Proposed changes to the Canterbury Earthquakes Insurance Tribunal Bill

On Monday, the Governance and Administration Committee published its report on the Canterbury Earthquakes Insurance Tribunal Bill.  It can be viewed here.

The Bill aims to establish a quick and efficient alternative mechanism for resolving extant insurance claims arising from the Canterbury earthquakes.  We discussed the Bill when it was first introduced.

The Committee has recommended a number of changes.  We think the following are important and noteworthy for the insurance market.

(1)        Expanded jurisdiction to claims arising from 23 December 2011 earthquake and beyond

The first draft of the Bill limited the proposed Tribunal's jurisdiction to claims relating to earthquakes up to the 13 June 2011 Canterbury earthquake.

The Committee has recommended that this be extended to include the 23 December 2011 earthquake and any aftershocks until 31 December 2011.  It has also recommended that the Tribunal be able to decide claims arising after 31 December 2011 in special circumstances (e.g. where the property sustained some damage prior to 31 December 2011).

This change will materially enlarge the Tribunal’s jurisdiction – by almost 50,000 potential claims.  It makes it even more unclear why Parliament wishes to restrict claims the Tribunal can hear e.g. by excluding claims arising from the November 2016 Kaikoura earthquake, given the cost of the Tribunal’s establishment and New Zealand’s ongoing earthquake risk profile.

(2)        Ability to hear evidence in a single hearing on issues relevant to multiple claims

One of the identified barriers to the speedy resolution of Canterbury earthquake claims has been the small pool of experts qualified to give expert evidence, relative to the number of claims.

The Committee almost certainly had this problem in mind as it has recommended the insertion of a new clause to the Bill that would permit technical evidence on a subject relevant to multiple claims to be heard at a special hearing of the Tribunal.  A special hearing would require the consent of all the parties involved.  However, it is possible that insureds might be reluctant to put their case in the hands of others on an issue of personal importance.

The Committee has also recommended allowing the Tribunal to seek and receive evidence on its own initiative, rather than relying on the parties to present all necessary evidence, which is consistent with the intended inquisitorial nature of the Tribunal.

(3)        Tribunal to have regard to the insurance policy and the general law

Clause 44 sets out a number of factors to which the Tribunal may or must have regard in deciding claims.

The Committee has recommended amending the language of the clause to clarify that the Tribunal must have regard to:

  1. the terms of the insurance contract; and
  2. the general law of New Zealand.

This will be a welcome change given the initial Bill proposed that the Tribunal was able, but not obliged, to have regard to the insurance contract, and then only if it was relevant.  We initially commented that it would be difficult to see when the insurance contract would not be relevant, and this appears to have been recognised.

Similarly, the Committee has recommended clarifying that the Tribunal has the power to award a remedy that a court could award (i.e. in accordance with the laws of New Zealand), where the Bill had initially described the Tribunal’s jurisdiction in more open-ended terms.  This was in response to the Bill’s proposal to permit the Tribunal to award general damages.  The Select Committee’s proposed amendment is intended to confirm that any such award is made in accordance with established legal principles.  The recent High Court decision in Bruce v IAG [2018] NZHC 3444 has confirmed that awards of general damages may be made in earthquake cases.

We see the Committee’s report as faithful to the Bill’s intended purpose of providing an efficient claims resolution service, but with greater and more appropriate protections for insurers.

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