Extreme tort reform - NZ’s ACC
December 11, 2017 1:01 AM   Subscribe

Would you give up the right to sue for personal injury actions if all of your injury treatment costs, rehabilitation costs, lost wages/salary, and family support were paid for? Tort Reform, Kiwi-Style (Peter H. Schuck, 2008) Yale Law School Faculty Scholarship Series. 1679.

When ordinary Americans think of New Zealand (which is hardly at all), they probably envision the breathtaking mountains, glaciers, and lakes panoramically depicted in the film version of Lord of the Rings. For legal scholars, however, radical tort reform distinguishes New Zealand's approach to accident law from that of the United States (and indeed of all other jurisdictions)….

The heart of the New Zealand system, in existence for more than thirty years, is a blanket prohibition on almost all personal injury damage actions…

The ACC provides generous no-fault benefits, including hospital and medical costs; wage replacement, starting only one week after injury, at a rate of 80% of average weekly earnings; rehabilitation and transportation costs; lump sum payments for permanent loss or impairment; and entitlements for surviving spouses and children. Most medical and dental services do not require pre- approval, and service providers, not consumers, complete paperwork for the ACC.

So could this work in the United States?

In this domain, and in a wide array of others, the United States is exceptional, and its politics and ideology reflect this pronounced singularity. Plainly put, New Zealand's comprehensive social insurance approach to accident law is simply inconceivable here. This realization is not based solely on the outsized influence of the medical profession and the tort and insurance bar in the United States, on how our lawyers are compensated, or on our greater suspicion of government-although those are certainly factors. It is also because so many Americans venerate the image of the Solomonic judge and jury, insist on the common citizen's right to a day in court, and believe in tort law that levels the playing field. The fact that the reality of tort law on the ground so often mocks these ideals seems to matter much less to Americans than does their ardent wish that the ideals were true.

TLDR? Overview of the ACC Scheme (Community Law NZ):

New Zealand’s accident compensation scheme provides cover for accidental injuries to New Zealand citizens and residents and to temporary visitors to New Zealand.

Most ACC claims involve physical injuries caused by accidents. However, sometimes nervous shock and other mental conditions are covered too…

To make a claim, you don’t have to show that some other person was at fault and caused your injury, and so ACC is sometimes described as “a no-fault scheme”. Whether you fell over at home, or twisted your knee playing sport, or were injured in a car accident when another driver failed to give way to you, you’ll be covered by ACC.

The ACC scheme has been running since the mid-1970s. When the scheme was introduced, it took away the right to sue in the courts for injuries covered by the scheme. However, if your injury isn’t covered by ACC and was caused by someone else’s actions, you can sue them in court for compensation (“damages”). For example, you might sue for negligence.

Note: In some cases, you may be able to sue in the courts for what are called “exemplary damages” even if your injury is covered by ACC. Exemplary damages are awarded by the courts for particularly blatant and reckless behaviour that causes an injury to someone. They’re awarded to punish the wrongdoer (so they’re sometimes called “punitive” damages), and they go over and above an amount that’s necessary to compensate the person who was injured.

Here, is an excellent (if lengthy) 1995 interview transcript with ACC expert, Law Professor, and former Prime Minister, Sir Geoffrey Palmer QC. The interviewer is not legally trained and so Sir Geoffrey breaks things down for us (I recommend reading the whole thing, but here are some excerpts if it’s TLDR for you.)

The scheme is based on the widely accepted premise that accidents are an integral part of modern society. Certainly, they need to be minimised but they are the price of progress from which we all benefit and therefore their cost should not rest where they fall. Accidents are an inevitable component of social life and society should take responsibility for their victims…

...the old tort system did nothing to minimise accidents. The threat of litigation didn't deter people from being negligent and it most certainly did not provide adequate compensation for their victims…

Many New Zealanders fail to grasp the value of our no-fault compensation system. When the reform first took place they didn't really understand what it was all about. Now it has been in place for so long they cannot remember what the old tort system was like…

The percentage of people who would benefit substantially by taking court action would be extremely small. Moreover, you must remember the infrastructural underpinnings required by way of courts, judges, lawyers, insurers, accident investigators and everything else needed to support the tort system. It's known as 'the injury industry' and is extremely expensive…

It seems to me that lump sum payments encourage people to think of ACC, as they used to think of common law litigation, as offering a pot of gold at the end of the rainbow. There is a strong incentive to exaggerate the injury in order to win that pot of gold. This encourages people to dwell on their plight and discourages rehabilitation…

The system as it exists is too parochial. It focuses entirely on accidental injury, ignoring the fact that accidents constitute only a small part of the entire universe of disability…

The Australian scheme I worked on under Gough Whitlam was all set to go through Parliament but the Labor Government didn't last long enough to pass it into law. The Whitlam Government was brought down, you will remember, by the Governor-General, and the accident compensation scheme went down with it…

Amongst other things, I was retained by the Commonwealth Secretariat to produce no-fault schemes for Sri Lanka and Cyprus. In the event, they didn't get adopted either, due to the usual opposition from vested interests like the insurance industry, trade unions, the legal profession and even treasuries.

And covering much of the same ground - “Big Change, Exciting Adventures: Accident Compensation” (on SSRN) a chapter from Sir Geoffrey Palmer's book - Reform: A Memoir (Wellington: Victoria University Press, 2013), 198-226

From a medical perspective - New Zealand’s World-leading No-fault Accident Compensation Scheme (Peter Foley, International Medical Community, PDF)

…the deficiencies of New Zealand’s ACC system are small compared to its advantages. One of those will have been brought home to New Zealand doctors by the collapse in 2004 of the Australian medical indemnity system, brought down by huge claims and huge settlements. Because such claims cannot be made in New Zealand, our medical indemnity subscriptions are considerably lower than those of most comparable countries.This does not make New Zealand doctors more careless, although it may make us less risk-averse and more willing to deal with uncertainty of outcome.

Here’s an independent PriceWaterhouseCoopers 2008 ACC scheme review report.

Some highlights:
  • Due to coverage of all injuries and ACC’s no-fault nature, ACC offers broader coverage than every other scheme around the world.
  • ACC offers a range of benefits covering income-replacement, impairment benefits, treatment costs, rehabilitation costs and death benefits. This enables ACC to take a holistic co-ordinating case- management role across all claimant benefits and services in pursuit of the best overall outcome for claimants in terms of participation and independence.
  • ACC income benefits are provided on a periodic basis, rather than as a single lump sum… A significant research base indicates that claimant outcomes are demonstrably better under periodic payments than in a lump sum environment. ACC offers income-replacement benefits of 80% of pre-injury earnings, which is in line with or above many other schemes.
  • Compared with other workers compensation systems, ACC performs well in terms of return-to-work. The clearest comparative evidence is for workers’ compensation schemes across Australia, where the ACC (88% of claimants returned to work within six months) outperforms both the Australian average (85%) and all three comparable schemes.
  • The ACC employer contribution rate as a proportion of wages is substantially lower (0.78% at June 2007) than in comparable Australian workers compensation schemes (NSW 1.86%, Victoria 1.38%, Australian average 2%).
  • New Zealand has lower claims management expenses (8% of total expenditure) than all Australian schemes (9% to 32%), and lower total administration expenses (24% of total expenditure) than the schemes providing comparable benefits (NSW 28%, Victoria 31%).
Overall, summarising our observations thus far, we conclude that the current ACC scheme is consistent with the Woodhouse Principles, adds considerable value to New Zealand society and economy and performs very well in comparison to alternative schemes in operation internationally.

Here’s a brief history of ACC and accident compensation in New Zealand

And, just to clear up a common misconception:

ACC is a statutory legal system covering all personal injury suffered by accident in New Zealand. It is not an insurance scheme. (Don Rennie, Law Talk, New Zealand Law Society)

However, ACC has not been without its problems:

Should a client be denied ACC, their ability to seek legal action is limited by the paltry number of specialist lawyers and the availability of legal aid. Legal aid and access to justice (Dave Rennie)

ACC causing 'unacceptable harm' to many rejected, legitimate claimants each year, research finds (Cecile Meier, Stuff)
Hundreds of thousands of injured Kiwis are declined cover each year by ACC, causing "unacceptable harm" to many legitimate claimants, according to new research.

Sir Geoffrey Palmer responds; Social insurance scheme has turned into a lottery:
The Otago report demonstrates we are getting back to where we began, a lottery. The vision has been betrayed. It should be recovered and repaired.

He goes on to argue that the root problem is the distinction between an ‘accident’ and an ‘illness.’
The person laid low by cancer or a heart attack is treated much less generously than the person who suffers an accidental injury resulting in the same incapacity.

ACC is not broken: The legal fiction at the heart of the problem (Dr Ben Gray)
Dr Ben Gray retorts that the solution isn’t to include illness alongside injury cover within the scheme but to restore funding to the health system that has been systematically drained, and not maintained at a satisfactory per capita level.

Criticism that accumulated ACC levy reserves should not be treated as a slush fund by the Government.
Is It Time To Take ACC Back To First Principles? (Don Rennie)


If you’d like to, you can look at Owen Woodhouse’s foundational Royal Commission report. Primarily known as “The Woodhouse Report”, its full title is: Compensation for personal injury in New Zealand : report of the Royal Commission of Inquiry. (Owen Woodhouse, 1967)

ACC Hompage

ACC - Statistics on our claims

Wikipedia page

posted by Start with Dessert (26 comments total) 32 users marked this as a favorite
Thanks for this. I've been meaning to go beyond my previously cursory reading on New Zealand tort reform for a good 5 years, and never found the energy to marshal the resources. Awesome work!
posted by howfar at 1:08 AM on December 11, 2017 [1 favorite]

I always found it strange the kind of things that could open and operate in New Zealand that weren't really possible at home. For instance, one attraction involved a gigantic inflatable ball that you were put inside and then pushed down a hill. I always knew it had something to do with the way insurance worked in New Zealand, but never understood the specifics until now. Thanks!
posted by Merus at 3:06 AM on December 11, 2017 [2 favorites]

Plainly put, New Zealand's comprehensive social insurance approach to accident law is simply inconceivable here...It is also because so many Americans venerate the image of the Solomonic judge and jury, insist on the common citizen's right to a day in court, and believe in tort law that levels the playing field.

Well...I'd love to think Americans think about stuff like this that deeply. In actuality, I think it simply comes down to the very American insistence that someone has to be made responsible, come hell or high water, and pay the price (as long as it isn't me). It's part of that all-American vindictiveness.
posted by Thorzdad at 5:59 AM on December 11, 2017 [9 favorites]

So, if you can accurately capture the externalities involved with negligently causing harm to others, you'd produce a system where companies moderate their safety measures in line with the costs they would incur. My worries are three-fold:

1. I'd really worry about regulatory capture of the agency that determines coverage by industry groups. There'd be a strong financial incentive to underdiagnose.

2. Maybe just capturing the externalities of harm isn't enough? Perhaps there should be a punitive component to companies who are cavalier with the health and well-being of their employees?

3. I wonder what compliance is with safety rules and regulations relative to other countries with different frameworks. Say I have a highly profitable flying buzz-saw factory, if I can easily cover the medical costs of the regular amputation of my employees, why bother with safety standards?
posted by leotrotsky at 6:25 AM on December 11, 2017 [4 favorites]

It looks like it may be Kiwicember all month thanks to Start with Dessert and, as I prepare for a cold Christmas in the opposite hemisphere to my homeland, I'm loving it!

I am very sympathetic to the argument that separating accident from illness means that some health services (like physiotherapy) are playing a whole different game to others (like mental health). I have also seen first-hand what it looks like for someone to be on the damaging end of a decision as to what is an "accident". The person I am thinking of suffered permanent brain damage when hit by a car about 30 years ago. For a while now, ACC have been trying to remove their support by claiming that this accident is not the reason they have difficulty maintaining enough focus to work. Fighting a decision like this requires tenacity that few people suffering from a long-term disability can be expected to have.

Generally, though, it has always seemed to me to be a remarkable system. In particular it feels like an absolute bargain for the 1.4% income levy. It's also my understanding that it is expansive in its coverage of physical and mental harm due to sexual assault.
posted by dashdotdot dash at 6:42 AM on December 11, 2017 [1 favorite]

Thank you so much for all these New ZealandFilter posts! I left the country when I was 15, and I had no idea our tort law worked like this/that the ACC was such a unique system. Blame overexposure to US media, I guess.
posted by Berreggnog at 7:00 AM on December 11, 2017

How ray is it to emigrate to New Zealand? Asking for a friend.
posted by Big Al 8000 at 7:56 AM on December 11, 2017 [1 favorite]

I have a friend who moved to New Zealand several years ago. Earlier this year, on a return visit, he explained this program to me. My main reaction was one of incredulity, as I've been so inculcated by the US belief system in suing that I spent a lot of time trying to figure out what the catch might be.

He also described it as "New Zealand is Oregon if it were run by Canadians," so perhaps our good neighbors to the north would be open to such a program.
posted by fifteen schnitzengruben is my limit at 8:30 AM on December 11, 2017 [7 favorites]

I've tried to explain ACC to some friends here in the US, and the thing that always seems to cause the most eyebrow raising is that "accident" includes injury caused by another to you, even if it was a negligent or criminal act....and potentially even covering the person committing the crime or being negligent to allow them claim if they got injured (not in all situations - especially for criminal acts).

So you are likely entitled for coverage in the event that you slipped over and broke a leg even after having one two many drinks, OR if your drunken mate stumbles into you and knocks you over even including if they were being reckless, OR if someone hits you and causes you to fall over. And if your drunken mate also falls over they may be covered, or even the person who hit you (maybe - definitely not in all situations).

While here - after almost any trip to a medical provider I seem to get a letter from the medical insurer's loss recovery team trying to work out if they is someone else "at fault" for my condition they can claim against.
posted by inflatablekiwi at 10:11 AM on December 11, 2017 [2 favorites]

Remember ACC does not stop the police from charging you if there is CRIMINAL negligence (dangerous driving, unsafe work spaces, etc).

It was sold to us with ideas such as "we'd need fewer court houses, lawyers, judges" in fact after it was passed the govt partially defunded law schools. Beforehand many people wouldn't give their friends a ride in their car because they were potentially legally responsible if there was an accident and didn't want to ruin a friendship.

ACC is funded from a bunch of things - employers pay a levy depending on how dangerous the job is (I pay ~$500/year as a self employed programmer), individuals pay a bit out of their taxes, some comes from car registrations (more for vehicles that statistically have more accidents) etc to some degree it's user-pays

The main issue with ACC is that if something is caused by an accident it's covered, a near identical problem caused by a disease or something just plain wearing out is not - we have a public health system that can be slow, ACC speeds things up and pushes you into the private system.

In general I'm a fan - a few years ago I broke my achilles tendon while on holiday in Australia, I stood in a hole crossing the road, an accident, as a NZ resident so I was covered - I needed a full reconstruction - that meant a serious operation that happened within weeks of my diagnosis, in a private hospital, equipment delivered to my home while I was bed bound for 3 months, and several months of physio ... then after the first operation didn't completely work (scar tissue built up) another operation, more equipment, and more physio - didn't cost a cent

(Oh yeah and I lived in the US for 20 years, trust me you really really want this thing)
posted by mbo at 10:33 AM on December 11, 2017 [2 favorites]

Ha, I just started as the Privacy Officer for ACC. AMA, I guess?

It's particularly timely as the NZ Law Foundation just commissioned a researcher to look into making ACC even more no-fault by covering disease as well.
posted by Sebmojo at 12:27 PM on December 11, 2017 [6 favorites]

I cannot imagine conservatives in the U.S. funding such a program.

The U.S. Workers Compensation system (or systems since every state has its own) is a modified no fault system that is constantly under attack and at risk of having benefits cut in an effort to reduce costs to the employers.

A totally no fault accident system would have to compensate the “guilty” as well as the “innocent” and under the federal system would need to be passed by each state since tort law has never been within the purview of federal law for the most part.

About the only thing that would have any chance of passing would be the total abolition of tort law without the compensation component.

The New Zealand type of social welfare system can only be realized in places where people really care about the wellbeing of all the members of their society. We, in the U.S., don’t live in a place like that.
posted by mygoditsbob at 12:43 PM on December 11, 2017 [1 favorite]

It sounds like the system is meant to augment problems with the health care system. Canada has a similar issue - when you sue for an injury that money is for things like physiotherapy and drugs. But in my mind, if you need physiotherapy or drugs, shouldn't you get it, regardless of how you get your condition?

This is an interesting system though, and obviously better than the US system (right?).
posted by el io at 1:02 PM on December 11, 2017

New Zealand also has a single payer for drugs which is popular and good enough that pharmaceutical companies want it dead in case people get the wrong idea about how much drugs cost.
posted by Sebmojo at 1:11 PM on December 11, 2017 [1 favorite]

My wife does therapy training with a colleague from NZ, so we’ve batted about the idea of a trip. But I'm only half-kidding about moving — the regressive politics that currently hold sway in the US (at all levels of government) is pretty disheartening when you read about a country that seems to manage a reasonable balance between individual liberty and collective responsibility.

Plus, my wife likes the idea of no snow to deal with.
posted by Big Al 8000 at 1:58 PM on December 11, 2017 [1 favorite]

A totally no fault accident system would have to compensate the “guilty” as well as the “innocent” and under the federal system would need to be passed by each state since tort law has never been within the purview of federal law for the most part.

Well the whole point is that there is no "guilty", at least in the civil domain. It means that you get a wheelchair for life if you need one whether you were hit by a rich person or a poor one, or even if it was you who caused the accident.
posted by mbo at 2:02 PM on December 11, 2017 [1 favorite]

See this guy for a contrary opinion and the comments for a lot of kvetching about the failings of the system.
posted by Sebmojo at 2:03 PM on December 11, 2017 [1 favorite]

See this guy ....

Yeah that's basically the point I made above, the distinction between "accident" and everything else is pretty spurious in some cases and have resulted in a number of lawsuits against ACC.

Like any other insurance company it also has a reputation of being pretty hard-arse - trying to kick out people it thinks are scamming them - given they have a fixed amount of money to work with they probably have to be careful that they do have enough money to perform their statutory purpose. Again the result is both law suits from individuals, and from groups of people who feel that what they have should be catagorised as an injury. (ACC covers medical misadventures .... )
posted by mbo at 2:17 PM on December 11, 2017

2. Maybe just capturing the externalities of harm isn't enough? Perhaps there should be a punitive component to companies who are cavalier with the health and well-being of their employees?

3. I wonder what compliance is with safety rules and regulations relative to other countries with different frameworks. Say I have a highly profitable flying buzz-saw factory, if I can easily cover the medical costs of the regular amputation of my employees, why bother with safety standards?

There's this little thing called the law...

A company who is cavalier with the health and well-being of their employees, such as the flying buzz-saw example, will find itself in court in short order, because non-compliance with safety rules and regulations is illegal.

However the employees will have their injuries treated at not cost to themselves, and the payment for such treatment is not contingent on the success of legal proceedings against those responsible.
posted by HiroProtagonist at 4:12 PM on December 11, 2017 [2 favorites]

One of the things that I really miss about my time living in NZ is the playgrounds. They look spectacularly dangerous by US standards, and are exponentially more fun. ACC has got to be responsible for that.

Immigration-wise... if you're financially comfortable enough to get there and support yourself for 12 months, or you have a job offer in hand in one of the fields that NZ is short of (which includes most computer/network related fields), or both, then it's not especially difficult to get authorization (which leads to permanent residence eventually). If you're under 30, it's pretty straightforward also.

I found NZ Immigration to be surprisingly accommodating (though my wife and I were both on the skills-shortage list at the time), especially once we were in the country. Once we were there and gainfully employed (and our employers documented their interest in keeping us employed), NZIS seemed to almost go out of their way to make sure we were allowed to stay. Compared to ICE/INS in the US, it was night and day.
posted by toxic at 6:02 PM on December 11, 2017 [1 favorite]

Hmm. I wonder if they'll let me bring my birds. ;)
posted by tobascodagama at 6:15 AM on December 12, 2017

No, sorry :(
posted by Sebmojo at 2:56 PM on December 12, 2017 [1 favorite]

By the way, if you or a family member are autistic or disabled, New Zealand doesn't want you. (They've made noises about trying to improve but to the best of my knowledge nothing has actually changed.)
posted by Lexica at 3:55 PM on December 12, 2017 [1 favorite]

Immigration in general is likely to become harder under the new Government. There's a perception that it has fuelled an overheated housing market and increased strain on infrastructure in the larger centres.
posted by Sebmojo at 5:40 PM on December 12, 2017

That's a heck of a job you've got there Sebmojo, what with ACCs torrid history with privacy breaches (see the wiki article about the 2012 privacy breach.)

Does your job involve setting up new systems and processes to protect everyone's information or is it more of an administrative job - a role you fulfil in particular ways already set out for you?

Also, do you liase with the privacy commissioner's office at all?
posted by Start with Dessert at 2:07 AM on December 15, 2017

I was at the OPC for 16 years - we talk to them a fair bit. Currently it's just around complaints, but I'm going to be talking to them proactively about the various new information projects we have in development. The 2012 breach still looms large, but ACC has the best resourced privacy team in the public sector as a direct result. in terms of my job, more the former than the latter - the administrative side is covered by my team.
posted by Sebmojo at 12:15 AM on December 16, 2017 [1 favorite]

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