A recent contract works claim for earthquake damage to a driveway was subject to an excess of $10,000. Depending on the contract terms the builder may have to pay it.
In this case, a new home was under construction and nearing completion when an earthquake struck, causing damage to the driveway that needed to be repaired.
The way excesses for damage from natural hazards are calculated varies across insurers. It could be a percentage of:
A. The total insured contract value, or
B. The value of the work done when the damage happened, or
C. The value of the damage
All will be subject to a minimum excess, and this and the % applied will depend on the earthquake risk in the region you're building.
Because the home was nearing completion and the excess was calculated as a percentage of the work done at the time the damage occurred, the excess worked out as 2.5% of the approximately $400,000 spent up to that point. That's an excess of $10,000, which was more than the cost to fix the damaged driveway.
The implications for builders
Firstly, if the value of the claim had been above the excess the builder & owner would need to have an agreement that states who's responsible for paying it when the damage or loss is not the builder's fault. Most reasonable people would say the builder should not have to fork out in these situations, but you should make sure your contract is explicit on this point.
Secondly, if the claim is below the excess the contract should state who is responsible for paying to reinstate the work if it is not covered by insurance. Again, is it fair for the builder to have to pay this (or to even pay a percentage of it) when the damage is caused by a natural event or for some other reason outside of the builder's control?
In either case, having it clearly specified in your contract will avoid any arguments if/when it happens.
Request a contract works quote online at: Contract Works Quote.
From the 1st of July the compulsory Fire Service Levy, which insurers collect on behalf of the Government via your insurance premiums, has increased.
This means after 1st July new and renewing tools, vehicle, contract works and other property insurance will incur this additional charge. Extensions to existing contract works project policies will also be charged at the new higher rate.
The government is merging the NZ Fire Service with volunteer and rural fire services to establish a single, unified organisation, Fire & Emergency New Zealand. This merger will be partially funded by an increase in the Fire Service Levy (FSL). The FSL is the main source of funding for New Zealand's firefighters and private insurers have collected the levy on behalf of the Government since 1975.
The FSL shows as an additional charge on the premium invoices of all home and contents, motor vehicle and commercial property insurance policies, including contract works insurance.
From the 1st of July the FSL component of the insurance premiums for these policies will increase by 40%.
How much extra will you pay?
Residential homes: FSL increases from $76 to $106 per dwelling
Residential contents: FSL increases from $15.20 to $21.20 per policy
Motor vehicles less than 3.5T: FSL up from $6.08 to $8.45 per vehicle
Commercial property (including tools & contract works): FSL rates increase from 7.60 cents to 10.60 cents per $100 insured