Canterbury Earthquakes Insurance Tribunal Bill

Parliament has introduced the Canterbury Earthquakes Insurance Tribunal Bill under urgency, with a view to establishing a quick and efficient alternative dispute resolution forum to determine unresolved earthquake insurance claims.

The progress and development of this Bill will be of interest to both insurers and Cantabrians – who, as a result of the urgency of the Bill’s introduction, were not consulted on its drafting. A number of the Bill’s key features, including the Tribunal’s jurisdiction, powers and procedures, have already been the subject of debate.

Jurisdiction

A number of limits will be placed on the Tribunal’s jurisdiction. The Tribunal may hear disputes in relation to residential – but not commercial – insurance claims, and only claims brought by the original policyholder.

The Tribunal will not have jurisdiction over claims brought by purchasers of earthquake-damaged homes who have taken an assignment of an insurance claim. This is because of the complexities inherent in many such cases – the drafters of the Bill wished to ensure that the Tribunal does not become clogged with complex cases which the courts are better placed to determine Those who have purchased earthquake-damaged properties will, however, query whether such a bright-line test is appropriate.

Also, the Tribunal will not have jurisdiction over claims relating to earthquakes other than the 4 September 2010, 22 February and 13 June 2011 Canterbury earthquakes. This limit on the Tribunal’s jurisdiction may be viewed as surprising given the resources invested in its establishment and the country’s ongoing earthquake risks. It is not obvious, for instance, why those affected by the Kaikoura earthquake should not be entitled to use the Tribunal.

Other aspects of the Tribunal’s jurisdiction remain unclear. For example, the Bill does not address whether the Tribunal will consider claims that were settled on a “full and final” basis which a policyholder wishes to re-open. It is possible that the Tribunal will need to refer questions of law to the High Court for determination and await its decision before proceeding. However, the delays involved in doing so may undermine the Tribunal’s goal of resolving claims in a “speedy” and “cost-effective” fashion.

Powers

The basis on which the Tribunal will make decisions is also of interest. The Bill provides that claims will be decided “based on existing law and (if relevant) the terms of the insurance contract between the parties.”  As the insurance contract governs the policyholders’ entitlements, it is unclear when the terms of the insurance contract would not be relevant to the resolution of a claim.

Furthermore, the Bill empowers the Tribunal to award general damages for mental distress. However, distress damages are not generally payable for breaches of contract. Only one case on the Earthquake List has resulted in an award of general damages, and in that case a nominal award was made on the basis of a breach of a duty of good faith as an implied term of the contract.[1] However, the principles relating to the nature and scope of any duty of good faith are unsettled and, by allowing for such damages awards to be made, the Bill skims over a complex legal issue that may be better resolved by the courts.

The Tribunal may set an amount of money payable by a party if they fail or refuse to do a particular thing by a stipulated date. In circumstances where parties are often reliant on a third party to carry out work to meet a deadline (such as an expert), such orders may prove inappropriate.

Process

Notable aspects of the Tribunal’s process include:

  • Mediation: at the first case management conference, the Tribunal may direct the parties to mediation and set time frames for that process. Given the large number of earthquake insurance claims which settle shortly before trial, building in an early referral to mediation is likely to be welcomed by both policyholders and insurers.
  • Cross-examination: the Bill provides that the Tribunal may “permit” cross-examination, but this is at the discretion of the Tribunal. Given that most cases will involve disputed expert or claims handling evidence, it is unclear when it would be appropriate not to permit cross-examination.
  • Experts: the Tribunal may appoint its own expert. This may help resolve disputes between existing experts appointed by the parties, and enable the Tribunal to better understand technical issues relevant to any given case.
  • Case management conferences: the Bill states that the Tribunal must “take a proactive approach to case management, for example by setting time frames for providing information or convening conferences of experts”. However, many of the delays experienced on the Earthquake List are not the result of poor case management but a shortage of experts who are available to assist and delays in preparing expert reports and arranging joint expert site visits. As the same pool of experts will be drawn upon for both Court and Tribunal proceedings, the Tribunal will likely encounter the same delays with expert conferral processes as the courts.

Next steps

The Bill has been referred to a Select Committee. Public submissions on the Bill are due by 18 October 2018.

Footnotes

[1] Young v Tower Insurance Ltd [2016] NZHC 2956, [2018] 2 NZLR 291.

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