In Peter Miles Davies v New Zealand Police  NZSC 47 (25 May 2009), the Supreme Court of New Zealand determined an important area of New Zealand's civil compensation system. Where a victim's injuries are covered by the Accident Compensation Corporation (ACC), reparation sentences can no longer 'top-up' the ACC payment.
Since the introduction of the ACC Scheme in New Zealand in the 1970s, any proceedings seeking damages directly or indirectly arising out of injuries covered by the ACC Scheme have been statute barred.
However, the Sentencing Act 2002 requires a criminal court to not only punish the offender but to also consider reparation to compensate the victim for:
- Emotional harm.
- Loss of damage to property.
- Loss or damage caused by either one of the above.
The Sentencing Act 2002 addresses the issue of ACC payments under section 32 (5) by requiring a court, when passing a sentence of reparation, to not order reparation for losses likely to be covered by entitlements under the ACC Scheme.
The recent case
When Dr Davies was sentenced for careless use of a motor vehicle causing injury, the District Court awarded reparation to the victim of an amount representing the shortfall between her earnings-related compensation received from ACC, and her actual earnings. This amount would not be available in any civil proceedings because of the statute bar.
The issue before the Supreme Court of New Zealand was determining whether the application of section 32 (5) of the Sentencing Act 2002 requires a qualitative enquiry into the ACC Scheme's coverage (ie are any entitlements available to the victim at all?) or merely a quantitative enquiry (ie what is the amount of that cover?). In other words, did the fact that some coverage was available to the victim in this case prohibit reparation or was the prohibition only in relation to the amount of that coverage, so as to allow a 'top-up'.
Overturning the High Court and the Court of Appeal, the Supreme Court of New Zealand held that section 32 (5) requires a qualitative enquiry. The fact that the loss is the subject of any entitlements under the ACC Scheme disqualifies it from being included in a sentence of reparation. The Court noted that this was consistent with the ACC Scheme and avoided a two-tiered compensation system: victims of tortfeasors cannot have their ACC entitlements 'topped-up', whereas victims of crimes potentially can.
While the decision is relevant to the entire civil compensation system in New Zealand, it is of particular interest to the insurance industry. Insurers have noticed an increasing trend of courts awarding reparation for injuries covered by the ACC Scheme. This is particularly so for offences under the Health and Safety in Employment Act 1992. Reparation sentences for offences under that Act now cannot include losses covered by ACC to any extent unless they fall within the category of 'emotional harm'.
The effect of this judgment is that the exposure for liability insurers, in particular under Statutory Fines Policies, is now reduced.
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