An earthquake-prone building is one whose seismic performance is rated at less than 34% of the requirements under the New Building Standard.
That means the building is likely to collapse, causing injury or death, or damage to another property, during or following a moderate earthquake.
Legislation requires New Zealand’s territorial authorities – or councils – to identify and develop a plan for earthquake-prone buildings in their area. This is a significant operation for councils and has wide-ranging implications for property owners.
If you own an earthquake-prone building, a council may serve you with a Section 124 Notice, which will require you to complete seismic upgrades to the building within a stated timeframe.
What you should do
If your building is insured with NZI, you should immediately notify us if your building is declared earthquake prone or you have reason to believe it has a seismic strength of less than 34% of the requirements under the New Building Standard.
Discuss the implications of changes in insurance cover with your broker. If you don’t have one, we can help you find a broker.
Review the insurance obligations detailed in agreements and contracts you have, e.g. mortgage contracts.
Consider your long-term plans for the building, which might include demolition,
re-strengthening work on the building, or divesting the asset (or liability).
Your insurance cover will almost certainly change if it is determined that a building you own is earthquake prone and it is insured with NZI.
Every building is different and will be assessed on its own merit regarding insurance cover. However, the minimum changes likely to apply are:
The basis of settlement on the building will move to indemnity value, if it is currently insured on another basis.
Seismic upgrade costs will be excluded from the cover.
There might also be other changes, depending on the cover in place under a specific insurance programme.
To find out more about earthquake-prone buildings and how the upcoming changes could affect you, take a look at our booklet called Important information about earthquake-prone buildings.
Local and central government
Councils are at various stages of completing their processes regarding earthquake-prone buildings. Check out your local council website, as some have published lists of these buildings in their areas.
The Ministry of Business, Innovation and Employment (MBIE) is seeking to introduce a consistent national approach to dealing with earthquake-prone buildings. Its proposals take into account recommendations that were made by the Canterbury Earthquakes Royal Commission.
Three months of public consultation on the proposals closed on 8 March 2013. The MBIE is analysing the 529 submissions received, along with feedback from 1000 people who attended public meetings, and will then report to the Government for it to make decisions.
You can read a summary of the proposals for earthquake-prone buildings. If adopted, the proposals will require legislative change, with the opportunity for further public input through the select committee process.