Christchurch City Council's insurer has cancelled cover for council works done under the Building Act.
Riskpool, the council's indemnity and public liability insurer, has told the council it has cancelled its cover, effective for all claims from 1 July.
The council's Corporate and Financial Committee chair, Helen Broughton, said on Friday it is a matter of serious concern and the council is moving quickly to find out what the implications are.
Ms Broughton said the council receives a number of these claims each year, with a maximum payout of $50,000, and is taking legal advice.
Earthquake Recovery Minister Gerry Brownlee said the move by Riskpool is no surprise and means if the council is negligent in its duties under the Building Act, any liability would need to be met from the council's own funds.
Meanwhile, Christchurch mayor Bob Parker said the operations of the entire council will have to be scrutinised more closely in the wake of the building consents debacle.
The council will lose its building consents accreditation on 8 July after an International Accreditation New Zealand (IANZ) report said it granted consents that are potentially dangerous.
The Government says a Crown manager will be in place at the council by 15 July to help sort out its building consents crisis and remain until December 2014 at the latest.
Mr Parker said other council departments would have to looked at after it was discovered that staff seemingly withheld information about the building consents department. However, such an investigation won't happen until the consent problems are fixed, he said.
