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New Sentencing Act Exposes Businesses and Individuals

December 4, 2014

New Sentencing Act Exposes Businesses and Individuals

New legislation coming into force this week has the potential to expose businesses and individuals to larger reparation payments by court order in criminal proceedings.

The Sentencing Amendment Act 2014 comes into force on December 6 and enables the courts to award reparation to victims of accidents to compensate the shortfall in ACC payments, which only cover up to 80% of a victim’s loss of earnings.

Liability insurance expert Melissa Cross, of insurance broker Crombie Lockwood, believes that most companies will not be aware that if they end up in court after an accident the courts can now enforce significant reparation payments to injured parties.

“These payments could potentially cover 20 or 30 years of lost income and if the injured party was making $50,000 a year, this lump sum payment could run into the hundreds of thousands of dollars,” says Ms Cross.

The law change is a direct result of a Supreme Court ruling in 2009 in which a Christchurch cyclist was denied reparation for the 20% shortfall in ACC, after she was knocked off her bike by a mattress that flew off a trailer on the Port Hills.

Initially, the courts ordered the driver to pay the cyclist over $11,000 to top up ACC payments, but the Supreme Court ruled that this reparation was not allowed for under the Sentencing Act.

In response, the Government has now amended the Sentencing Act to also allow the courts to award victims of accidents reparations for the 20% shortfall in ACC payments, against the party that caused the injury.

Ms Cross says that under the previous legislation even the most serious accidents would rarely result in reparation awards over $100,000, “but with this new law, the figures are likely to be significantly higher.”

Ms Cross says that businesses should seek advice from their broker whether their statutory liability policy has the required level of cover, as this amendment will have potential impact when there is a breach of the Health and Safety legislation.

She pointed out that companies would not be able to insure themselves against any penalties but could get insurance that would cover reparation and legal costs.

Ms Cross says she will be working closely with her clients at Crombie Lockwood to prepare for this law change.

“At this stage it is still a bit unclear how the courts are going to use this new tool, but you wouldn’t want your company to be the guinea pig.”

ENDS

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