New Zealand’s Earthquake Commission (EQC) is soon to start settling about 13,500 land claims from Canterbury earthquake victims whose homes have become more vulnerable to flooding.

It follows a ruling in the High Court last week that the commission can pay out on loss of value to land.

“The judgement is a positive outcome for many EQC customers because it supports [our] approach to settling complex land claims,” CEO Ian Simpson said. “It means we now have answers to some of the more challenging questions for our customers in Christchurch.”

Mr Simpson says the ruling allows the EQC to assess and make payments based on its “increased flood vulnerability policy”, which includes diminution of value where land repair is not feasible or consented to.

The EQC sought the declaratory judgement to test the way it hopes to settle with about 9000 flood vulnerability customers in Christchurch, plus 4500 properties in the “red zone” that have mostly been sold to the Crown because the land cannot be remediated.

Justice Stephen Kos says increased flood vulnerability is like natural disaster damage, for which the EQC should compensate.

When a house subsides with the land, and the land and building become vulnerable to flooding, this constitutes damage to the land but not the building.

The High Court recommends the commission finalises its proposed liquefaction policy as soon as possible, “because of the large number of residential properties affected”.

The Insurance Council of New Zealand (ICNZ) says it will not comment on the court decision until talks are held with its legal team and members.

The High Court questioned why the case was brought to it, given nothing in legislation suggests the commission’s claims disputes should be resolved by judicial review.

“Given the commission’s capped monetary liability, we would have thought most claims against it would best be addressed in the District Court.”