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FENZ - the need to comply

26 May 2017

The hotly contested Fire and Emergency New Zealand Act, which was recently passed by Parliament by a large margin, brings together the country’s fire services into a unified national fire and emergency service but has proven highly controversial.

Insurance Business spoke to Auckland barrister Veronica Cress, who has already provided details of three of the four key changes and now focuses on the fourth change and the way in which companies and individuals can avoid joint and several liability.

She emphasised that the act imposes joint and several liability for shortfall penalties on the insurer, policyholder, and every insurance intermediary who arranges the contract of insurance. However, she elaborated that a person can avoid it if they can prove they were not “involved in the contravention”; they reasonably relied on information supplied by another person; or they took reasonable precautions to avoid a contravention that was ultimately due to the act or default of another person, or an accident, or some other cause beyond their control.

In addition, the act repeals the Forest and Rural Fires Act 1977 and the old cost recovery mechanisms for rural fires under that act, which included making civil claims against those responsible for causing fires and levying landowners.

“The new act replaces these with an offence and penalty regime,” said Cress.

She explained that the act creates offences for intentional conduct that can attract maximum penalties of up to two years imprisonment and fines of up to $300,000 for individuals and up to $600,000 for organisations. The act also contains a general regulation-making power for additional offences and “infringement offences” to be created in the future.

Timelines for changes to take effect
“From July 01, the new offence and penalty regime will come into force and levy rates will increase for the 2017/18 financial year, but the levy provisions in the previous legislation will otherwise continue to apply,” said Cress.

It should be noted that the levy commencement order extended the one-year transition to 18 months, so the transitional levy rate comes into force from July 01, 2017 until December 31, 2018, and the new regime comes into force on January 01, 2019.

“In light of this, insurance companies and intermediaries are advised to complete their change projects for compliance with the new act as soon as possible,” Cress concluded.

 

 - Insurance Business

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