Canterbury Earthquakes Insurance Tribunal Bill

Thank you, Madam Chair. Well, it is a pleasure to stand and speak on the Canterbury Earthquakes Insurance Tribunal Bill. We have supported this bill through its stages to this point, and I will be introducing four Supplementary Order Papers, which our continued support very much depends on. While we all have great sympathy and empathy for those people who are still struggling to settle their insurance claims and recover from the Canterbury earthquake sequence, there are principles of natural justice and also principles in law that we support and hold very dear, and I think we take those principles for granted at our peril.

My first Supplementary Order Paper (SOP), SOP 230, which seeks to prevent a one-way access to the justice system, illustrates that point very well. As things stand, the only entity that can bring a claim to the Canterbury Earthquakes Insurance Tribunal is an insured person, and that’s an important point. My SOP seeks to amend clause 5, making some changes, but the main part is in clause 10, inserting new subclause (2A), which is “An insurer may bring a claim to the tribunal against at least 1 person who is a policyholder or an insured person (or both), an insurer, or the EQC by making an application under section 12 that is accepted by the chairperson under section 13.” Now, it might seem strange, and I understand, in principle, why the Government elected and the Minister elected to do this, but, in fact, there are legitimate reasons why the Earthquake Commission (EQC) or an insurance company may wish to introduce a claim into the tribunal. Sometimes, claimants are reluctant to enter into a settlement process for their own reasons, whatever they are—we shouldn’t be judging that—but we must preserve the principles of justice. It is unprecedented in this context to have a one-way access to that—

💬 Dr Duncan Webb: The insurer can’t sue a homeowner.

—and I’m sure Dr Webb actually knows that very well. The actual, legitimate reasons, Dr Webb, are there. We know they’re there, and I’m sure that that member knows they’re there. In fact, it’s quite interesting, and I’m really looking forward to the Minister in the chair, Stuart Nash, explaining why Cabinet agreed to this provision when, in fact, the Minister’s own officials recommended that that not be the case. In fact, they said quite clearly that there is a principle of natural justice and a legal principle by limiting an insurer’s access to the tribunal. So I’d like to hear from the Minister why they arrived at that decision, because it’s an important principle, and it’s one that we stand on. As I said, in part, our support will be dependent on this SOP going through.

We’ve got to also remember that insurance companies have contributed billions of dollars towards the repair of homes in Christchurch, and those insurers rely on underwriters from offshore. Those underwriters put their capital at risk to underwrite insurance policies on the basis of the risk, and those risks are not just limited to the natural risks that can cause damage to homes; it’s also around the legal and the justice principles in the country in which they are investing their capital. We have just seen recently with what’s been occurring here in Wellington with the change in insurance costs what could happen if the insurance industry loses confidence in this market. It’s a very important point. I think it’s been lightly treated by the Government, and I’d like to know why. I’d like to know have they thought about that? Have they assessed that risk?

All of the SOPs I’m going to introduce tonight have a similar process and principles in behind them. So it is a very important principle, as I mentioned, and I think that’s very important.

But I’m going to move now to my second SOP on Part 1, which is SOP 227, which allows insurance and the EQC to continue claims in the tribunal against third parties. Now, this is quite an important principle in itself, and it’ll probably warrant some explanation. As the bill stands at the moment, a claim is deemed to be finished in the tribunal when the insurer and the insured reach a resolution. Now, there may well be third parties such as builders or engineers that could be third parties to that claim, and they are disincentivised from actually reaching a resolution because they know the moment that the insurer and the insured reach an agreement and that’s settled in the tribunal, the whole claim falls away from them. They are no longer required to continue in the tribunal, and that would require the insurer or EQC to pursue that claim through the High Court.

Now, we have a tribunal that is either there for justice and natural justice, or it’s not. It currently isn’t, without this SOP. If the tribunal is capable of reaching a resolution between the insured and the insurer, it surely is capable of reaching a resolution with the third parties as well. All of the evidence will have been presented, all of the cases will have been put, all of the expert witnesses will have been called, and the tribunal is then going to back away and say, “No. Go and sort the rest of it out for yourself.”

The problem is that the people that will get hurt the most out of this are the very people that this bill is seeking to protect—that is, the insured. Those insured persons will be sitting there trying to reach a resolution, and it may well be in the insurance company’s and the EQC’s and, indeed, the third party’s interests to delay that as much as possible, and, in fact, they may be reluctant to even reach a resolution. The whole point of this is to move on from this, to get people’s claims settled. These claims are the most difficult claims. That’s why they haven’t been settled. We all wish they were, but wishing isn’t going to help. We actually need to put in the legislative framework that is fit for purpose, and without this SOP 227, that will not happen.

So I would also like to hear from the Minister in the chair. This is actually, I think, an extremely reasonable SOP. Both of the SOPs are extremely reasonable. They’re not political. This has got nothing to do with politics. It’s about a resolution for the people that matter, and the people that matter are the insured people that have waited for quite some time for a resolution. It is beyond me why the officials missed this one, and we certainly did point it out through the select committee process, where we had some fantastic presentations from those giving evidence to the Governance and Administration Committee. The committee was engaged on this whole issue right across the tables, so I just don’t know why that hasn’t happened.

As I said, our support is very much dependent on these SOPs going through, and we want a good result out of this, but we don’t believe fixing one wrong with another wrong is the way to go. This is about justice, and it’s in the name, so we want justice. We don’t want an unjust process. We don’t want the principles of natural justice nor the principles of a one-way justice system trampled on by this bill, which is supposed to be in the best interests of the insured persons, and it’s my proposition that at the moment, this bill is not. These two SOPs are the first two that I’ll speak to on this, and we must have these passed for our support. Thank you.

Thank you very much. Look, I think it’s important that we deal with the honourable member Stuart Smith’s Supplementary Order Papers first and foremost just to clear up a few things. First of all, we do not support the recommendations of Supplementary Order Paper (SOP) 226, and let me explain why. We don’t agree that procedural fairness, or natural justice, more broadly, means that the use of experts or cross-examination should be permitted in every case as a right. Clause 37 requires the tribunal to comply with the principles of natural justice when managing claims. However, this does not require the tribunal to permit the use of experts if the tribunal considers this is unnecessary, or to permit cross-examination of a party or a person. The default assumption is that parties can use experts and have them provide evidence. The tribunal can already limit the use of experts, including their number, if it considers they are unnecessary—for example, when a party has multiple experts of the same discipline. That’s in clauses 20 and 27. Clause 23 of the bill also allows the tribunal to limit the number of experts at the first case management conference.

Under cross-examination, natural justice does not always require a right to cross-examination in tribunals. For example, the Law Commission’s 2008 report Tribunals in New Zealand noted that the requirement for tribunals to comply with natural justice normally requires a right to call witnesses and present evidence in support of their case, but does not always require a right to cross-examination. The tribunal is not as formal as the courts and does not apply the formal rules of evidence—

💬 Stuart Smith: I raise a point of order, Madam Chairperson. Clause 37 is in Part 2.

CHAIRPERSON (Poto Williams): Yes, we agree. However, the Minister did start to refer to—

To your SOP 226.

💬 Stuart Smith: Speaking to the point of order, Madam Chair.

CHAIRPERSON (Poto Williams): Just a moment. There are elements of the Minister’s explanation that relate to clauses 20 and 21, I believe, but there are some elements that refer to Part 2.

💬 Stuart Smith: I didn’t speak to SOP 226.

What did you speak to?

CHAIRPERSON (Poto Williams): SOP 227.

OK. Let me continue. Supplementary Order Paper 227—we do not support this either. Let me outline the reasons why. The intent of the tribunal is to primarily resolve disputes between insurers and policyholders, not third parties. If the main—

💬 Stuart Smith: I raise a point of order, Madam Chairperson. SOP 227 is on clause 11, and that’s in Part 1.

CHAIRPERSON (Poto Williams): That’s right. That’s correct. We are debating Part 1.

This is SOP 227. It’s clause 11, to allow an insurer and a third party to remain in the tribunal once the policyholder is removed. As mentioned, we do not support this, and let me just outline why. The intent of the tribunal is to primarily resolve disputes between insurers and policyholders, not third parties. If the main dispute involves a third party, and does not involve a policyholder or an insurer or EQC, this dispute should be dealt with in another forum.

Clause 11 provides that if the insurer, EQC, or the policyholder are removed as a respondent or a claimant from the claim so that only a respondent or a claimant and a third party remain, the claim cannot continue in the tribunal. This is not the same as settling a claim.

The claimant can pursue a claim against the third party in another forum within six months from when a respondent was removed. If the claim reaches a tribunal decision stage with a third party joined to that claim and the tribunal finds there is no liability between the insurer or EQC and the policyholder, or vice versa, the tribunal can still decide the liability of a third party. This means that the claimant does not necessarily need to start over again in another forum to claim against a third party. If a third party’s claim remained in the tribunal, this would stretch the tribunal’s resources and negatively impact the process of other claims. That is the reason why we can’t support SOP 227.

Thank you, Madam Chair. I want to congratulate Stuart Smith for crafting four Supplementary Order Papers, two of which I believe pertain to Part 1, so I’d like to address my comments around Supplementary Order Paper (SOP) 229, around the appointment of tribunal members, but before I do that, I’d just recall that around 2 percent of all dwelling claims relating to residential homes have yet to be resolved.

CHAIRPERSON (Poto Williams): Order! Order! What part is the member speaking to?

Part 1, thank you.

CHAIRPERSON (Poto Williams): Clause 55?

Speaking to SOP 229, Madam Chair.

CHAIRPERSON (Poto Williams): Clause 55.

No. No?

CHAIRPERSON (Poto Williams): Yeah, I have it as clause 55. The SOPs aren’t in numerical order depending on Part 1 and Part 2.

💬 Stuart Smith: It’s very confusing.

CHAIRPERSON (Poto Williams): Yeah, they are. So the member is speaking to which SOP in particular?

Thank you. I will revise my contribution. Thank you for the advice.

CHAIRPERSON (Poto Williams): Thank you—no worries.

Indeed, it is a little confusing.

CHAIRPERSON (Poto Williams): It’s OK. I think clarity will reign shortly. I think we’re all a little confused at the moment.

Just noting—and I think this is a salient point, notwithstanding the confusion around the numbering around the SOPs—that there are around 2 percent of insurance claims which are relating to residential homes from the earthquakes that remain unresolved. We might stand here in the Parliament getting a little confused about which SOPs relate to which parts of the bill, but, actually, this does matter to those 2 percent of homeowners who have their claims unresolved some eight and nine years later. I think if we can focus on that, then maybe we will set the right tone for the debate this evening.

These remaining claims—this 2 percent—are often those that are technically the most difficult and legally complex. There can be a number of factors that come into the lack of resolution of these claims over all of these years, and they can be financial or health-related, or are other people, the claimants—are they ready? Are they wanting to pursue that claim at the time? There might be financial difficulties involved, and this is where we really must remind ourselves that this bill around an earthquakes insurance tribunal is not so much around the process of appointing the people to the tribunal board and the other matters, which we will explore.

At its heart, it is around those homeowners and families and individuals who have gone through a significance shock to their lives, and that shock is not yet resolved. I think if we can in this debate really keep that at the forefront of our minds as we are stumbling our way, sometimes, through the detail of this bill, then that can only be for the better.

Thank you very much, Madam Chair. I’d just like to take a short call to talk about the purpose of the bill in Part 1. National supported this bill through the first and second readings and, of course, through select committee because we did believe that a tribunal could provide an alternative mechanism to manage outstanding earthquake claims.

I think everybody would like to see a speedier, more flexible, and cost-effective service to solve claims, but all the way through this process we have had serious reservations and concerns about whether the tribunal will actually do that. As you’re seeing today, we are presenting a series of Supplementary Order Papers that we think improve the bill and would make it possible for us to vote for it in the committee stage and the third reading.

We’re particularly concerned about the bill in that it can only deal with simple cases—cases that are not already in court—because we know that the vast majority of the 2,233 outstanding claims that have been identified are complex and technical, and of course that makes sense because they are still outstanding after seven or eight years. So we do feel that the progress of this tribunal will be limited.

We’re also really concerned that the Ministry of Justice felt that a mediation process very like National’s—the Residential Advisory Service, which was particularly successful in this area of solving difficult claims, or solving claims full stop—would have been very useful, and we would have liked to have seen that in preference to a tribunal. The thing that really disturbed us was that in the regulatory impact statement they were very doubtful about the tribunal and how effective it would be. The problem with that was it felt that the tribunal might make claims take longer than they already would for the process, rather than the status quo, and I don’t think that would be getting anyone anywhere. That would be a tragedy.

I’d just like to talk about two Supplementary Order Papers that are in the first part of this bill. The first is Supplementary Order Paper (SOP) 230. This goes back to clause 5 and the definition of a “claimant”. In the bill now, the definition of a “claimant” is “a policyholder or an insured person (or both)”, and what we want to do is insert “or an insurer”, because there are circumstances where an insurer may like to use this process to solve some of the claims. We feel that a balance to have that insurer, to have that opportunity, would make a difference. On top of that, in clause 10, we also want to include that the insurer may bring a claim to the tribunal. In clause 12, again, we want to insert after “policyholder or an insured person (or both)”, “or an insurer”—furthermore, also in clause 16 and later in other parts of the bill.

Basically, this is all about providing for insurers to bring a claim, just as a policyholder or insured person could do that. We believe it’s important that the procedure under the tribunal is equally available to both insured and insurers. To be able to examine a contract between two parties when only one party has access to the tribunal process is, we believe, a miscarriage of justice. Both parties should be able to access the process equally.

The other SOP that I’d like to look at is SOP 227. This is an amendment concerning the bringing of a claim to the tribunal with additional parties. In this amendment, we’d like to simplify the process if an insurer or the Earthquake Commission wishes to continue claims against a third party through the tribunal. Now, this is a logical extension of what should happen. If we are using a tribunal and there is a third party that needs to be involved in this case, it should be able to be continued through the tribunal, rather than have to go back to the slow, costly process of going through the High Court.

So we are concerned about this bill. We have supported it to this stage simply because we think something could provide a mechanism to manage earthquake claims, but we have reservations, and the SOPs address some of those reservations. Thank you, Madam Chair.

Amendments set out on Supplementary Order Paper 225 in the name of the Hon Andrew Little to Part 1 agreed to.

The question was put that the amendments set out on Supplementary Order Paper 230 in the name of Stuart Smith to Part 1 be agreed to.