New legislation leaves businesses exposed

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Employers are being encouraged to check their statutory liability insurance in the wake of changes made to the Sentencing Act 2002 which will allow the Court to award reparation to employees injured in the conduct of a crime, to compensate the shortfall in ACC payments.

According to law firm Simpson Grierson this means that in relation to health and safety prosecutions, companies will potentially be liable for far higher reparation awards made up of not only lost wages but other losses as well, such as medical costs and the loss of other benefits.

The amendments, which came into force on December 6, are relevant not only to employers, but directors and officers, particularly under the Health and Safety at Work Act due to come into force next year.

Liability insurance expert Melissa Cross, of insurance broker Crombie Lockwood, believes that most companies will not be aware that if they end up in court after an accident the courts can now enforce significant reparation payments to injured parties.

“These payments could potentially cover 20 or 30 years of lost income and if the injured party was making $50,000 a year, this lump sum payment could run into the hundreds of thousands of dollars,” Cross said.

The amendments were made following a Supreme Court ruling in 2009 in which a Christchurch cyclist was denied reparation for the 20% shortfall in ACC, after she was knocked off her bike by a mattress that flew off a trailer on the Port Hills. The courts had ordered the driver to pay the cyclist over $11,000 to top up ACC payments, but the Supreme Court ruled that this reparation was not allowed for under the Sentencing Act prompting the government to make the change to the legislation providing for this.

Cross explained that under the previous legislation even the most serious accidents would rarely result in reparation awards over $100,000, “but with this new law, the figures are likely to be significantly higher.”

She advised businesses to seek advice from their broker whether their statutory liability policy has the required level of cover, as this amendment will have potential impact when there is a breach of the Health and Safety legislation.

While companies are unable to insure themselves against any penalties they could get insurance that would cover reparation and legal costs.

“At this stage it is still a bit unclear how the courts are going to use this new tool, but you wouldn’t want your company to be the guinea pig,” Cross said.

 

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