04 February 2013

Earthquake: Insurance Council v. Christchurch City


Local councils requiring earthquake strengthening when repairing existing buildings cannot set standards beyond the 34 per cent limit set by regulations under the Building Act.  An attempt by Christchurch City to set the seismic limit at 67 per cent of new building standard was struck down by the High Court as invalid and in excess of its powers.  A 34 per cent limit is the assessed seismic strength required to support a building suffering an earthquake of one-third the intensity that could be borne by a new building erected on that site.
In the aftermath of Christchurch’s earthquakes, the local council has been setting new rules for reinstatement of earthquake-damaged and earthquake-prone buildings.  The Insurance Council, which represents insurers covering some 95 per cent of New Zealand’s insurance cover, objected to new city council rules which required buildings to be brought up to 67 per cent of new building standard.  The Insurance Council said this would increase repair bills by hundreds of million dollars.  The High Court was told that a rebuild of earthquake damaged Canterbury University would cost an extra $140 million if a 67 per cent limit was set rather than 34 per cent.
In practice, building owners want to see their buildings strengthened to a 67 per cent rating.  Not only does this reduce risk, but also improves the building value.  Post-earthquake rebuilds have been on hold while insurers have argued over the level of seismic strengthening required.  The level of danger created by the building, the use to which it will be put and the cost of repairs are weighed by the city council in giving approval to rebuild plans.
Justice Pankhurst said the primary focus in the Building Act is to manage the likely risk of earthquake-prone buildings collapsing causing injury or death.  New buildings are required to meet 100 per cent of the seismic strength required by regulations made under the Act.  When repairing or reinstating existing earthquake-prone buildings, they need only be brought up to 34% of the seismic strength required for new buildings.  Councils cannot impose higher standards than those set under the Building Act.
Insurance Council v. Christchurch City – High Court (4.2.13)
13.004