Fire Service to appeal over levy schemes

The Fire Service is to appeal against the High Court decision late last year which ruled as legal the schemes designed by insurance brokers to help large corporates reduce their fire levies.

The Sunday Star-Times broke the story of the legal battle over the schemes, which allow large property-owning businesses to structure their insurance to dramatically slash their fire levy in a way homeowners cannot.

The Fire Service says if such schemes are allowed, then mum and dad homeowners will have to foot more of the bill for the vital emergency service.

"The advice we have is there are still some legal issues which are worth exploring further and we support that because we are trying to manage the levy base for the whole of New Zealand, not just a sector within New Zealand which is seeking to arrange their insurances to minimise their contribution," Fire Service national commander Paul Baxter said.

The test case involves the insurance arrangements of a number of ports, including the Auckland Council-owned Ports of Auckland, which took out insurance provided by insurer Vero, but organised by insurance brokers, which enabled the ports to each cut the levies they paid the Fire Service.

Baxter said the service did not believe Parliament had intended for large corporates to be able to arrange their insurances to minimise the levies they pay and make others pay more.

"If these kinds of schemes are upheld as lawful, it would have millions of dollars of impact on the levy which would ultimately have to be paid by somebody else," Baxter said. "It is not right for companies to be trying to get out of contributing their fair share."

Ports have traditionally been quite heavy users of fire services, Baxter said, describing their use of the arrangement as "disappointing". He said the Fire Service had better uses for funds than spending it on fighting to shut down insurance sector-devised schemes to reduce the levies businesses pay.

The legal fight, which was actually brought by the Insurance Brokers' Association (Ibanz), is not the only way in which the fire levy minimisation schemes may be shut down. The Government could choose to step in and legislate.

The Fire Service is awaiting the publication of a ministerial review of Fire Service funding, said Baxter. This has been concluded but not yet released.

Baxter said the service had argued for continuing to collect funding as a levy on insurance, but had called on the Government to update legislation to close perceived loopholes that were being exploited.

"What we are saying to the Government is tidy up the legislation that makes it fair for everyone," Baxter said.

Changing the law could be a slow process and the High Court ruling could open the floodgate for brokers to help more and more businesses reduce their fire levies, Baxter said.

Because of that, it was likely the appeal would continue even if the Government pledged to stamp out the levy minimisation schemes.

There appear to be two versions of the schemes in use.

The first involves a broker grouping a number of buildings together under one fire insurance policy on the assumption that it is extremely unlikely more than one of them will burn down in any insurance year.

The other scheme involves insuring a building for an artificially low "indemnity" value, the value on which the Fire Service levy is calculated.

Sunday Star Times