Lawyers say a proposal to amend New Zealand legislation governing the payment of certain civil damages could increase exposure for liability insurers.

The NZ Government intends to amend the Sentencing Act 2002 to reverse the effect of a recent Supreme Court decision.

Last year the court ruled that reparation sentences cannot be used to top up a victim’s entitlement to payments from the Accident Compensation Corporation (ACC) – the state-run provider of no-fault personal injury cover.

Reparation sentences in NZ determine certain civil damages payable by the offender. Courts impose them on offenders to compensate victims for personal injury or damage to property.

Law firm DLA Phillips Fox says any decision to allow reparation payments to top up ACC payments would introduce a two-tier civil compensation system in NZ and expose liability insurers under current liability and statutory fines policies.

Auckland-based DLA Phillips Fox Special Counsel Crossley Gates told insuranceNEWS.com.au the move would enhance the rights of victims of crime above those of victims of civil wrongdoing such as negligence.

He says motor insurance is likely to come under particular scrutiny.

“The Government is on the warpath about being tough on crime. If this legislation is passed, it would create a two-tier system. Where crime is involved the offender is exposed, and where it isn’t, they walk away. That’s inconsistent.”