NZILA President’s message
Jonathan Scragg

H&S reforms under review

New Zealand’s Transport and Industrial Relations Select Committee has released its report on the Health and Safety Reform Bill, which is currently before the NZ Parliament.

The committee has recommended various amendments, some of which have been criticised by stakeholders as watering down the effect of previously proposed law reform.

Health and safety (H&S) law reform is of considerable interest to the NZ insurance market. Many businesses buy insurance to respond to legal liabilities, and associated defence costs, that arise out of the growing number of H&S investigations and prosecutions in NZ.

Typically insurance is offered as a stand-alone statutory liability policy, or as a companion cover to general liability insurance. The proposed law reforms, once enacted, will inevitably lead to more H&S investigations and enforcement action. That will mean businesses, and insurers, face greater costs and liabilities for H&S issues.

The reform of NZ’s H&S law has been brought about largely because of the Pike River Mine tragedy in 2010; the collapse of the CTV building during the February 2011 Christchurch earthquakes; and the increasing number of forestry-related injuries and fatalities over the last five years. The NZ Government has stated its commitment to major H&S reform and is aiming for a 25% reduction in serious workplace injuries and fatalities by 2020.

The current Bill is based on Australia’s model Work H&S Act and includes the concept of a “person conducting a business or undertaking” (PCBU) to cover all relationships between those in control of workplaces and those affected. The Bill increases penalties, provides improved compliance tools, and gives increased resources to WorkSafe NZ, NZ’s H&S regulatory and enforcement body.

The Bill was expected to be enacted in the latter part of 2015, but the select committee’s review was extended to allow further submissions from interested parties, including the agriculture and forestry sectors.

The committee’s report was released on 24 July 2015. Its proposed amendments appear to make some aspects of the proposed new H&S regime less onerous on PCBUs. In particular, the committee has recommended the following changes to the Bill:

• Changing a PCBU’s primary duty of care from ensuring the H&S of “workers employed or engaged, or caused to be employed or engaged, by the PCBU”, to ensuring the safety of those who “work for the PCBU”.
• Imposing officer duties only on those who have very senior governance roles within organisations, such as directors or CEOs, and who are in positions that allow them to “exercise significant influence over management of the business or undertaking”.
• Excluding businesses with fewer than 20 workers in low-risk sectors from the requirement to have H&S committees or H&S representatives.
• Allowing larger employers to refuse requests for H&S committees or H&S representatives if they believe their existing worker participation practices comply with the Act.

The committee’s recommendations have been criticised as watering down the Bill and creating a two-class system where small businesses and farmers are treated differently from other sectors.

Another issue is delineation between low-risk and high-risk sectors or industries. Some commentators have suggested exceptions for businesses “not within the scope of any prescribed high-risk sector or industry” could pose difficulties for interpretation and enforcement.

NZ’s Workplace Relations Minister has released a draft list of industries deemed high risk. The classification of some industries as high risk, such as lavender growing and mini golf, has been swiftly criticised by many commentators. Equally, there has been criticism of the classification of other industries, commonly in the agricultural sector, such as sheep, beef and deer farming, as low risk. Any formulation of a test to designate what industries are high risk will always lead to anomalies, particularly in an “other” classification. Consultation on the draft list will occur when the regulations are released for review.

The amended Bill was read for a second time in Parliament on 30 July. Although the Labour Party has withdrawn its support, the Bill is expected to pass its third reading and come into force in mid-2016.

While some critics believe the Bill does not go far enough in its reform of H&S law, it is a significant shift in NZ’s H&S legislation.

East v Medical Assurance Society

Readers of the March issue of Resolve may recall my column in which I summarised the High Court decision in East v Medical Assurance Society. The Easts’ home was damaged in the Canterbury earthquakes and they wanted to repair it. They had replacement value cover under a policy with the Medical Assurance Society (MAS). MAS wanted to pay repair costs as they arose. The Easts argued payment should be made up front.

Issues for the Court of Appeal were:

• Whether the words “cover the cost of” rebuilding or restoring a dwelling oblige an insurer to pay the insured the cost of repairing damage, irrespective of whether liability to incur those costs has been or will ever be incurred; and
• Whether the insurer’s obligation to rebuild or restore a dwelling to a condition “substantially the same as new” requires that dwelling to be rebuilt or restored to the standard of a new dwelling built today.

On the first issue, the Court of Appeal set aside the High Court’s decision and held that if the Easts elect to rebuild, the rebuild costs must be incurred by them before MAS becomes liable to pay for the work.

On the second issue, it upheld the High Court’s decision a house that is rebuilt or restored to “substantially the same as new” must be in accordance with current building standards. The Court of Appeal said “as new” is a quality standard not a temporal standard.

It remains to be seen whether the case will rest there or whether either or both parties will seek leave to appeal to the Supreme Court.