It’s not often that an earthquake measuring 7.1 on the Richter scale can be described as record breaking, but that was quite literally the case when, on 4 September 2010, an earthquake hit Christchurch, New Zealand.
The background
Real Groovy, a large boutique retail music store in the city, was a tenant on the ground floor of a four-storey building in the city. Specialising in selling CDs and vinyl, both new and second hand, as well as associated products, the business employed 10 people on a full-time, part-time and casual basis.
As a result of the earthquake, the building suffered minor structural damage. The biggest problem for the insured was the damage to water mains throughout the floors, which caused extensive flooding and damage to stock and plant in the Real Groovy store.
The damage to Christchurch’s CBD was severe. The police cordoned off the whole area, and access was cut off for four days.
The insured, Paul Huggins, was away on business in Wellington at the time of the earthquake, but was able to confirm to his broker, Conal Bevan of FMR, that the store was in the cordoned-off area, and that the Christchurch urban search and rescue team had confirmed his property had suffered extensive damage.
Huggins was naturally concerned that his business might fold. He was unable to trade, and there was no likelihood of his premises being up to trading for the foreseeable future. It’s a situation that every business owner fears, and understandably he didn’t know what to do.
“Through conversations with Conal I ascertained that the claim exposure was going to be large and immediately made an interim BI claims payment on the 8th of September to Real Groovy for the amount of $20,000,” says Zurich New Zealand’s Claims Team Leader Scott Borley.
And so the process of reinstating the Real Groovy business began in earnest.
The claim
The claim was broken down into two parts: Material Damage Loss and Business Interruption Loss, and the Insured began to collect together the necessary information to support his claim. In the meantime, two further Business Interruption payments of $20,000 each were made, giving resource to the task to retaining staff and commencing the process of costing stock and plant with the assessor.
On the 21 September, Zurich’s Scott Borley flew to Christchurch to meet with Paul Huggins (insured), Simon Foley (local Zurich underwriter), Conal Beban (FMR broker), and Stephen Dillon (MYI adjuster).
“On meeting with Paul I realised immediately that the existing premises Real Groovy were located in would not be reinstated any time soon and that to minimise BI and save the business we needed to identify a new site,” says Borley. “I gave Paul the go-ahead to search for new premises. Getting onto this so early meant we were first in the queue.”
Rebuilding the business
Through contacts with the local council, Huggins was able to secure a two-storey corner site directly across the road from his existing location. The site had twice the road frontage for advertising, and had much more natural light, making it far more inviting to customers.
During the meeting, Borley and Huggins had also worked through the stock and plant loss, and as a result a payment of $112,000 was made on 23 September as a partial offer of settlement, which enabled Huggins to begin purchasing new stock.
Of course, there was still the damaged stock left to deal with. Usually, the insurer would consider it salvage, but the value to Zurich in its damaged state was minimal. However, for Real Groovy, the value was potentially huge.
“I decided that the best way to manage this damaged stock was to use it as best we could and agreed with Paul that the stock could be kept by Real Groovy for the sole purpose of an ‘Earthquake Sale’ at the opening of the new premises,” says Borley.
“This was a fairly radical position but it gave Paul a powerful advertising tool for the opening of the new premises and encouraged him to push ahead with this as soon as possible. In turn this settlement position would help minimise Zurich’s BI exposure and save far more than any salvage value – plus the win to the insured was invaluable.”
The outcome
On Tuesday 19 October, Scott Borley flew back to Christchurch and visited the new Real Groovy store.
“Paul was putting the final touches to his shop fit out that week and was excited to show us around,” says Borley.
The grand opening was scheduled for the following Friday, only one and a half months after a total loss. He’d even signed up Trinity Roots (a popular local dubstep band) to play in store to celebrate.
Borley also worked through some of theremaining items outstanding on his claim and was able to agree to a further interim payment on stock and plant of $134,811.
“Paul verbally expressed his gratitude to me and Zurich at the way we have handled his claim and the empathy I have shown him throughout theclaim process,” says Borley. “This was reinforced by Conal who expressed sincere thanks for the way Zurich had managed his client’s loss.
"We have now settled the MD claim for stock and plant in full and are working through the final BI payments to complete the claim. It is truly satisfying to see Paul’s business come back from ruin and be functioning again with a new sense of life and passion. It is also very gratifying to be expressly acknowledged for the hard work put into this claim and the difference it has made to another person.”
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