QUESTION
I have been assisting a <non-client> of mine, who has held their insurance via a direct insurer. Their residential property, along with two others (either side), suffered a landslip in 2023 on their land that sloped down to the waterfront, in front of their homes. The council identified the homes as dangerous buildings; however, this client's home was not red-stickered, and following meetings with the council, they were allowed back in to inhabit the home, where they continue to live. The home suffered no loss from the landslip, and Tonkin and Taylor reports confirmed the home was not in imminent danger. These reports were supplied to their insurer. The insurer has insured the home under Material Damage Insurance, excluded landslip/subsidence, and restricted cover to Indemnity. The insurer has charged FEL based on the full sum insured (which would appear to be the previous reinstatement sum insured as opposed to indemnity). When the client has questioned the insurer on why the residential FEL levy has not been applied, they have replied that because the home is insured under a Material Damage policy due to the significant damage that the home suffered, and it not falling under the definition of a home, the levy is payable on the full sum insured.
Is this correct?
EXPERT ANSWER: Stephanie Beswick - Fire and Emergency New Zealand
In this case, the issue is not that it is insured under a material damage policy; these types of policies can cover residential buildings, and provided the building meets the definition of a residential building, the levy can still be charged and capped at the residential rate.
It appears the reason the insurer has not charged it as residential is that, as stated above, "due to the significant damage that the home suffered and it not falling under the definition of a home".
The current Act (Fire Service Act 1975) uses the definition of a residential building as defined in section 2(1) of the Earthquake Commission Act 1993. I would recommend requesting further information as to why the insurer has stated it no longer meets this definition of residential, as there may be a valid reason that it is now excluded.
QUESTION PART 2
This is an update on my previously posted question (above).
FMG has now accepted that the home has been lived in and qualified as a residential dwelling since October 2024, and they have now agreed (in one email) to change cover (from the date it was confirmed eligible for NHI cover) over to their residential home insurance. They are, however, refusing to refund the overcharged Fire & Emergency Levies. Their response to the customers in a later email when he questioned it, was:
“There will be no credit due for the fire levies previously charged. When we first priced the home under our Material Damage policy, we reduced the premium that FMG would ordinarily receive. This was done so the total premium would be as close as possible to what you would have paid under an FMG House Policy.
We felt it would not be fair for you to pay more simply because the home needed to be insured under a different policy type due to its occupancy, given the situation.
Once you advised us that the property qualified for NHI Cover and the residential Fire Service Rate, the levy was adjusted accordingly. As a result, while the levy component has changed, there is little overall impact on the total cost. This is because the home was insured and priced as it would have been from the start had we known the occupancy details.”
I would be grateful if Stephanie from FENZ would answer and confirm if the customer is indeed entitled to receive a refund of the overcharged FEL since October 2024 via FMG.
EXPERT ANSWER: Stephanie Beswick - Fire and Emergency New Zealand
If the levy itself has been charged and paid incorrectly, yes, the client is entitled to a refund.
The levy for each period of insurance from 2024 should be recalculated by the original payer, and any overpayment can be claimed back.
This means if FMG were the party responsible for the payment to FENZ, they are the party that must claim the overpaid levy back from us.
Our website www.fireandemergency.nz has more information under the policy section named ‘Assessment of levy refunds’.
