Happy Christmas & a splendid New Year!
We have seen some major changes developed this year which affects us all. In addition to the Health & Safety legislative changes being developed which many of you will be aware. Conversely, I suspect not as many people will be as conversant with the most recent introduction to our Statutory Legislation. A summary follows:
Sentencing Amendment Act 2014
Effective 6 December, the Sentencing Amendment Act 2014 will allow the Courts to help the victims of crime by using reparations to address the financial shortfalls of ACC. However, it will be impossible to judge the real impact on policy wordings for many months to come.
Prior to recent changes in legislation, victims of crime who suffered a personal injury could only obtain compensation from ACC up to 80% of salary, currently capped at $1,818 per week. This meant that victims of crime were often financially disadvantaged, with high income earners especially so.
The Government decided to remedy this through a change in the law and the Victims of Crime Reform Bill was introduced to Parliament in August 2011. As the Bill went through the legislative process, sections were split off to cover specific areas. The outcome from one of these areas was the Sentencing Amendment Act 2014.
Key change under the amendment act
Under the Sentencing Amendment Act 2014, the Courts will now be able to award a sentence of reparation in order to make up the financial ‘shortfall’ not covered by ACC. This could include the 20% salary gap, as well as additional costs such as uncovered medical bills and loss of benefits. As reparations have to take into account the offender’s ability to pay, the existence of insurance will be a key factor.
Effect on policy wordings
Given that a sentence of reparation must follow a criminal conviction, it is difficult to foresee what the impact will be across all insurance product classes. Certainly, most of our wordings exclude cover for criminal acts via either insuring clauses, exclusions or policy conditions.
The two being watched most closely are Statutory Liability and Motor.
- Statutory Liability
Insurers have been paying reparations awarded in relation to Health and Safety in Employment (HSE) breaches since 2003. Whilst it is likely we will see claims costs rise in this area the quantum is a total unknown.
Note: Significant proposed changes to HSE legislation are currently being reviewed as part of the Health & Safety Reform Bill. The Select Committee is due to report back to Parliament on March 30th 2015 &, depending on the outcomes of this Bill, it may be appropriate to update Statutory Liability wordings then.
- Motor Vehicle
Typically, Commercial Motor policy wordings (Section 2 Liability to Third Parties) pays compensation in respect of bodily injury & could pick up additional reparation costs. However, the approach of both the Police (who need to ‘charge’ the offender in the first place) & the position the Courts take are unknown. For this reason insurers are currently choosing to adopt a watching brief.
Insurers will we suspect monitor future judgments & assess how the Courts are using their new powers. As the situation becomes clearer & new precedents develop, we will review policy cover as necessary. In the meantime, it would be prudent to ensure your Limits of Indemnity remain adequate. As always, I am available to assist.
Christmas & the holiday season is nearly here and I am sure you are either looking forward to a well-deserved rest or winding up to your busy time of the year. I am personally staying at home this year as we are looking forward to having our daughter, who lives in London, stay for three weeks.
As this is our last newsletter for 2014 we would like to take this opportunity to thank you for your support throughout year. We wish you and your families a very relaxing & safe holiday. Whilst the office will be closed from Thursday 25th December & will re-open on Monday 5th January, as I have in the last 10 previous years, will be available over this period by telephone on any day you may require some insurance services. Please call our office number 03 548 2211 and it will be transferred to my mobile.