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Why you need good liability insurance

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More changes to the country’s universal accident compensation scheme could prove very expensive for employers caught under new health and safety legislation.

Our accident compensation scheme came into effect on April 1, 1974 under the administration of the new Accident Compensation Commission (ACC). Both the empowering legislation and the Commission (now Corporation) have constantly changed over the past four decades.

The most recent change, through an amendment to the Sentencing Act 2002 made in December 2014, allows the Court, in instances where a criminal act has caused personal injury, to award reparations to victims for losses suffered as a result.

The change is defended as a ‘top up’, awarding the difference between the victim’s ACC compensation (80 percent) and their actual lost earnings. It is also argued that this change remains ‘consistent’ with the basic principles of the ‘no-fault’ scheme as it simply covers the shortfall between ACC cover (80 percent) and ‘actual loss’. That is – if you interpret the Act as only providing ‘fair’ rather than ‘full’ compensation.

In addition to the 20 percent ACC ‘shortfall’ in compensation, victims can also claim reparation for medical bills and loss of benefits.

You would have noticed the increasing size of fines and reparations the courts are handing down to companies found guilty of workplace accidents that result in serious injury. These ‘penalties’ are widely advertised and touted like spiked heads on city gates to warn other employers of their obligation to keep workers safe. Reparations to victims in criminal trials involving individuals don’t appear to get the same publicity.

Insurance focus

The new safety in the workplace laws came into force in April and, with this amendment to the Sentencing Act, you can expect to see even larger dollar-value fines and victim reparations handed down to companies where breaches of the act have caused serious harm in the workplace.

Reparation orders of this nature are generally covered by your statutory liability insurance cover.

However, the response of statutory liability insurance policies will depend on the wording of the policy. While they are generally covered, it will vary from insurer to insurer.

It is also expected that an increase in the number and scale of court reparations will place a new focus, for both insured and insurer, on the ‘adequacy’, and costs of statutory liability insurance.

A much-amended scheme

When the world’s first compulsory, accident compensation scheme was made law in 1974 there were a number of contentious aspects to the Accident Compensation Act 1972: That it was immediately expanded to also cover non-workplace accidents; that it is mostly only paid for by levies on workers and employees (until 1992 it was paid for by employers only); that it covers non-resident visitors who don’t contribute to the cost (we are currently hosting around 2.5 million visitors a year); and that it took away our individual right to sue for damages, even where there is a clear case of negligence (how much this has a proved a disincentive for not acting responsibly in regards to the safety of others, has always been a good question).

The ACC scheme, since it came into force, has been radically modified by every new political party that has come to power. Within the first five years of operation the overall cost was creating concern – particularly among employers who resented paying for the cost of non-work claims. The National government of the day set up a Cabinet caucus committee chaired by Derek Quigley to review the scheme. Consequently, substantial changes were made to the Accident Compensation Act in 1982 including the deletion of over 60 sections of the 1972 Act.

The main changes included moving the funding structure from ‘fully’ funded to ‘pay-as-you-go’ funding; reducing employers’ obligations for providing weekly compensation from 100 percent to 80 percent for the first week; and moving work-related motor vehicle accidents from the earners’ account to the motor vehicle accident account (which means at least visitors who rent vehicles and buy petrol contribute something to motoring accident cover).

There were further changes in 1989, 1992 and 1998 when private insurers (from July 1999) were allowed to provide work-related accident insurance. After the insurance industry invested a massive amount of money and resources to provide privatised ACC, the Labour government came in the following year and reverted the system back to a government monopoly. Private insurers continue to manage claims for some injuries suffered between July 1, 1999 and July 1, 2000.

April 2004 marked the 30th anniversary of the accident compensation scheme. By now the cost of providing a swelling number of visitors (especially adventure tourists) with free injury treatment had been compensated for by a gradual erosion of their entitlements, while denying them the right to sue (you can’t have two opposing legal systems operating at the same time).

These days visitors are not entitled to compensation for lost overseas income and their cover is discontinued once they leave the country. In the case of serious injuries they are only assisted to the point where they are able to safely return home. Visitors are advised to load up on travel insurance before travelling here.

Likewise, ACC will cover any injury to a resident that happens to them overseas to a limited degree, so load up on good travel insurance before leaving the country (and watch the pre-conditions clause).

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