EQ repairs' loss of rent?

Question from Peter updated on 30th April 2015:

My question is around loss of rent due to the Christchurch earthquake. Our loss of rent cover at the time of damage read "if we agree your home cannot be lived in because of loss or damage covered by this policy, we will also pay you for Loss of Rent". EQC/Fletchers have assessed the damage and advised a start date which is when they require the property vacant. Under the Residential Tenancies Act we, as landlords, are required to give the tenant 90 days notice to vacate on a periodic tenancy. Under the same agreement the tenant is required to give the landlord 21 days notice. There is a potential maximum vacant period of 69 days before the contractor starts repairs, during which time the property is habitable but in reality cannot be tenanted under a rental agreement for obvious reason. My insurance company has stated they will only make loss of rent payments with effect from the date EQC/Fletchers have indicated as their start date for repairs. We believe it should be from the vacated date?

Our expert Myles Noble responded:

The relevant loss of rent trigger for the loss of rent clause is "if we agree your home cannot be lived in because of loss or damage covered by this policy, we will also pay you for Loss of Rent". The difficulty here is that technically the home could still be lived in for the 69 days (proven by the fact it is currently tenanted), yet at the same time it will be unlikely to be re-tenanted for the short period between the tenant leaving (due to notice having to be given) and the repairs starting. So the landlord is incurring a loss of rent directly related to the claim that he would not otherwise be incurring had the loss not occurred. I think it’s important to note that the landlord is not making a "business decision" or choice here to have the house empty - the rent he is losing is directly attributable to the claim and because he is having to comply with the legal requirements of the RTA. In some respects the insurer has “agreed” the home can’t be lived by virtue of the fact they know the damage is severe enough that the house must be empty during repairs. There is no mentioned definition of the start date for loss of rent in the policy (and my experience is that this is not usually defined), therefore my thoughts are the start date should be when the loss actually occurs, which is as soon as the property is no longer tenanted. Generally insurers will take a “contra proferentem” approach where there is some ambiguity in the policy wording and then decisions are made in favour of the policy holder.


Myles Noble is head of claims and earthquake response for Crombie Lockwood. He also holds various advisory board positions in the insurance industry.

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