Statutory Liability Insurance is designed to provide cover to the firm and its principals, officers and employees for defence costs and fines/penalties in respect of unintentional breaches of almost all Acts of the New Zealand Parliament with the exception of the Health & Safety at Work Act where the policy covers defence costs and reparation orders (this Act expressly prohibits insurance against fines and penalties.
Some of the more significant Acts that are included and have particular relevance to Members are:
- The Resource Management Act 1991 and its amendments
- The Building Act 1991 and its amendments
- The Fair Trading Act 1986 and its amendments
- The Consumer Guarantees Act 1994 and its amendments
The insurance in general terms applies only to events neither expected or intended by you, but does not cover any deliberate failure to comply with the statutes or lawful notices, including any prohibition or suspension notices issued under the authorities of the Acts.
Please be wary of any tax liabilities
It is often not appreciated by Accountants that in accepting appointments as Trustees any tax liabilities of the Trust are, in fact, commensurate with the personal tax liabilities of all of the Trustees.
Any statutory demands for payment of taxes, use of money interest or penalties for non-payment are very significant personal risks that are basically uninsurable under Professional Indemnity or any other liability policies (i.e. they are not demands for compensation by a Client in a Civil Court)
The IRD can make its statutory demands against any one or all of the Trustees of a Trust as an example. Accountants should understand that as Trustees, in the event of a Trust having insufficient assets to meet its tax liabilities, they could become personally liable along with the other Trustees for that tax.
This is diametrically opposed to a situation whereby an Accountant has made an accounting error or an error in the provision of any tax advice to or on behalf of a Client and the Client then makes a demand for compensation seeking reimbursement of loss caused by the error.
In this latter situation, such a demand for compensation would constitute a “civil claim” and be the subject of Professional Indemnity Insurance, subject to its terms and conditions.