SH47968

18 March 1999

The Chairperson and Members

Regulatory and Resource Management Committee

1. REASON FOR REPORT

   To report to the Committee a protocol for elected members on how to respond to approaches from citizens or enquiries regarding issues or potential or actual litigation against the Council.

2. BACKGROUND

   During a recent Councillor briefing session the issue of Councillor response to ratepayer approaches regarding potential or actual litigation against the Council was raised.

   The Council has a professional indemnity insurance policy with a private insurance company. This policy places obligations on the Council in respect of actual or potential litigation issues.

   Elected members may on occasion find themselves in a position where they are expected to advocate on behalf of a ratepayer or there is an expectation of them to resolve a particular matter.

   In these circumstances Councillors may find themselves in a compromising position and the protocol developed will provide a guideline that will enable Councillors to confidently take some action without prejudicing the Council's position with its insurers.

3. INSURANCE POLICY

For the purposes of policy, the member is defined as including staff and elected representatives. The responsibilities of the Council under its policy would extend to persons acting on behalf of the Council in the ordinary course of their duties including staff and elected members. The obligations under the insurance policy therefore extend to elected members.

The Council's insurance policy has several conditions attached to it that are germane to this report. These conditions are:

1. The Member shall as a condition precedent to their right to be indemnified under this Section of the Protection Wording give to the Fund as soon as practicable written notice of each of the following:

   (i) any occurrence of which they shall become aware during the subsistence hereof, which may give rise to a Claim against them;

   (ii) any receipt of notice, written or oral, from any person of any intention to make a Claim against them; or

   (iii) any Claim made against the Member.

2. The Member shall not admit any liability for or settle or make or promise any payment in respect of any Claim which may be the subject of indemnity hereunder or incur any costs or expenses in connection therewith without the written consent of the Fund except as specifically provided herein who if they so wish shall be entitled to take over and conduct in the name of the Member the defence and/or settlement of any such Claim.

3. At the Member's own expense, the Member shall provide Fund, or legal counsel appointed by the Fund on the Member's behalf, with all information, including records and statements, and any other information, and attend all necessary conferences and court appearances which the Fund may require in the course of investigating or defending any Claim. The Member shall also co-operate with the Fund in the defence of any litigation against the Member of in the prosecution of any recovery actions instigated by the Fund. This is a condition precedent to the Member's right to indemnity for any Claim.

4. Nevertheless the Member shall not be required to contest any legal proceedings unless a Queen's Counsel (to be mutually agreed upon by the Member and the Fund) shall advise such proceedings shall be contested.

If the Member and the Fund are unable to mutually agree upon a Queen's Counsel, then a Queen's Counsel shall be appointed by the president of the New Zealand Law Society.

4. DISCUSSION

   It is an implied term of every contract of insurance that both the insurer and the insured must act toward each other with the utmost good faith at all times.

   The Council is obliged to notify the insurer when either:

   - There is an occurrence which may give rise to a claim.

   - There is notice whether written or oral of an intention to make a claim.

   - Any claim is made against the Council.

   It is therefore good practice to give early notification to the insurer. Nevertheless, the appropriate discharge of the Council's duties in response to clients should not be unduly compromised. If a complaint is made to Council, then in the absence of the assertion of a claim, or notification of a claim, the Council should not be so transfixed by the possibility of being sued that it does nothing to assist the person making the complaint. This principle applies equally when approaches are made to elected members.

   As previously mentioned however, there is an obligation on the Council to give early notification of any occurrence which may give rise to a claim. A Councillor should notify the City Manager when he or she is given a notice of intention by a citizen to make a claim against the Council, or a Councillor is made aware of the presence of facts which directly or indirectly involve the assertion of a claim against the Council.

   In the course of dealing with any claim or potential claim the Council is not permitted under the conditions of indemnity to admit liability or to settle a claim. Councillors, when engaging in conversation where a claim has been made or threatened, must be mindful that they should not give any undertaking, promise or opinion that may be construed as an admission of liability, nor make any offer to settle or do any act that may prejudice in any way the insurers later defence of the claim in litigation.

   An insurer is entitled by virtue of its position to handle any claim which it accepts in the manner in which it considers best.

5. ADVICE TO COUNCILLORS OF NEW CLAIMS

   There is a protocol for reporting a potential liability claim to elected members that has been recommended by the City Solicitor. This process is as follows.

   - The Council notifies its insurers of claim.

   - The City Manager notifies elected members of early notification by memo, attaching the Council's notification letter to insurer.

   - The City Manager arranges, where appropriate, a briefing to Councillors by Council's solicitors.

   The information imparted during such a briefing will be subject to client/solicitor privilege.

6. SUGGESTED PROTOCOL

   As previously indicated the protocols proposed in this report are not intended to discourage or prevent Councillors responding to citizen approaches but rather provide guidelines that will avoid members being compromised. There follows an indicative list of should and should not dos.

   How Should a Councillor Respond?

   - Listen to concerns.

   - Seek clarification.

   - Refer person to appropriate agency, eg. City Manager, Solicitor, Consultants, Dispute Tribunal, etc.

   - Relay information to City Manager or appropriate manager of the Council.

   - Advocate on behalf in a limited capacity to the Council.

   - Notify the City Manager where notice of intention to make a claim against the Council is given, or there are facts present which involve the assertion of action against the Council.

   What Shouldn't a Councillor do?

   - Admit liability

   - Settle or make or promise any payment

   - Do anything that may prejudice the insurers defence of litigation.

   - Disclose any information that the Councillor has received by way of confidential briefings on the litigation matter.

7. IMPLICATIONS

   7.1 Community

   Citizens and ratepayers have an expectation that Councillors can be approached with matters of concern to them. Having protocols that provide a guideline to Councillors on how to respond to approaches on matters of litigation will provide Councillors with confidence in dealing with such approaches.

   7.2 Financial

   The Council is confronted with a number of litigation matters each year and relies on the integrity of its contract with its insurers to defend these matters. Ensuring that Councillors do not compromise the insurance contract will protect the Council's financial exposure to claim.

   7.3 Communication

   There are no communication implications.

8. RECOMMENDATIONS

8.1 That the protocol contained in Section 6 of this report be adopted.