The Bay of Plenty Regional Council has estimated it will cost up to $7 million to litigate claims brought against it in regard to the Edgecumbe flood eight years ago.
Regional council chairman Doug Leeder said the cases raised issues across the local government sector in terms with how they deal with natural disasters.
“The sad reality is that there is only one group of people that will end up paying for that, and that is the community by way of ratepayers.”
On April 6, 2017, Edgecumbe was flooded due to the breach of a Rangitaiki River floodwall at College Road.
In May 2023, the regional council was served with two legal claims in relation to the flood, just a month before the statute of limitations expired.
Shine Lawyers has since filed proceedings in the High Court in Rotorua on behalf of four Edgecumbe residents and one business, seeking damages of just under $4 million plus costs and interest on the damages.
Insurance company IAG, which also issued insurance under the brands AMI, State, NZI, NAC and Lumley, was also suing the regional council and announced in April 2024 that it had been joined by insurers QBE, Vero, Tower and AA Insurance. IAG said it was also suing Whakatāne District Council.
In a report to the regional council in December, staff described the action as “the first proceeding of this scale against a local authority”.
“Based on information available, council currently considers it is in the best interests of the community to defend these claims.”
External costs of the defence, should the matter proceed to a full trial, were expected to be as much as $7 million, which exceeded the council’s insurance limit for legal costs of $2 million.
The council voted to set aside $5 million through the Regional Fund Reserve for these additional expenses and delegated authority to the chief executive to approve expenditure on costs relating to representative class action litigation.
Leeder told Local Democracy Reporting that regional councils were responsible for the maintenance and upkeep of flood defences but it was not realistic to be able to defend against every adverse event.
“It does raise issues across the sector for regional councils in terms of their approach to dealing with these issues,” he said.
“What is the future position of insurers going to be where there are adverse events that cause damage to property?
“Hawke’s Bay, West Coast, Canterbury, or any regional council that’s had a significant event that’s caused damage to people’s insured property, are going to be looking at whether they are next in term of insurers filing claims within the statute of limitations.”
LDR is local body journalism co-funded by RNZ and NZ On Air.
