A New Zealand court has provided clarity on claims advocate impacts when a property damaged in the Canterbury earthquakes is eligible for a government on-sold program, a Christchurch-based specialist says.

The on-sold program was set up in 2019 for quake-damaged homes sold to owners who later discovered more problems and where the additional repairs would cost more than the government-backed Earthquake Commission cap, set at $NZ100,000 ($89,705).

A New Zealand High Court case between claims handler Proclaims Management and a property owner related to a disputed success fee of $NZ51,083 ($45,824) charged for the “on-sold” element.

The court upheld a decision that found Proclaims’ contract did not extend to the on-sold “over-cap” amount and it was not entitled to the fee.

But it found the company should be paid $NZ500 ($449) for a “quantum meruit” claim for services provided.

Christchurch-based claims preparer Dean Lester says the decision provides clarity on percentage fee agreements relating to homeowners’ insurance claims.

Mr Lester says Justice Lisa Preston was clear that the on-sold program is an “ex gratia” response to resolve a situation of possible negligence, rather than the insurance response of the EQC.

“This finding by the judge provides clarity that Proclaims isn’t entitled to its success fee relating to on-sold program settlements, and any other homeowners in similar circumstances could be entitled to a refund if they have paid Proclaims or have entered into the same agreement with a similar company,” he said.

“On-sold” homeowners can follow the program pathway laid out four years ago, supported by their own experts, or engage lawyers, according to Mr Lester.

Earlier this month, the New Zealand government outlined changes to the on-sold program, including deadlines to address “a rolling maul of cost increases”.

Associate Finance Minister David Seymour said by June this year the estimated cost of the completed program had risen to $NZ717.9 million ($644 million), compared with a 2019 estimate of $NZ250 million ($224.3 million).

“The on-sold program has supported over 800 Canterbury homeowners to complete repairs and move back into their homes, and hundreds more are in the process of doing so,” Mr Seymour said.

“The program was never intended to continue indefinitely, though, so the government is making changes to simplify it, encourage timely settlement for these remaining homeowners, and avoid delays that add to program costs.”

Mr Lester says the court decision has brought clarity by highlighting the difference between the business-as-usual part of claims handling by the EQC, now the Natural Hazards Commission, and the on-sold program, with claimants sometimes confused about the roles.

The court decision is available here.