When the dust settled in Christchurch after the killer quake of four years ago, there was one big shock still to come for many owners of homes and businesses. Their insurance policies didn't cover them for what they thought. Insurance policy wordings failed the people that relied upon them.
Thousands of Cantabrians were left out of pocket despite being insured. Any one of us could find ourselves in the same position should an earthquake, volcanic eruption, tsunami or other widespread natural disaster hit.
Christchurch is the fourth most expensive earthquake in history in insurance payout terms. No one foresaw a situation where parts of the central city would be cordoned off for up to three years and large areas of land would become unusable.
Probably the biggest lesson for homeowners from Canterbury is that "replacement" doesn't necessarily mean what you and I think of as replacement.
Cantabrians found out that despite having "new for old" coverage, modern building materials could be substituted for heritage features such as rimu floors. This has led to many court cases, says insurance lawyer Andrew Hooker.
A related problem hit homeowners whose houses sat on concrete slabs which were cracked by earthquakes. If the cracks to slabs were under a certain size insurers opted to repair them with epoxy filler. This left some homeowners seething at the effect a bogged slab has on their property values.
"Why should I have a [repaired] crack in my slab?" says Hooker. "It saves the insurance company money, but that's not my problem."
Hooker has several clients who have had their foundations "fixed" with a method called "jack and pack". This involves jacking the house up and packing between the foundations and the floor plane, but doesn't solve the problems of the wrecked foundations underneath. These cheap patch-up jobs are already starting to fail, says Hooker.
The red-zoning of land opened another can of worms. If your house was only slightly damaged but the land unusable, insurance companies argued they only needed to pay the repair cost, not the full cost of building a new home elsewhere.
In the case of Matt and Valerie O'Loughlin, the damage had been estimated at $337,000, but it would cost at least $540,000 to rebuild on another site. Had they agreed to Tower's offer they would have been $203,000 out of pocket.
The O'Loughlin's other option would be to take the government compensation package. That was at 2008 rateable values, which in most cases was well below what the properties were worth on the open market and less than it would cost to buy a new house. Some owners who took this option lost hundreds of thousands of dollars on paper. The O'Loughlins took Tower to court instead and won.
Owners who didn't want to rebuild found that the wording of most policies entitled them to "market value" rather than replacement. The theory behind that, points out Tim Grafton, chief executive of the Insurance Council, is that no one should be put in a better position by insurance than they would have been if the earthquakes had never happened.
Multi-unit dwellings and businesses have also caused a nightmare, Grafton points out. There have been instances where repair work can't be done because there are multiple insurers as well as uninsured units. Without agreement, work can't proceed. In the end insurance companies have agreed that one should be lead repairer.
There have also been instances where the Earthquake Commission (EQC) and insurers couldn't agree or one was waiting for the other, which slowed work down. They should have made joint assessments, says Hooker, which would have saved a lot of time. There is a review of EQC under way as a result.
A huge number of cases are working their way through the courts although some will be settled out of court. Others have been resolved by the Insurance & Savings Ombudsman and other complaint resolution services.
Some of these court cases will set precedents. But it's important not to read too much into them, says Hooker, because each policy is worded slightly differently. Sometimes "precedents" are folklore, he says.
Another issue that could happen anywhere is that of homeowners not calculating their floor area correctly when they took the policy out. If they'd told the insurer that they had a 150sq m building but it was in fact 200sq m, they would only be paid three-quarters of replacement cost.
The insurance process was far slower than people or policy wordings anticipated. Many claims are still not settled four years down the track.
Most homeowners who were insured had temporary accommodation cover. Yet in numerous cases the owners hadn't even had the damage on their homes assessed before their six or 12-month temporary accommodation cover expired. They then found themselves paying for both a mortgage and rent.
Landlords were in a similar situation. Their insurance policies had six months to a year's worth of loss-of-rent cover. But if they couldn't get properties repaired within six to 12 months they had no cover.
Grafton says many landlords are in no hurry now to have properties repaired because they don't want to forgo rent. It's a catch 22 situation for property owners who do want properties repaired, but can't afford the loss of rent during the repair period.
Some of the biggest aftershocks were for business owners. Business-interruption insurance is supposed to pay out for lost takings if you're put out of business by an earthquake.
The reality is that you're only covered if your building or plant is damaged. If your business is situated behind a cordon and the building or plant is usable, then you have no claim, even though you can't do business.
"A lot of people in the cordon didn't have damage. They could have kept trading but for the cordon," says Grafton.
He says it's now possible as a result of the Canterbury experience to get contingent business interruption insurance that is triggered by things other than building damage. It's expensive, however, and only covers a proportion of a loss.
Another common problem business owners faced was insurers arguing business losses weren't due to the earthquake but a result of depopulation that happened as a result of the earthquakes. Sorry, mate, no payout.
If your business was dependent on tourism, for example, and the tourists stopped coming, you weren't covered. "Sometimes I feel like I've fallen down Alice in Wonderland's hole and I am talking to the March Hare," says Hooker.
Susan Taylor, chief executive of Financial Services Complaints, is handling a case currently in which the insurance company and owner have spent more than three years arguing over whether the damage to a building was caused in one earthquake or three.
Another big problem, says Hooker, was on the issue of reinstatement of sum insured. Policies usually include a clause that says that the sum insured reinstates after each event. So if you have three earthquakes in a year, in theory the sum insured could be paid out three times in a year.
The insurers, however argue that the sum insured is the maximum that can be paid out over a year. This affected business owners who were underinsured.