Councils say legal action by insurers could discourage them from building more flood banks.
Earlier this week, the Bay of Plenty Regional Council put aside $5 million to fight a lawsuit by insurance companies and residents over a 2017 flood.
The umbrella group for regional and unitary councils, Te Uru Kahika, is concerned and calling for central government intervention.
The chairperson of Greater Wellington Regional Council Daran Ponter said it raised the question of why councils bother building more flood management infrastructure.
“It could well have that chilling effect for local authorities,” he said.
“From time to time there will be failures and if we are saying that those failures are the responsibility of the local authority, then it might just be time to call time on this type of infrastructure.”
Last year, two claims were filed against the Bay of Plenty Regional Council in the Rotorua High Court in relation to damages caused by the 2017 floodwall breach in Edgecumbe.
The plaintiffs include insurance companies and residents who are bringing representative actions on behalf of others impacted by the event.
The hearing is expected to be held in the first half of next year.
Ponter said the behaviour of insurance companies had been “predatory”.
“It’s got us all very nervous.”
However, the Insurance Council disagrees companies are being predatory.
“You’ve got to maintain and manage infrastructure as well, and if residents are hit and as a result there are claims, then insurers have a right to ask whether the right thing was done,” said chief executive Kris Faafoi.
Councils are calling for law changes to protect them from litigation.
“We need the government to cut through this otherwise what we will be doing is spending ratepayer money on lawyers,” said Ponter.
The Government is working on bringing insurance laws into a single set of standards.
“The issues before the courts now have happened in an environment where we haven’t had that surety, where each individual council might have been doing their own thing in terms of maintenance and management. We need that to be gripped up,” said Faafoi.
Local Government Minister Simeon Brown said he’s concerned by this approach from insurers and the effects that this could have on local councils and their policies.
He said the Government is keeping a close eye on this issue and what the implications arising from this case might be.
