ACC Jan 15 articleThe new sentencing Amendment Act 2014 changes the court’s ability to award reparation costs in respect of personal injury over and above ACC settlements. There are differing opinions within the legal fraternity as to the potential impacts on individuals and companies until some real world examples emerge.

The law change has come following a Supreme Court ruling where a cyclist in Christchurch applied for, but was denied, reparation for a shortfall in ACC support after being knocked from their bike. Initially the District Court ordered the driver of the, at fault vehicle to pay the 20% ‘top up’ above the cyclist’s ACC 80% entitlement of their previous year’s earnings.  In response, the government has decided to change the Sentencing Act allowing awards (reparation) to be ordered over and above ACC’s traditional support. The new Sentencing Amendment Act 2014 that applied from December, now makes it possible to award reparation above the traditional 80% .

Both individuals and companies could face chunky reparation orders to victims. Health and Safety Act breaches could mean companies end up meeting the loss of income to injured parties for many years into the future. Likewise a motorist found guilty of careless driving, who may have injured somebody, could be faced with same fate.

It is obvious that the government has made a clear policy choice to prioritise the interests of victims of not only crime, but fundamental negligence. The legislation change now creates an exception to the principle of ACC being the only avenue for compensation for personal injury by accident.

The impact from an insurance perspective will be on Statutory Liability policies.

In respect of reparation awarded by courts most likely under the Health and Safety in Employment Act. Cover under Statutory Liability policies currently exclude claims for damages in respect of the Health and Safety in Employment Act, but notably do provide for punitive or reparation damages. It is also possible that Motor Vehicle and Public Liability policies could be impacted where there is cover provided for punitive or reparation damages following negligence.

The legislation also creates an exception to the principle of ACC being the only avenue for compensation for personal injury by accident. The landscape of ACC being the protectant against unknown and potentially disproportionate claims is at an end. When combined with the more rigorous Worksafe regime and new Health and Safety legislation, there is little doubt that the new Sentencing Act will contribute toward an increase in the cost of claims for insurers that could ultimately effect premiums charged to the insurance buyer.

Of no comfort is a provision in the Act which allows courts, when assessing levels of reparation, to take into account the offenders financial capacity to pay.

The question that no-one can predict is how the first case will unfold. As in the case of the recent Health and Safety Act changes, we will wait and see.

As specialist insurance providers to the transport and logistics sectors, O’Connor Warren Transport will be happy to assist with any queries around this topic but importantly will provide advice as to how well you are actually covered by your insurance programme for possible future legal costs and reparation awards.

Eamon O’Connor is a director of O’Connor Warren Insurance Brokers, which specialises in transport and logistics insurance. He will be sharing his expertise on risk management and insurance matters in DIESELtalk. He can be contacted at: eamon@oconnorwarren.co.nz

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