Statutory Liability: Is Your Business Covered?

Given the highly regulated business environment in New Zealand, running a business can be complex.  Business owners face a number of risks in their daily operations and can find themselves with significant fines or penalties as a result of unintentionally breaching regulations.

Statutory Liability Insurance can protect your business from costs associated with unintentional breaches of Legal Acts.  It is an insurance policy that covers the legal costs associated with investigations and costs involved with defending a prosecution. In the event that your business is found guilty or admits guilt, Statutory Liability Insurance also covers any legally allowable fines, reparations or statutory damages.

Does My Business Need Statutory Liability Insurance?

Every business has to comply with certain laws and statutes as part of their daily operations.  As such most businesses should consider Statutory Liability Insurance.

The risk exposure of your business will depend on a number of factors such as the industry you operate in, your daily activities, if you produce or sell products, the number of employees you have and the location of your business.

Legal costs can be expensive and accumulate quickly, placing financial strain on the business.  With Statutory Liability Insurance in place, your business can get the advice it needs from lawyers and other professionals if you are investigated or prosecuted for an alleged breach of an Act.  When you know that these key legal costs are covered, you can act quicker in these circumstances, which can prevent prosecution or damage to your business’ reputation. It also lets you continue to operate the business without financial pressures.

What Circumstances May be Covered by Statutory Liability Insurance?

The following are examples of when Statutory Liability Insurance may respond for a business.  Remember that these claim examples are an illustration only, and provisions of the insurance policy will be interpreted on a case-by-case basis.

  • Building Act: A property owner changed the use of his premises without obtaining proper consent. Although the building was situated in a commercial zone and was used partially for commercial purposes, the local authority discovered that part of the building was being let out for residential purposes. The property owner was prosecuted and fined for breaches of the Building Act.
  • Credit Contracts Act: A finance company pleaded guilty to 17 breaches of the Credit Contracts and Consumer Finance Act 2003, resulting from inadequate disclosure of the terms and conditions of its loans. The contracts were unenforceable because of the failure to properly disclose the terms and conditions. The finance company also pleaded guilty to further charges of breaching the act by telling the customers that the contracts were enforceable. The Court found that documents provided by the finance company had been faxed and photocopied, and in some cases were so distorted what they were impossible to read. The company was fined $60,000.
  • Fair Trading Act: A clothing importer and retailer was prosecuted and fined $15,000 for failing to affix country of origin labelling to clothing sold in New Zealand.

What Does it Not Cover?

It’s important to be aware that there are certain things that are not covered under Statutory Liability Insurance. Certain Acts such as the Crimes Act 1961 and Land Transport Act 1998 are not covered by a Statutory Liability policy.  It also does not cover fines under the Health and Safety at Work Act 2015 as this is illegal to insure in New Zealand, however reparation payments may be covered.

For more information on Statutory Liability Insurance, please speak to your broker.



Conditions apply for each policy and the information expected from you for a policy to trigger. Coverage may differ based on specific clauses in individual policies. Please ask your broker to explain the additional benefits and exclusions pertaining to your policy.

The information provided is general advice only and does not take account of your personal circumstances or needs. Please refer to our financial services guide which contains details of our services and how we are remunerated.

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