Massive insurance costs for Masterton taxpayers

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A secret settlement reached by Masterton Regional Council over defects at the Wairarapa Hospital is one reason its liability insurance premiums are higher.
photo: Emily Ireland/LDR

Masterton ratepayers will pay $500,000 this year to protect the council from prosecution.

Last year’s Confidentiality agreement reached with New Zealand Ministry of Health over Wairarapa Hospital deficiencies It is “one of the factors” that the insurance market is dealing with, a commission spokesman said.

But the problem goes far deeper than that, all local governments are affected by rising premiums.

For Masterton District Council, the cost of professional indemnity and public liability insurance has risen to $516,731 from $179,250 last year.

This is $205,000 more than the council budgeted.

Despite the increase, the council will only be able to secure up to $15 million in coverage; last year, the council received up to $300 million in coverage.

A report by parliament’s audit and risk committee, which met on Wednesday, said all local authority clients faced the same challenges.

In May, the London-based reinsurance market withdrew its support for providing such insurance in the New Zealand local government market.

This is the result of nervousness about taking liability claims in an environment where insurers are losing cases, shouldering increasing legal costs, and paying claim settlements.

The report, written by the council’s finance manager David Paris, said councils were at great risk in an increasingly litigious environment, were challenged and were “expected to have the strongest financial resources”.

“The reduction in insured amounts from $300 million to $15 million significantly increases the financial risk to the council – which could have to cover claims costs in excess of $15 million in any given year.

“The council had no choice but to accept the terms that were agreed as the alternative of fully self-insured was too risky and not advisable.”

He said the council had the opportunity to extend the professional indemnity limit by a further $5 million, but that would cost between $150,000 and $170,000, which was “unreasonably high”.

“Staff’s view is that the council would be better off focusing its efforts on reducing litigation risk by striving to achieve exemplary standards in functional areas that are more susceptible to risk, such as engineering and regulatory services.

“The council is never free from challenges.

“There will always be people who think the parliament is to blame for the losses they’ve suffered.”

last year, New Zealand Ministry of Health seeks nearly $90 million in damages from Masterton District Council for negligenceplus GST, interest and fees.

The money would be enough to pay for a new standalone hospital building adjacent to the existing one, a solution proposed by the Ministry of Health.

In contrast, the MDC’s remedy involves repairing Defective parts of existing hospital buildings The estimated cost is $4 million.

The commission has denied responsibility and defended the allegations.

Settlement Amount and Terms The council and Te Whatu Ora kept it a secret..

“In this case, it would not be in the public interest if the information were disclosed which could prejudice our ability to negotiate future insurance arrangements,” the committee said at the time.

Masterton District Council’s material damage insurance premium for 2024/25 is $1,099,000.

Local Government New Zealand deputy chairperson Campbell Barry said like households, councils had experienced significant increases in insurance premiums.

“In fact, rising insurance costs are one of the main reasons for record premium increases across the country. Some local governments have seen premiums rise by more than 70 per cent compared to three years ago,” he said.

From the numbers

This year Masterton District Council’s professional indemnity and public liability insurance premiums have risen by $337,481. Here are some of the council’s similarly priced items: