Wairarapa ratepayers are footing a $156k bill for a leaky waterfront apartment development in Napier as part of a group insurance scheme claim.
Masterton, South Wairarapa, and Carterton councils, like many other councils around New Zealand, were previously members of former mutual fund liability insurer Local Government Mutual Funds Trustee Limited [also known as RiskPool].
RiskPool is now in “wind-down” after incurring more in claims than it had collected from its members.
The need for payment comes after a Supreme Court ruling about the Napier waterfront development, which has been the subject of a long legal battle between Napier City Council and RiskPool.
In 2019, the Napier City Council paid $12.3 million to settle a claim made by 51 owners of units in the waterfront apartments.
Completed in 2007, the apartments were later found to be leaky buildings.
The building owners claimed the council was negligent as a building regulator for its role in issuing building consents, inspections during construction, and issuing code compliance certificates.
After paying out the apartment owners, Napier City Council sought cover from RiskPool, but RiskPool said it was not liable for weathertightness claims or claims with a weathertightness component.
In August last year, the Supreme Court ruled in favour of the council.
As a result of the ruling, Masterton District Council was asked to pay $64,719 to RiskPool, South Wairarapa was asked to pay $47,000, and Carterton was asked to pay $43,484.
RiskPool was originally set up as a way for councils to get liability and professional indemnity insurance, at a time when insurance companies were generally not open to offering this sort of cover.
The insurance covered claims against alleged failures by council processes that led to a financial loss to claimants, up until the end of June 2017.
Members of RiskPool’s mutual scheme paid premiums, comparatively very low by today’s standards, on the basis that if the defence costs and settlement of claims exceeded the available RiskPool premium pool of funds, for any year of insurance, all members would proportionately share in the shortfall.
Insurance procurement is now managed through a joint service of the three Wairarapa councils through an international broker called Marsh.
RiskPool member councils continue to remain liable for contributions to cover shortfalls in any fund year, and councils have no control over the timing of claims.
– NZLDR
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