Changes to personal injury laws may produce higher payouts and require changes to vehicle insurance and public liability policies, according to the Insurance Brokers Association of New Zealand.

“The impact of the change in legislation means a court can award reparation costs in this area that could be higher in value than was previously anticipated,” CEO Gary Young said.

He says New Zealand’s Accident Compensation Corporation (ACC) no-fault scheme limits loss-of-income payments to 80% of salary, capped at $NZ1818 ($1686) a week, but changes to the Sentencing Amendment Act 2014 last week may result in higher payouts.

The new law follows a judgement by the New Zealand Supreme Court that it is illegal to top up ACC payments under the Sentencing Act for loss of earnings after injury.

The main insurance impact is on statutory liability policies, for payouts awarded by courts most likely under the Health and Safety in Employment Act.

Previously, cover under statutory liability policies has excluded claims for damages and defence costs under this Act, but it has not excluded punitive or reparation damages.

Insurance Council of New Zealand CEO Tim Grafton says if people are convicted of an offence causing injury, such as a motoring crime or a breach of health and safety legislation, the guilty party could be forced to pay reparations above ACC compensation limits.  

“This creates a double standard in treatment, where those suffering an injury as a result of a motoring offence, for example, have the potential to gain greater compensation than those suffering the same injury when no offence was involved or no one was prosecuted,” Mr Grafton said.

“Insurance companies will be closely monitoring developments and some may consider changes to policies to cover the exposures from this Act.”

Exposure to higher reparations can extend to many other areas, such as workplace health and safety offences or breaching the Dog Control Act. 

Vero NZ says claims costs will rise under “a triple jeopardy for insurers”.

“The liability market also has potential exposures under public liability policies for reparation awards arising from various negligence-based criminal convictions that may attract indemnity and defence costs,” it said.