I was recently asked by Australian media whether the Whakaari eruption might give kiwis a reason to reconsider our no-fault accident compensation scheme. I said that I didn’t think it would, but people might ask “why aren’t we doing more?” rather than “why do we have this at all?”. Here, I expand on how Whakaari raises questions about the boundaries and funding of the scheme.

I’ll start by giving a brief introduction to the ACC scheme and what it means following the Whakaari eruption. Then, I’ll move on to the points that I want to make. First, the Whakaari eruption, like the Christchurch mosque shootings, highlights the miserly treatment of mental injury under the ACC scheme. The second is the sexist way in which consent to risk is generally irrelevant under the scheme, but an exception is made for sex and pregnancy (note: I briefly discuss pregnancy and rape in this section). The third is that businesses that create significant risks for customers get protection under the ACC scheme that they don’t pay for.

A brief introduction to ACC

In the late 1960s, the people of New Zealand realised that the different possible outcomes for someone who was injured basically amounted to a lottery: the best case scenario was being able to successfully sue someone and receive a significant lump sum to compensate for the injury and its lifelong consequences, but more likely there was no viable lawsuit, with assistance only coming from Social Security and the Health system. As Patrick Atiyah put it in a book called The Damages Lottery, it is as if “faced with a hundred homeless people living on the street, we picked out one or two and lodged them in the Ritz at our expense.” Sadly, since I first read it, that description has also become slightly more applicable to New Zealand’s actual response to homelessness, which now includes putting people up in Motels.

On top of the lottery for victims of injury, a Royal Commission formed to address the issue also pointed out that the old position was inefficient use of funds: lots of money was spent arguing about who was at fault instead of helping injured people. As a society, we thought that was not good enough and that we could do better. The Royal Commission recommended the introduction of a no-fault scheme where everyone had access to generous entitlements without having to point the finger at a wrongdoer as the source of compensation, and that’s basically what we got – and still have.

The introduction of the scheme is sometimes described as a “social contract”: in exchange for giving up the right to sue, New Zealanders have the right to receive fair entitlements without having to identify a wrongdoer. I have some issues with taking this “social contract” idea too seriously, but it’s not bad as a broad-brush description for the change made in the introduction of the scheme.

The consequences of ACC for victims of the Whakaari eruption

Injuries or death caused by the Whakaari eruption will be covered by the ACC scheme, whether suffered by locals or visitors. For injured people, entitlements can include treatment, rehabilitation, compensation for lost earnings and lump sum payments for permanent impairment. Where death occurs, the scheme can contribute to funeral costs and make other payments including for lost earnings. ACC has provided a page specifically about entitlements for people injured in the eruption and their families, with information for people living in New Zealand and visitors. ACC entitlements are more desirable than what is available under the health or social welfare systems, including that under ACC you get compensation for lost earnings based on 80% of pre-injury earnings.

Where the injury is covered, there is no ability to bring a civil claim for compensatory damages. Claims for exemplary damages, which are aimed at punishing and deterring outrageous conduct, can still be made. If a person is convicted of a criminal offence (such as under the Health and Safety at Work Act 2015) then, as part of the sentencing process, the offender can be ordered to pay “reparation”: compensation over and above what is available under the ACC scheme. My focus here is on ACC, so I’m not going to get into the prospects of the likelihood of prosecution or exemplary damages.

Mental injury cover and ACC

The Accident Compensation Act 2001 creates a distinction between “physical injury” and “mental injury”. “Physical injury” is defined as “including, for example, a strain or sprain” while “mental injury” is defined as “a clinically significant behavioural, cognitive, or psychological dysfunction”.

The scheme provides cover for “mental injury” only where it has been caused by:

• Sexual abuse or assault (what ACC calls “sensitive claims”);

• A physical injury; or

• Witnessing a traumatic event at work.

Notably, there is no cover for a person who develops a mental injury after witnessing someone else being hurt, unless it’s at work. So, in the late 90s, the Court of Appeal confirmed that a man who developed post-traumatic stress disorder (and other mental injuries) after witnessing his wife die in a rafting accident did not have ACC cover, and consequently could sue.

Of course, being able to sue does not mean that you will necessarily succeed that’s the lottery that got us in ACC in the first place. Also in the late 90s, the Court of Appeal considered further when someone who witnesses an injury to someone else might be able to sue for damages. In the case, a majority of the Court of Appeal suggested that the person bring the claim must have developed a mental injury (emotional suffering that did not amount to a clinical condition is not enough), and have a close relationship with the victim. They left open the question of whether it was necessary to be physically present at the time of the accident. There has not been that much development in this area of law in New Zealand, but that might change.

In the context of a no-fault accident compensation scheme, there is no obvious principled reason why people who suffer a mental injury as a result of seeing a traumatic event at work should get cover while those who witness the exact same event, and also develop mental injury, are excluded. Basing cover on work-relatedness might make sense if we were talking about a Workers Compensation scheme. But we’re not.

There’s a practical explanation for the limited cover for mental injury. Parliament has proceeded slowly in expanding cover under the scheme, due to concerns about cost. Cover for mental injury for traumatic events at work was only brought in in 2008, and has some strict requirements, such as witnessing the event (or its aftermath) firsthand. I can accept that that incremental expansion of cover might be a politically achievable way of bringing more people the benefits of the ACC scheme. It does mitigate the risk of an expansion of cover out of sync with the scheme’s funding. But I think the Whakaari eruption really gives us reason to consider expanding mental injury cover, especially in light of the Christchurch Mosque shootings.

In both awful events, someone who witnessed a family member die and developed a mental injury would not have cover, and neither would someone who came to the aftermath of the event as a volunteer and developed a mental injury. On the other hand, someone at work who developed a mental injury could have cover. As a result of David William’s excellent investigative reporting, we know that, after the shootings, Cabinet actually considered effectively extending ACC mental injury cover in relation to the shootings so people suffering non-covered mental injury could receive help from ACC including compensation for lost earnings. Despite ACC Minister Iain Lees-Galloway and officials working hard on a short timeframe to put a proposal together explaining how that might work, the Government ultimately decided against it.

I think it’s reasonable for the Government to decided against an ad hoc retrospective expansion of ACC cover, despite how compelling the particular event might be. In deciding to offer special assistance in light of the Christchurch Mosque shootings the Government would have been favouring victims of that incident over people who developed non-covered mental injuries as a result of other events such as the Christchurch earthquakes. Incremental prospective expansion of the ACC scheme might be reasonable and doable politically - but the incremental expansion ought to continue. In 2017, I supervised a LLB(Honours) student who argued that the next step should be broad cover for mental injury because of a traumatic event, not limited by work-relatedness. It’s time to consider such a change.

As I mentioned above, since there’s no ACC cover for someone who develops a mental injury due to witnessing a loved one injured in a volcanic eruption, that raises the possibility of a civil claim. That brings the prospect of possible compensation, but I think the victims are better off with the certainty of ACC cover. With respect to tourism operators, the possibility of a civil claim is also undesirable, as it exposes them to a difficult-to-assess risk. The undesirability of civil proceedings is a further reason to expand cover.

Sex, pregnancy, consent to risk and the sexism of the ACC scheme

This section discusses pregnancy resulting from rape.

The ACC scheme is no-fault. It does not require that people identify an at-fault party who caused their injury before they can have cover. Neither is there any general reduction of entitlements if the injured person was also at fault in some way, as generally happens in fault-based systems (ie contributory negligence). So, if I’m cleaning the gutters on my roof and fall off and get injured, I get cover and it doesn’t matter whether or not I was doing so in a totally unsafe and unwise way. Entitlements can be limited where someone deliberately injures themselves, but not because they were foolish. The definition of “work-related personal injury” even makes it clear that an injury does not stop being work-related just because the employee was acting in contravention of instructions, or indulging in “skylarking” or “negligence”.

Neither does the scheme generally exclude risks that a person is regarded as having consented to. In the USA, people sometimes talk about the “Baseball rule”: spectators at baseball games are generally not able to sue if they are injured by a foul ball, and one of the reasons given is that the spectator has chosen to assume the risk of such an injury. ACC has no equivalent.

So, that means that the fact that someone may have knowingly undertaken a risky adventure tourism activity is simply irrelevant to ACC cover. As is the case with someone who plays sport, or goes skiing, or rafting, or any number of other activities that involve a risk of injury. Except that there’s a weird exception – for sex and pregnancy.

In 2010, the Supreme Court considered whether pregnancy could amount to a “personal injury” under the scheme, found that it did, and further considered when pregnancy could have cover. The appeal followed an unsuccessful tubal ligation surgery. The Supreme Court was in agreement that that was one of the circumstances where a person could have cover for pregnancy, and also that pregnancy that resulted from rape would also have cover. However, four of the Supremes (Peter Blanchard, John McGrath, William Young, and Andrew Tipping) also suggested that an unintended pregnancy arising from consensual sex would not have cover in the absence of some failed treatment.

An unintended pregnancy is an “accident” in the everyday sense of the word. And the legal definition of “accident” says nothing about risk or consent, and the physical mechanism of conception is arguably the same whether sex is consensual or not. However, the majority thought that Parliament cannot have meant that a colloquial “accidental” pregnancy, such as where a condom burst, had cover under the scheme. Justice Blanchard put it this way:

where a woman chooses to engage in intercourse, during which she suffers no physical harm but as a result of which she falls pregnant, it cannot sensibly be said that there has been an “accident” within the statutory definition

The way that the majority achieve that result is by reading the idea of consent to risk-taking into the definition of accident. But, they realised that if it was generally the case that consent to risk ruled an event out from being an accident, then this would dramatically reduce the number of events that qualified as “accidents”. Many sporting injuries, for example, would be excluded. So, the majority made it clear that this special definition of accident applied only for sex and pregnancy. The Chief Justice, in contrast, doubted the legitimacy of this approach, and noted that the Court did not actually have to make a ruling on cover for pregnancy outside the case in front of them.

Now, the majority may well be right that, in passing the accident compensation statute, Parliament did not have in mind that cover would be granted for a wide range of “accidental” pregnancies. But, the point here is that the ACC scheme is based on a bit of a gendered idea of accidents and injuries. It’s not just pregnancy, and I have my colleague Dawn Duncan to thank for pointing out to me several other aspects of the ACC scheme that are, to put it bluntly, sexist.

The sorts of accidents and circumstances under which cover is most readily available tend to be conventionally masculine activities: playing rugby, or getting injured while cutting down a tree, for example. However, when we turn to injuries or activities that are less conventionally associated with the masculine, cover is harder to get. Pregnancy is just one example. The current provisions for work-related mental injury focus on mental injury resulting from specific traumatic events, when in conventionally female-dominated industries the greater mental health risk can be related to gradual accumulation of non-physical stress (which the statute spells out is not covered) rather that specific events.

The idea that any notion of consent to the risks associated with setting foot on an active volcano is irrelevant for the ACC scheme, but suddenly matters for sex and pregnancy, should give us pause. We should work to unravel the gendered aspects of the ACC scheme.

Levies and adventure tourism

The final point I want to make here is that businesses that generate significant risks of injury for their customers, rather than workers, get a benefit from the protection from being sued that is not matched by the financial contributions that they make to the scheme.

Businesses pay levies based on their industry and individual accident record, and those levies are used to fund entitlements for people who are injured at work. Outside work, injuries are funded depending on how they were caused. Generally speaking, motor vehicle injuries are funded through vehicle registrations and petrol levies, injuries to earners are funded through a levy on income (it comes out alongside tax through PAYE for most people), and injuries to non-earners are funded through general taxation. That means that visitors to New Zealand who do not work here are helping fund the ACC scheme indirectly by spending money in New Zealand, even though we do not levy them directly.

However, with respect to risks to customers, businesses get the protection from being sued but do not have to make financial contributions. For the most part, that is probably unimportant because the main risk is to employees. However, for some businesses there is also a significant risk to customers. As some researchers have pointed out, manufactures of defective goods that injure people are one example. Adventure tourism operators are another. Also, I would suggest, are e-scooter operators: ACC figures suggest that e-scooter-related accidents have cost $NZ4.4m since October 2018. But none of these businesses contribute to the ACC scheme in a way that reflects the risks that their enterprise generates for customers. Rather, when customers are injured occurs the cost is borne by the community more generally rather than by those businesses. That seems unfair to me.

I am not entirely sure how we could go about fixing this problem. It might not be easy to identify which businesses generate risks to customers. It may well be that some adventure tourism businesses are not viable if they are required to account for the risks generated for customers. If that is the case, then it is not clear to me why those businesses should be able to free-ride on the presence of the ACC scheme and have everyone else share the burden of a risk that they are profiting from. For me, the profit element is significant – I am not so enthusiastic about imposing new levies on community sporting groups, for example, even though they generate risks and do not have to pay levies.

What I am sure of is that the recent events at Whakaari give us a reason to re-think at least these aspects of the scope and funding of the ACC scheme. Certainly, it’s arguable that these issues are just the tip of the iceberg. Bigger questions about the differential treatment of injury and illness under the scheme always arise when we talk about the future of ACC. It may well be that what’s really needed is a bigger reform that radically reforms both cover and funding. But, in the absence of such change, we should work incrementally to improve the scheme we’ve got now.