NZILA President’s message
Jonathan Scragg

New Act sparks interest in H&S insurance

Readers of the August 2015 issue of Resolve may recall my column on the Health and Safety Reform Bill, detailing the expected changes to New Zealand’s health and safety regime.

The bill has now come to fruition. The Health and Safety at Work Act 2015 (HSW Act) entered into force on 4 April 2016, replacing the existing Health and Safety in Employment Act 1992.

Modelled on the Australian Work Health and Safety Act, the HSW Act creates four types of duty holders that have work and safety obligations: persons conducting a business or undertaking (PCBU), officers of a PCBU, workers and other people at a workplace.

The concept of a PCBU encompasses all relationships between those in control of workplaces and those affected. A PCBU must ensure the health and safety of its workers and of other workers whose activities are influenced or directed by the PCBU. It must also ensure the health and safety of any other person is not put at risk because of work being conducted. 

Originally, the Bill’s definition of ‘officer’ included any person who made decisions that affected the whole, or a substantial part, of the PCBU’s business or undertaking. That definition has subsequently been limited in the HSW Act to the most senior governance roles within organisations. Officers must exercise due diligence to ensure PCBUs comply with their duties and obligations under the HSW Act.

The rationale behind imposing that duty is the influence officers can have on a business’s health and safety culture, resulting in a top-down effort to increase awareness of risks created by the business they are involved in. It seems likely prosecution of officers will become more common under the HSW Act.

Duties are owed by workers as well as PCBUs and officers to take care of their own health and safety, and ensure they do not put the health and safety of others at risk. The Act sets out requirements for worker participation in a business’s health and safety policies. The level of worker participation depends on the workplace’s classification as a low or high risk sector industry. All businesses in sectors with moderate to high risk of injury, and PCBUs employing more than 20 people, are obliged to provide H&S representation if requested by their workforces.

The definitions of high and low risk industries remain a point of contention. High risk industries have been defined as sectors that have had more than 25 fatalities for every 100,000 workers since 2008, or where the serious injury rate exceeds 25 per 1,000 workers. Excluding the sheep, beef and grain farming industries from the high risk classification has been the subject of widespread media criticism.

As the HSW Act brings an increased likelihood of enforcement action, the precise scope of the changing landscape is of particular interest to the insurance market. Companies of all sizes must be proactive about managing their exposures, due to increased liabilities and much higher maximum fines for HSW Act breaches. While fines remain uninsurable under the Act, businesses can continue to buy insurance to meet reparation orders and defence costs.

It remains to be seen how the courts will interpret the new legislation, but the message delivered by the HSW Act is that it’s better to be safe than sorry. Insurers should expect to see continued interest in liability products covering HSW Act risks.

Immunity for residential tenants: Court of Appeal decision

Readers of the June 2015 Resolve may recall my column on the notable and highly debated High Court decision of Holler v Osaki [2014] NZHC 1977.

The High Court held that the immunity provided to commercial tenants in the Property Law Act 2007 (PLA) by virtue of the exoneration clauses (s268 and s269) extended to residential tenancies governed by the Residential Tenancies Act 1986 (RTA). In extending to residential tenants the immunity previously understood to apply only to commercial tenants, the High Court reversed the long-standing and commonly understood position that residential tenants are liable to their landlords (or their landlords’ insurers) for accidental property damage.

The Court of Appeal has affirmed the High Court’s decision. The meaning of s142 of the RTA remained central to the Court of Appeal’s analysis, as it was used as the principle mechanism by which the PLA could be read into the RTA. That section provides: 

(1) Nothing in Part 4 of the Property Law Act 2007 applies to a tenancy to which this Act applies.
(2) However, the tribunal, in exercising its jurisdiction in accordance with s85 of this Act, may look to Part 4 of the Property Law Act 2007 as a source of the general principles of law relating to a matter provided for in that Part (which relates to leases of land).

The court considered PLA’s exoneration provisions to be “very good, if not the best candidates for general principles” (as opposed to classifying them as a special dispensation limited to the context of commercial leases). The court concluded the text, policy and legislative history of s142 of the RTA supported the tenant’s interpretation, thereby giving immunity to residential tenants from landlords’ claims for careless damage caused by tenants.

The court answered the question “whether residential tenants are immune from a claim by the landlord where the rental property suffers loss or damage caused intentionally or carelessly by the tenant or the tenant’s guests” in the affirmative, but only to the extent provided in s268 and s269 of the PLA.

This aspect of the decision is curious given s269 (3) specifically provides that where damage is caused intentionally, the tenant is not exonerated from liability. The court’s answer may give rise to uncertainty on intentional damage. Some clarification would be desirable.

The Court of Appeal’s decision has been met significant interest from the insurance and property markets and alarm in some quarters. It is a departure from what many in the insurance and property markets had long understood the position to be.  Some commentators have suggested the issue ought to be considered by Parliament. Others have referred to the significant consequences the decision is likely to have in the future for insurers, landlords and tenants, including in pricing and availability of insurance.

The degree of industry comment created by the decision means we are unlikely to have heard the last word on the issue.

( Holler v Osaki [2016] NZCA 130)