Following the series of Canterbury earthquakes, home owners should be taking note of the insurance issues around retaining walls.  They might be dull, but they are extremely expensive items and could be financially crippling to replace at your own expense.

Knowing the rules could save you thousands – don’t necessary take the opinion of your EQC Assessor as being completely correct.  It pays to know some rules before your inspection, rather than try and correct a problem later.

To begin, who owns a retaining wall?  Logically the answer would be “the property owner”.  Most retaining walls tend to be sited on the boundary line, and in these instances the retaining wall is shared equally between two neighbours.  If your boundary line is shared with the Council, then the same rule applies.  If you have a cross-lease title, or a unit title, and the retaining wall is constructed within the “common area”, then the retaining wall is owned by all property owners; and in some cases adjoining property owners too.

Seeking repairs to damaged retaining boundary walls can become timely and difficult if you have a number of retaining walls, all with different neighbouring property owners, condition, quality and insurance companies.  Not to mention, who has the money available to progress repairs.

Residential Land means, in relation to any residential building, the following property situated within the land holding on which the residential building is lawfully situated:

(a) the land on which the building is situated; and

(b) all land within 8 metres in a horizontal line of the building; and

(c) that part of the land holding which - (i) is within 60 metres, in a horizontal line, of the building; and (ii) constitutes the main access way or part of the main access way to the building from the boundary of the land holding or is land supporting such access way or part; and

(d) all bridges and culverts situated within any area specified in paragraphs (a) to (c); and

(e) all retaining walls and their support systems within 60 metres, in a horizontal line, of the building which are necessary for the support or protection of the building or of any property referred to in any of paragraphs (a) to (c).

After a careful read of the Act, and a bit of back and forth with EQC, there are three main types of retaining walls which you should know about:

Retaining walls which support or protect a building: EQC will cover these walls as long as they are within 8 metres of your home, or garage.  These walls are not just aesthetic; they are needed to help protect the house. If it’s not obvious whether they do or don’t ‘support’ or ‘protect’ an engineer needs to be appointed to get a ruling.

Retaining walls that hold up your driveway: they refer to these as walls supporting the ‘main access way’, from your boundary to each building on the property.  EQC will cover these walls if they are within 60 metres of the building.  Remember EQC will not cover the surface of your driveway, such as asphalt or concrete surfaces (your insurer should cover this, but check your policy).

Retaining walls which do NOT support or protect a building: this is where the most confusion lies, as it is assumed that these are not covered.  This is not correct.  EQC will cover any retaining wall within 8 metres of a building, regardless of its use.  It doesn’t have to be protecting the house.  Even if the wall is holding up a pool or patio, it will be covered if it’s within 8 metres of any structure on your property.  EQC won’t cover the pool itself, or artificial surfaces on patios (your insurer will deal with that), but they will cover the wall and its support system.

Retaining walls further than eight metres from any building, but does not support a driveway or access route: this is unlikely to affect many Lyttelton Harbour residents, but in this instance, you would need to refer to your own insurance policy, as it might not be covered by EQC.  Some insurers expect large scale landscaping works to be notified on the policy.  Remembering that retaining walls protect both your house, and a neighbouring house.  If a retaining wall is greater than eight metres from any of your buildings, it might be less than eight metres from a neighbour’s house, and thus potentially covered under EQC.

Further points to consider:

Retaining walls are part of a land claim, so they don’t form part of the $100,000 maximum payout for damage to your home.  EQC may well settle your claim for the walls at the same time though.

The 8 metre and 60 metre rules apply to any building on your property, not just the main house (sometimes referred to as ‘appurtenant structures’).  So if you have a separate garage, the measurements apply from these other buildings, out to each retaining wall in a horizontal line.

The wall must have failed as the result of an earthquake. Cracks or damage due to old age, lack of maintenance or poor design/construction are not covered.

A link to the EQC Act can be found at www.legislation.govt.nz.   Check out section 2 (1) and look up the definition of ‘Residential land’.  Point ‘e’ talks about retaining walls and it’s important to note that it cross references back to points a, b and c.  It’s this referencing which allows the inclusion of any wall within 8 metres of the house, and walls holding up driveways.

How do EQC value retaining walls?

Unfortunately the legislation doesn’t cover full replacement value.  Instead, ‘indemnity’ value is used for each retaining wall [Part 2, Section 19(b) Earthquake Commission Act].  This is the depreciated value of the wall, allowing for age.  If the wall can be repaired for a cheaper price, this will be paid instead.   When assessing a retaining wall, a registered valuer is appointed.  EQC estimate the average life span of a good quality engineered retaining wall at 100 years (probably generous because the Building Act allows for a life of 50 years).  However, the 100 year rule is a guideline only and EQC leave it to the valuer to decide.

The 100 year depreciation rule, basically implies that depreciation will be applied at 1% per age year of the retaining wall.  If your retaining wall is 20 years old, then the depreciation calculation would be reconstruction price, less 20% depreciation [but not generally applied for the first five years].  If the retaining wall is 100 years old, then the wall could be perceived as offering a near to nil value.

As a rule of thumb, Lyttelton’s old retaining walls that are not engineered, and have not been maintained across the 100 year life span, will have very little indemnity value.  Newer engineered walls, which comply with the building code have a better value.  As an observation, for those with newer homes, the outcome may not be too bad.  If the valuer uses the 100 year guideline, a new wall should suffer very little depreciation.  But for the old     historic retaining walls in Lyttelton, the indemnity value could be very disappointing for home owners.

Valuations take time as the scope of options has to be covered.  The cost of full replacement will be calculated and adjusted for age to get the indemnity value.  EQC then compares this to a repair solution to calculate the most cost effective option.

On a final note, remember that there are always shades of grey and each claim is worked through on a case by case basis.  Always ask after an EQC assessor has been through “does that sound fair”.  If you feel it just doesn’t sound right, keep asking for clarity.