New Zealand has made it illegal for insurers to cover fines or penalties imposed for breaches of the Resource Management Act, affecting statutory liability claims.

Insurers can no longer cover such penalties even if a claim was lodged and/or accepted before August 20, when the change took effect.  

Any policy clause providing indemnity for these fines is now unenforceable.  

“We recommend insurers address this with brokers and insureds now, to ensure they are aware of the upcoming limitations of cover,” law firm Wotton Kearney said.

“Importantly, this change will not apply retrospectively to any indemnity provided for fines before royal assent. Insurers will need time to adjust statutory liability policies to remove indemnity for [Resource Management Act] fines.”

There is now a specific offence of insuring fines or having an insurance policy for coverage of fines, but there is a two-year grace period.  

Maximum fines have been increased to $NZ1 million ($900,000) for individuals, up from $NZ300,000 ($270,000), and $NZ10 million ($9 million) for companies and other non-individuals, up from $NZ600,000 ($540,000).

The change does not apply to other acts, and insurers can still cover legal defence costs for unintentional breaches of the Resource Management Act, remediation costs and investigation support.

Rural insurer Farmers’ Mutual Group is reviewing its cover and will advise clients of alterations.  

“This is a significant change that affects our statutory liability optional benefit,” FMG said. “We are currently working through this change and our website will be updated as necessary.”