Insurers IAG and Tower are headed to court to challenge the Earthquake Commission's payouts for Canterbury earthquake claimants whose properties had land issues.

The two separate cases centre around the difference between what the insurers paid out to settle those claims and how the EQC calculated the payments made to some private insurers.

In order to speed up the claims process IAG, whose brands include AMI and State Insurance, and some other insurers decided to reinstate or cash settle claims for customers with properties facing increased liquefaction vulnerability instead of insisting they go to EQC first to get their land either fixed up and paid out on.

The insurers claim they did this on the understanding that EQC would compensate them for the costs.


But now the EQC has made the payments and published its methodologies the insurers say they have discovered there is a "fundamental difference" in the approach to the land settlements between private insurers and EQC.

An IAG spokesman said EQC had taken the approach that it would not pay the actual cost of overcoming land damage through foundation enhancement on the basis that this is not 'land repair' even though it cures land damage by over coming it.

"We disagree with this approach and how these land payments have been calculated and due to this we have issued legal proceedings against EQC.

"A legal ruling will confirm EQC's liabilities and private insurer's recoverable costs in this situation, and help all parties avoid such confusion in future."

Tower chief executive Richard Harding said he believed court action was now the only way to create clarity for both private insurers and EQC.

"Despite repeated discussions with EQC, we have failed to agree how to treat these costs. The private insurance industry needs clarity and a High Court ruling now seems the only way forward on this particular issue.

Harding said the court action would not prejudice or impact on customer settlements.

"We are simply seeking to have EQC fairly reimburse Tower for costs incurred responding to ILV [ increased liquefaction vulnerability] in settlements already reached."