed set of facts about the reinstatement issue – obtaining what is known as a declaratory judgment – and there is no reason why they couldn’t do the same here. Mr Brownlee speaks of dozens of insurance policies as a reason not to do that – but the standard clauses in the relevant part of those policies are very few and there is no reason why the court couldn’t be asked to assess each one on agreed facts.
The declaratory judgment which said that insurance cover (and therefore EQC cover) reinstated after each separate event has set back the recovery, not only financially, but more importantly, it has cost precious time as EQC is forced to reassess thousands of claims in order to apportion between the events.
Mr Brownlee says we should use the process ourselves – go the Insurance & Savings Ombudsmen and then to court – but who can afford that? And why are we being left to do it on our own? The government helped the insurers get the legal ruling in that case – they should help the people now.
And why should they do that? Because as I pointed out in my letter to the Prime Minister the government itself has a major conflict of interest.
The government is:
an insured home-owner (having settled with over 1000 home owners with Option1, but also through state housing ownership),
an insurer (EQC & Southern Response), and
responsible to claim back as much as possible from insurers and EQC for the Option 1 settled properties.
It is important to note that the government pockets any extra money they get back from either source over and above the RV. Most people don’t know this, including CERA officials. But what it means is that the government could end up better off than the people they say they are helping.
In addition to this, the advice to people from CERA that people are likely to be better off with Option 1 if they are not a rebuild would indicate an understanding between the government and the insurance industry that they do not need to honour replacement policies despite the constructive total loss.
I have now been copied a letter from the Minister that I am releasing today, because it makes it abundantly clear that the government has sold out the red zone owners who are the big losers in those so-called ‘incredibly’ fair offers. Mr Brownlee should be careful about giving this sort of legal advice when the government is so utterly compromised by these conflicts of interests.
He says: “While I can understand that your family member’s preference is to choose Option 2 and be paid full replacement for her unit, the purpose of Option 1 is to provide an alternative for those red zone property owners who do not qualify for a rebuild.”
He repeats the mantra that “the purpose of the Government offer to red zone property owners is to enable people to move on”.
The trouble is that it’s hard to move on when your adjoining unit gets rebuilt and yours doesn’t. And actually bullying people into taking an option that leaves them much worse off than their neighbour is hardly enabling people to move on.
As Mike Coleman from WeCAN said recently, it is the insurers that should have been given a deadline, not the residents.
In fact a government offer should never have been made until the insurers had put their position in writing so we wouldn’t have this sudden change of mind about rebuilding or repairing. I would have thought that with John Key having been a currency trader, he would have known the effect of disclosing our bottom line before the negotiations had even begun.
So where to from here? Sunlight is the best disinfectant. I hope you support my request to the Prime Minister to step in and require the legal issues to be resolved with no cost to the red zone residents. And the offer should be put on hold until this done.
And all of the other red zone issues should be addressed as well: the empty sections, the houses still being built when the earthquake struck, the houses consented after the February earthquake, the businesses, the properties owned by community groups. All of these have been left in a state of limbo in the red zone, not knowing when and how the government will respond to them.
And the uninsured – there is judgemental language in the Cabinet papers about the people who took the risk of being uninsured.
This is a set up for the wider public to think they are lucky to get anything from the government. But I have heard the stories of the widows and widowers who missed the payments when a bank account was changed and the automatic payments not reinstated; the couples who faced financial hardship struggling to get themselves back on their feet after serious illness. When the government makes them an offer, it must be fair. As must it be as fair as possible for everyone.
The government has characterised the red zone decision as de-risking the city for the insurers and reinsurers. I don’t object to that. But it is important that the process is transparent and that it is fair. I reject the winners and losers scenario that doesn’t sound like fairness to me. The earthquake had an unequal impact, but no-one really expected to be a winner – the government’s job was to identify who the losers were and seek to address their needs in a meaningful way.
Who are the losers? They are the people whose RVs (capital value for Option 1 and land value for Option 2) were below the market value at the time of the earthquake as well as those whose insurers have decided to offer only repair costs.
So how did this happen? The government looked for a ‘one-size-fits-all’ solution because they wanted to announce it with the first red zone decisions. It’s part of a clever narrative to make it look like they are decisive and helping people move on. But the fact that over three-quarters of the people are taking Option 2, would suggest that the offer is leaving many people between a rock and a hard place. The three month extension the government has had to provide for the so-called voluntary offer is testament to the difficulties that people are facing.
These are elderly people, who don’t know what to do; some whose sons and daughters have been to lawyers and there are others who have grouped together to find answers to the questions. Brooklands includes people in all groups. And then I read that someone who used to tell the children of this country to ‘stay cool till after school’ cannot himself stay cool after listening people talk about their problems – it is then I know the under-currents of anxiety and stress are running deep.
Olly Ohlson nailed it when he said that the rest of New Zealand is unaware of what is happening here and that is because there has been a government controlled spin around the red zone decisions and the red zone offer. The people of New Zealand have been given a narrative about what is happening and they believe it.
I congratulate Olly for speaking out – I know full well the consequences of doing that – especially when you use your own place as an example. But somehow bulling Olly Ohlson is going to be a bit harder than bullying a politician.
I agree with Olly when he says that the way red-zoned people are being treated by this Government is a crime and should not go unchallenged. I hope that the legal opinion will help people realise that there is more than one side to this story and that the government has not been as transparent as it should have been.
Finally there is the issue of the value of the land. Out here there is a real discrepancy as to when the valuations were first done and how well the sections were marketed as each sub-division was released. There is a need to challenge this, as EQC has obligations under its legislation and the legal opinion touches on this as well.
So let me remind you again of what John Key promised outside this hall on the 12th September 2010. He was answering a question about what happens when the land cannot be rebuilt:
“So properties that cant be built on who covers that cost? Right Ok. …. (He then gave acomment about the impact of liquefaction and the fact that this didn’t mean the land couldn’t be rebuilt and goes on to say)…If however they can’t be built on EQC rules are that they pay out. They are complex but they do pay out on the land.
And what we need to do once we get a handle on how many houses can’t be rebuilt and what the compensation is for your land and then the government is going to go away and have a look and see if there is a difference what that difference is and what we might do about it. We’re working our way through it. The number of houses that can’t be rebuilt on those sections we think is relatively small but obviously that can change but that is one issue we are acutely aware of.”
They may have been acutely aware of this issue back then, but now they are just trying to bury it. If people are to make an informed choice, they are entitled to know what all the choices are and what the potential consequences may be.
How can you choose Option 1 if you don’t know what the insurer is legally obliged to provide under the policy and what EQC is required to pay to cash settle the land? And how can you choose Option 2 if you don’t know that EQC figure. And how can you choose either if you don’t know what would happen if you don’t take the voluntary offer – veiled threats about compulsory acquisition which may mean less money haven’t hit the headlines, because those sorts of threats don’t suit the narrative of helping people move on. But compulsory acquisition is when people can challenge the government in court. Perhaps that’s why they don’t want to go near a court now, because the court might uncover what has really been going on behind the scenes.
I am sorry that I have not got more news today. But at last the media are starting to unravel the spin and tell the real story. And Brooklands is lucky that Olly Ohlson decided to move here all those years ago – because people are starting to listen.