INSURANCE RISKS

Southland Times, Issue 22202, 20 December 1933, Page 8

INSURANCE RISKS

“ACTS OF GOD” LIABILITY OF COMPANIES CLAUSE IN FINANCE BILL (From Our Parliamentary Reporter.) Wellington, December 19. The provision in the Finance Bill regarding the liability of insurance companies in respect of workers’ compensation claims arising out of “acts of God” gave rise to considerable discussion in the House to-day. In moving the second reading of the Bill, the Minister of Finance, the Rt. Hon. J. G. Coates, explained that the clause was necessary as a result of the recent Privy Council decision. Mr J. A. Lee: A big bonus to the party funds. Mr Coates: That is exaggeration. That is not worth talking about. It is a peculiar mind that will interject like that. It is a very unjust remark for anybody to make. I am debarred from using the term I would like to use. It could be reasonably suggested, said Mr Coates, that when the workers’ compensation legislation was first introduced into New Zealand, it was not contemplated that an employer would be responsible for personal injury to. a worker caused by an earthquake while in course of his employment, but by a long line of cases, the construction of the words “arising out of” had been progressively broadened until they were now faced with liability on employers which, in the event of a disastrous earthquake in a thickly populated area, would be unquestionably greater than could be borne. Insurance companies had stated their inability to undertake it, and, of course, it would be useless to expect individual employers themselves to meet the responsibility which the present insurance resources found it impossible to undertake. From the purely practical point of view of finance therefore, it was necessary to bring the present employers’ liability in the event of an earthquake disaster within limits which could be envisaged so that adequate provision might continue to be made for it. It might be reasoned that no accident arising out of an earthquake should be compensational on the ground that an earthquake was an act of God, but it was not proposed to go as far as that and the clause in the Bill limited the exclusion of liability to accidents arising out of real “community” risk—the risk of falling buildings and of fire following an earthquake. That risk was one to which all men in some degree were exposed, whether the matter came within the provisions of the Workers Compensation Act or not. Since the Hawkes Bay disaster, he continued, the Government had been seriously concerned to find some way of mitigating the financial loss which a severe earthquake entailed, without having. recourse to the public funds for rehabilitation purposes, as was necessary in 1931. One of the conclusions clearly established from the San Francisco and more recent Napier earthquake, was that the greatest damage to property was from fire following an earthquake, but in common with the practice in other parts of the Empire, New Zealand fire insurance policies did not ordinarily provide against loss by fire following an earthquake. If such protection were required, it was necessary to contract for it specially and pay an increased premium which was relatively high and more than the average insurer could afford to pay. Lessons Soon Forgotten.

It was the case also that lessons taught by the earthquake disaster were soon forgotten by the community in general and property owners were inclined, with a return to normal conditions, to dispense progressively with special insurance against the consequences of earthquake. Thus to protect owners against their own shortsightedness and to conserve the liquid resources of the State in stress of an earthquake catastrophe, it was considered that fire insurance policies should provide as usual a term in the contract for insurance against fire following an earthquake. Power was taken in the Bill to approve fire policy conditions and to ensure that they were uniform, but it was not proposed to exercise the power until an agreement had been arrived at with insurance companies as to rates and conditions. It was recognized that the inclusion of the risk presented considerable difficulties, both to the companies and the State Fire office, and that it was necessary for the matter to be referred overseas and for the companies to consult together before finality could be reached. That might not be for some months. The Leader of the Opposition, Mr M. J. Savage, said the Minister’s explanation had been astounding. The question was, who should carry the liability? Was it anyone in New York, Australia, or in some place outside New Zealand altogether ? “Is it not a fact that we all carry liability, whether done in the organized fashion or in piecemeal fashion?” he asked. Property could be insured, but a life could not. Mr W. E. Barnard: Is property more valuable than life?

Mr Savage proceeded to quote from the Privy Council decision in the Hawkes Bay earthquake compensation cases and referred to the fact that the provisions of the New Zealand Act were identical with those of the English Act. If workers were injured in Britain, the English Act would cover him, but New Zealand was to lead the way in a new principle and was not going to follow Britain. The insurance companies accepted risks on properties, but in the case of a man being injured as a result of earthquake, the Minister wanted to know who was going to accept the responsibility. The Minister contended that it was impossible to arrive _at a premium that would cover the risk.

“We can arrive at a premium to cover a building,” said Mr Savage, “but not to insure the individual who happens to be in it.” Mr Savage said that in the finish the people of New Zealand had to take the risk, even if it meant taking up collections. The question was whether people should take the risk in the organized orthodox methods of insurance. “The Bill is going to destroy that cover and I hope the House will never stand for it,” said Mr Savage. “Whether we have an insurance cover or not, the people of the country must carry the risk. We should not desert anyone in a disaster.” Mr Coates: Who suggested that? Mr Savage: The Bill means nothing else. Mr Coates: The hon. gentleman is arguing two ways. Mr Savage said that the men who had got compensation for the Hawkes Bay earthquake would not receive compensation in any future earthquake if the Bill were passed. The Privy Council said that the men were entitled to compensation. EMPLOYERS’ LIABILITY. • LEGISLATION MODIFIED. (From Our Parliamentary Reporter.) Wellington, December 19. To meet sustained Labour opposition and representation, the Government decided late to-night to modify

its legislation for the limitation of liability of employers for the payment of workers’ compensation for accidents due to earthquakes, by introducing an amendment to the relevant clause in the Finance Bill providing that in the case of one disaster or a series of disasters occurring within seven days, insurance companies and those they indemnify will not be liable for more than a total of £50,000. In announcing the alteration to the House, Mr Coates stated he would, next session, introduce a Workers’ Compensation Amendment Bill and afford an opportunity for the whole question to be thoroughly and completely threshed out. “We want to do the right thing and we want to make perfectly certain that our a,ction is reasonable,” the Minister added. “I must say that insurance companies have met us in this matter very well.”