Re-thinking the Sentencing Amendment Act

Re-thinking the Sentencing Amendment Act | Insurance Business

Re-thinking the Sentencing Amendment Act

Back in 2014, insurers warned the Government that the Sentencing Amendment Act (SAA), which enables the Courts to provide reparations over and above ACC benefits, could result in severe, unintended consequences.

We were told New Zealand was not a litigious country, so its use would be rare. We countered that the basis of ACC was that citizens gave up the right to sue in return for a universal payment without the need to attribute fault. The SAA changes would undermine that social contract.

Insurers’ advice was ignored.

The SAA only applies where someone is convicted in criminal proceedings. This may sound somewhat narrow, but criminal acts occur when the Health and Safety at Work, the Fair Trading and the Transport Acts are breached. The net is cast wide. Individuals, companies and directors can all be caught.

When determining the level of reparation, one of the criteria the courts consider is the defendant’s ability to meet any reparation. For companies with the ability to pay and minimal mitigating factors, this can result in some not-insignificant awards being made.

For example, last year, a company was ordered to pay over $225,000 to top-up ACC for future loss of earnings after a 27-year-old employee was injured in a workplace accident.

A more recent health and safety case shows the expanding limits of the SAA. A deceased mine worker’s family was awarded $350,000 in reparations for potential earnings lost over the victim’s lifetime. The Court reduced the prospective payment by around half as the mine was expected to close in the near future.

Statutory liability cover has attracted modest premiums until now because awards were modest. With exposure to large reparation payments, it is inevitable this will change.

The real shift may be an upsurge in private prosecutions. Any person injured in a workplace can consider a private prosecution if the regulator chooses not to. So, too, can people who are harmed by work carried out by a business. The attraction of substantial reparations may open the door to personal injury litigation in another guise, driven by enterprising lawyers. This is exactly the situation ACC sought to avoid.

Expanding this scenario to fair trade offending and traffic accidents, New Zealand’s personal injury landscape will substantially alter. Liability insurance premiums will escalate and arbitrary litigation will result in inequitable compensation for similar injuries.

Finally, it’s worth considering outcomes for victims of intentional and serious criminal offending. Murder victims, or those seriously assaulted by uninsured criminals, will continue to get modest, if any, reparations while those injured by unintentional regulatory offending will be handsomely compensated.

The question is whether this is what Parliament intended when it passed the SAA or are these unconsidered and undesirable consequences? Even more importantly, is this what New Zealanders want?

Perhaps it’s time to rethink the SAA.