Yesterday, 1 August 2018, the Ministry of Justice published the a bill to establish an insurance Tribunal to address insurance disputes arising from the Canterbury Earthquake Sequence of 2010 in 2011. The Tribunal will be called the Canterbury Earthquakes Insurance Tribunal ("the Tribunal"). This development is welcome although as with anything, the devil is in the details. My thoughts are:
- That the tribunal is being established at all is a great development and all credit to the coalition government for taking this step. In particular credit to Andrew Little, Megan Woods, and no doubt Duncan Webb.
- The Tribunal has what appears to be a sufficiently broad jurisdiction* to deal with CES issues.
(*it could, and should be broader, see below)
- The Tribunal, as is common with other similar tribunals will have the power to decide its own procedure, and will have the ability to act in an inquisitorial manner. This means the Tribunal can conduct its own investigations, rather than being limited to evidence put before it by the parties. If correctly applied in a proactive manner, this will allow for robust and cost-effective resolution of the issues. One of the major barriers for insured people in going to court is the cost. The High Court Rules allow for the party with the most resources to make litigation expensive and time-consuming. Most of the matters coming before the tribunal will involve Consumers and SME taking on Insurers and EQC. Insurers these days are as often as not multi-national entities who have expert in house legal teams, the commercial clout to obtain discounted pricing for experts and external legal counsel, and whose operating budgets run into hundreds of millions of dollars. There is real and material resource gap.
- The tribunal is specifically empowered to consider issues of delay and to award damages for distress caused poor claims handling. This will hopefully see the development of robust legal authority on these issues. The current case law is developing remedies but the authority is limited and at times problematic and contradictory.
- The tribunal has the power to appoint its own independent experts. This is a departure from the current situation where every party to a case will usually have its own expert; geotechnical engineer, structural engineer, building consultant, surveyor, quantity surveyor, and generally a cast of thousands. If both eqc and an insurer are defendants, a case can have more than a dozen expert witnesses. The large number of witnesses is expensive and leads to disagreements with the court is left to decide between two equally qualified experts. If the tribunal uses its own experts this will allow the process to be simplified and will allow for more certainty as to the outcome of the dispute.
- The Tribunal, or a party, will be able to refer questions of law to the High Court. This is a good development as currently to have a definitive answer on a question of law from the High Court parties normally need to bring a case and to either pursue the matter to trial or in certain circumstances use the so-called "special question" jurisdiction of the High Court. Even after 6 years of High Court litigation on CES issues, there remain a number of unresolved legal questions. By allowing a procedure for such questions to be referred to the High Court from Tribunal level I foresee that a number of these questions will be resolved sooner. This will provide certainty for both insurers and insureds.
- Why only Christchurch? The establishment of the tribunal will see the development of a specialised tribunal for insurance matters, which is currently lacking. I believe that having established such a tribunal, the jurisdiction could and should be broadened to consider all consumer and s.m.e. insurance disputes. It is my belief that the current system, involving multiple dispute resolution schemes competing in the same market, has led to a loss of effectiveness, a softening of the rigour with which complaints are addressed. The establishment of an independent tribunal which can consider all insurance matters would be a positive development.
- Why has it taken so long? Even with the fastest parliamentary process, it is unlikely that the tribunal will be hearing cases before 2019. This will mean that 9 years will have passed since the first CES earthquake. It is a damning indictment on the previous government's lack of urgency and mismanagement (in particular of eqc's early claims process) that this step was not taken some years ago. Had such a tribunal been established in 2014, a good deal of suffering for a number of people could have been avoided
- Why not on-solds? There is a current crisis occurring where earthquake damaged properties were either negligently repaired or negligently assessed and then sold, leaving the new owners with problems. These cases are particularly difficult as the current law limits the policy benefits available to subsequent buyers, and much can turn on the manner in which the EQC claim(s) are described in the deeds assigned those claims to the new buyer. This means that for these claimants not only do they have to prove the damage, that there was negligence, and that there was an insurance claim that could have been made, but they face probability that their recovery will be limited to EQC's statutory cap. I cannot see any principled reason why the Tribunal's jurisdiction should not also include on-solds. This would allow a more straightforward, cost effective and timely means to settle these disputes.
- In a normal court case there is a presumption that costs are awarded to the successful party as of right. This means that cost risk is a real danger for litigants, and can be used to pressure settlements when there is an otherwise worthy case to be argued. The Tribunal will only be able to award costs where the actions of a party have been in poor faith, have caused delay, or are otherwise naughty. I am ambivalent on whether this is a good or bad development and it cuts both ways, lowering the risk for both parties while leaving both to cover their full legal and expert costs.
- The bill allows for appeals on issues of law or fact to the High Court. However, any subsequent appeals to the court of appeal or Supreme Court are limited to questions of law. While this means that issues of disputed fact may not be appealed it does allow for finality in the decisions reached.
- Appeals are only available with leave from the appellate court. this is different to the normal procedure where appeals are available as of right. While this limitation on the appeal right may prevent some cases from being heard, it will also stop unmeritorious appeals from being pursued, and will stop threats of appeal to be used as settlement bargaining chips.
In summary I believe this is a good step and with some broadening of the jurisdiction I believe the tribunal could become a permanent and useful feature of the New Zealand insurance law landscape. I would also point out that the establishment of a general insurance law tribunal and an insurance list in the High Court to consider issues of law is something that I proposed in my submission on the insurance law Reform issue recently.