Current Newsletter: March 2005  (pdf)

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- Workers Compensation
- Mortgage Holiday - Marketing Ploy or Useful Tool
- Flexible Loans
- Capital or Revenue
- Employee or Self-employed Contractor
- Shortfall Penalties Concession
 

Given the extent of the media attention already given to this issue we can hardly ignore it – quite apart from its importance.

In essence, as from 1 July 1999, the new Accident Insurance Act shifts the responsibility for the delivery of our 24-hour, no fault ACC scheme from the Government to approved private insurance providers. In the process, the entitlements of injured employees are being fully protected.

A number of issues are causing difficulty.

The new Act requires employers to obtain private cover and provides an opportunity to "shop around". However, given the time constraints it is likely that this first round of contracts will, to some degree, be standard rated. This means that the benefit of a good claims history may not be immediately fully realised. We suggest that you continue to work with your provider after entering into the initial contract with a view to developing a stronger position before it comes up for renewal.

Some employers believe that if they do not enter into a contract with a private provider, cover will remain with ACC or its replacement. This is not correct!!! All employers must actively enter into a contract. Only the self-employed may choose to remain with ACC. If a new contract is not in place on 1 July, the employer will be allocated an insurer and a penalty of up to five times the unpaid premium may be applied.

Employers who have been employing continuously since before 31 March 1980 and self employed who have been in business since before 30 September 1979 have been paying their ACC in advance (advance payers). Those who commenced after these dates have been paying in arrears (arrears payers). As private providers will require payment in advance there could be significant cash flow issues for the arrears payers.

Arrears payers will need to pay:
- ACC for the year ended 31 March 1999;
- ACC for the three months from 1 April 1999 to 30 June 1999;
- The "tail" to 31 March 1999 (to fund claims yet to crystallise under the old regime); and
- The levy charged by the private provider for the coming year.

Advance payers will not have the first item to contend with.

ACC are expected to offer some form of (as yet unspecified) financial arrangement. Some brokers may also provide some form of finance. If this is an issue, it should be considered in the course of selecting the provider.

Shareholder employees are treated as employees and must be covered under the new regime. In contrast, the payment of directors’ fees, which are subject to the withholding payment regulations, come within the self employed ambit.

Motor vehicle accidents previously did not impact on an employer’s claims history. The new Act alters the position slightly as the definition of "work related personal injury" now incorporates some motor vehicle accidents. Exactly where the line will be drawn will no doubt be the subject of litigation between private insurers and ACC.

Further difficulties arise in the employment area. Employees’ rights are absolutely protected, regardless of the level of disclosure made by an employer. If the business has not made full disclosure, the contract between the employer and the insurance company will have been breached and damages may be recovered from the employer.

To minimise risk, employers must make full disclosure, including relevant information regarding employees. Potentially this may result in breaches of the Employment Contracts Act, Human Rights Act and/or the Privacy Act. Litigation may clarify some of the issues but, in the meantime, tread carefully.

Arguably the greatest unknown comes from the Beehive. The new Act was introduced by the National Party. Its introduction has been vigorously opposed by the Labour Party and they have indicated that the Act will be repealed if they gain power in the next election.

Not withstanding all these concerns, to avoid substantial penalties, employers must have an insurance contract in place to cover their employees by 1 July 1999. Time is running out and we urge you to act if you have not already done so. If you require any assistance we are here to help.