New Zealand Law Society - Does the legal profession have any interest in the legal rights of accident victims?

Does the legal profession have any interest in the legal rights of accident victims?

By Don Rennie

Since 1974 when the common law right of accident victims to sue to recover damages for personal injury was abolished, the legal profession has shown very little interest in ensuring that the statutory ACC scheme adequately replaces common law and former statutory rights of accident victims.

Lack of professional interest probably arises from the fact that lawyers find it difficult to make a viable income from handling ACC cases. Not only is the legislation complex and prolix but the jurisprudence is extensive and few lawyers are prepared to commit themselves to becoming proficient enough to advise accident victims.

It is made even more difficult with the current legal aid rules that mean a lawyer can barely recover overheads, let alone make an acceptable income from handling legally aided ACC clients. Any legal aid granted is only a loan and must be repaid if compensation is recovered or otherwise it remains a debt owing. The position is so bad that in Auckland – a city with a population in excess of 1.675 million – no lawyers will handle legally aided ACC cases.

ACC advocates are not legally qualified or registered but regularly advise accident victims by interpreting how the Act, regulations and the court decisions, apply to clients. This probably breaches the Lawyers and Conveyancers Act 2006 and is in direct contrast to advocates provided under the Health and Disability Commissioners’ legislation who are specifically prohibited from giving legal advice.

The Woodhouse Report recommendations

The 1967 Report of the Royal Commission on Compensation for Personal Injury in New Zealand made five specific recommendations which have been the subject of articles in LawTalk – commencing with “Community responsibility” (LawTalk 917, May 2018), followed by “Comprehensive entitlement” (LawTalk 919, July 2018), “Complete rehabilitation” (LawTalk 920, August 2018), “Real compensation” (LawTalk 926, March 2019) and “Administrative efficiency” (LawTalk 935, December 2019). These articles are available on the New Zealand Law Society website in the section Practice Resources/Practice Areas/Accident Compensation.

There has been no comment in LawTalk about these articles. The Law Society’s Accident Compensation Committee, of which the author was convenor for 16 years, received little correspondence from practitioners raising ACC issues, principles, or policies, yet the articles point out how far the current legislation and the policies and practices of the ACC have departed from the five Woodhouse recommendations. It is difficult to determine the principles the ACC currently operates on, other than an apparent desire to follow private insurance principles by reducing claims and costs and building up reserves that in 2019 exceeded $45 billion.

Independence of AC Commission

The original Accident Compensation Commission was an independent statutory body. The chairman, or one of the commissioners, had to be a barrister of at least seven years’ experience – in other words, the same qualification as required for appointment as a judge. Woodhouse recommended that appointment of commissioners was to be made by the Governor-General and appointments were to be for a period of six years. As an independent statutory body the Commission, like the Health and Disability Commissioner, was to be answerable to Parliament, not the Minister or the government-of-the-day.

Abolition of the Independent Commission

The independent Commission was abolished by the Muldoon Government in 1983 by the Accident Compensation Act 1982. The Act established the Accident Compensation Corporation and replaced the three independent commissioners with a Board of Directors appointed by the Minister. No Board member was required to have any legal qualification. The government-appointed Board was required to follow Government policy and the independence of the former Commission was lost. Notwithstanding that it had a major impact on the statutory replacement for the loss of the right to sue for damages for personal injury, this fundamental change attracted little or no attention or comment from the legal profession.

Iain Lees-Galloway, Minister for ACC, is currently considering positions on the ACC Board and Treasury has called for expressions of interest from persons having the skills noted in the position specification on the Treasury Board Appointments website. There is no requirement for any Board member to have skill, experience or expertise in safety or accident prevention, knowledge experience or expertise in the medical treatment of accident victims or knowledge experience or expertise in the rehabilitation of accident victims.

Current ACC Board members have expertise and experience in business, finance and investment which reflects the Board’s major interest which is obviously in the financial management of the scheme in accordance with the requirements of the Minister of Finance for Crown Financial Institutions and the Minister for ACC.

Ministerial Service Agreement with ACC

To clarify government policy, the Minister for ACC enters into a Service Agreement with the Corporation Board. The service agreement for the 2019/20 years clearly states the Corporation: “...must ensure that the ACC functions as a publicly administered and delivered social insurance scheme distinct in character from a private insurance company”.

There is no mechanism to ensure that the ACC Board complies with the service agreement. Indeed, the way the ACC has operated over the last 46 years is almost indistinguishable from the way a large private insurance company operates.

Impact of operation by ACC on accident victims

The Corporation has been set up and operates so that the burden of proof is on claimants to prove to the satisfaction of the ACC, that their injury is covered by the complex and prolix wording of the AC Act and that they have a right to the entitlements provided by the Act. Few, if any, accident victims have any knowledge of the Act and Regulations and the extensive jurisprudence that has developed since the law was introduced. It is almost impossible to challenge an ACC decision without legal or other independent expert assistance.

The structure and methods of operation of the ACC has affected the rights of hundreds of thousands of accident victims and one might have expected that lawyers would have been more active and vociferous about the way many victims have been treated. That has not been the case.

Current situation

(1) The ACC scheme is not insurance. It is a unique statutory socio/legal system covering all personal injury suffered in New Zealand.

(2) The unique character of the scheme envisaged by Woodhouse is not reflected in the legislation or how the scheme is administered.

(3) The ACC has been structured and operates as an insurance company and is not set up, organised or staffed to administer a unique socio/legal system.

(4) The scheme is funded by an outdated levy system inherited from the previous Workers Compensation Act and, in relation to work injuries to earners, is based on the private insurance principle of risk-related classification of industrial activity. The levy system is what would be expected in an insurance scheme where entitlements were limited but is unrelated to entitlements payable under the AC legislation.

(5) Since the independent Accident Compensation Commission was abolished in 1983 and the three independent commissioners were dismissed, the Board of Directors appointed by the Minister of the government-of-the day, has been required to follow government policy. It is therefore subject to changes in policy, dependent on the political party currently in power which does not necessarily reflect the Woodhouse Principles or the actual needs of past, present or future accident victims.

(6) Since premiums and levies have been required to be collected on a “fully funded” basis, the emphasis has been on setting levies at rates which ensure the building up of reserves ostensibly to recognise the insurance principle of premiums being sufficient to cover the future cost of current claims. Risk-related levies reflect a “user pays” principle which is contrary to the Woodhouse principle of community responsibility.

(7) Levies and premiums were required to be set on a fully funded basis at a time when the law allowed private insurers to offer cover and ACC entitlements for work injuries. That requirement was changed in 2000 by the Helen Clark-led government that removed private insurers and prohibited them from offering such cover. At the same time, presumably by oversight, the requirement for “full funding” of the ACC levy accounts, was not removed from the legislation. The AC Corporation has continued using that provision to authorise the collection of levies in excess of what is required to fund the system on the former, pay-as-you-go basis.

(8) There is no logical reason for a public organisation like ACC to collect compulsory levies in excess of what is required to operate a statutory scheme, in order to provide an investment fund to meet estimated future liabilities

(9) The ACC regulations and the administration of the scheme breach numerous laws (eg, in relation to weekly compensation for superannuitants, the Human Rights Act 1993 and the New Zealand Bill of Rights Act 1991 as well as in relation to work injuries, the International Labour Organisation conventions) which New Zealand has ratified.

(10) Like an insurance company, ACC has a strong emphasis on restraining costs in operating the scheme often at the expense of claimants who have lost common law rights.

(11) The ACC has a unique database of all claims for cover and entitlements by accident victims since the scheme commenced in 1974 but the Board has no apparent interest in ACC being an internationally recognised centre of excellence and research on the prevention of accidental injury or the treatment and rehabilitation of accident victims.

The legal profession has been silent on many important issues resulting from the loss of common law rights by accident victims, the nature of the ACC legislation and on the way the law has been administered by ACC.

The legal profession should have concerns about the rights of accident victims. They should raise their concerns with the New Zealand Law Society, or by writing to LawTalk or with their local Member of Parliament.

Don Rennie was convenor of the Law Society’s Accident Compensation Committee from 1990 until 2019. He has worked for the ACC and in private practice and is widely published in the areas of accident compensation and personal injury. The opinions in this article are of Mr Rennie in his private capacity.

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