Labour questions legality of red zone payouts

9:14 pm on 23 April 2012

The Labour Party says a new legal opinion raises serious questions about the actions of some insurers in dealing with claims from red-zoned Christchurch residents.

Labour is questioning the legality of some insurance payouts to homeowners with earthquake-damaged properties in Christchurch.

The opinion from Duncan Webb, a partner at Christchurch-based law firm Lane Neave, says insurers cannot offer payment for just repairs to red-zoned owners where the land is so badly damaged it is unlikely to be rebuilt on for some time.

Dr Webb says many red zone homes are not badly damaged, and some insurers believe they need only pay for the damage that has occurred. But he says if for all practical purposes a property is lost, the owner can get full compensation.

Dr Webb says the creation of the red zone has essentially deprived homeowners of their land.

While it will depend on individual policies, he says in many cases, insurers may have to pay owners the full replacement value of their homes.

Labour's Earthquake Recovery spokesperson Lianne Dalziel says the question about repairing properties in the red zone has not been properly resolved.

Ms Dalziel says houses in the red zone should be written off on the basis they cannot be lived in and, therefore, insurers should pay for rebuild - not just a repair.

The Government needs to have it resolved in court to get an outcome for everyone, she says.