The RMA Amendment Act has received royal assent — the cost of non-compliance for builders has increased again. After the adjustment of this legislation, builders will pay more for non-compliance.
As is well known, the construction industry is a high-risk industry in New Zealand. The ‘risk’ here not only refers to health and safety matters but also includes legal and compliance issues that may arise during project development and construction.
On 20 August 2025, the Resource Management (Consenting and Other System Changes) Amendment Act 2025 officially received Royal Assent and came into force. The amendment clearly prohibits insurance companies from covering fines arising from environmental offences. This policy adjustment means that builders will now have to bear significantly higher costs themselves when breaches occur.
Fines Can No Longer Be Insured, Making Non-Compliance More Costly
As an important step in New Zealand’s transition toward a completely new resource management system, the Resource Management (Consenting and Other System Changes) Amendment Act 2025 officially received Royal Assent and came into force on 20 August 2025.
The amendment significantly increases the penalty standards for environmental-related offences and breaches. The legislation allows for the highest level of penalties to be imposed for relevant offending, although in practice the actual fines imposed are usually much lower than the statutory maximums.
In most cases:
- For individuals, the maximum fine has increased from NZ$300,000 to NZ$1,000,000, while imprisonment has been reduced from 2 years to 18 months.
- For companies, the maximum fine has increased from NZ$600,000 to NZ$10,000,000.
Following this adjustment, Statutory Liability Insurance — previously regarded by many construction developers as a “lifeline” — will no longer be able to provide cover for these substantial fines.
This change is consistent with the rules introduced in 2016 prohibiting insurance coverage for health and safety related fines, marking another important step by the Government in strengthening compliance accountability.
Investigation Costs, Legal Proceedings and Large Compensation Claims May Still Be Covered
Although the fines themselves can no longer be paid by insurers, Statutory Liability Insurance can still provide substantial assistance to builders.
It can cover legal costs incurred during court proceedings, expert consultation fees, and court-ordered environmental remediation costs.
From practical experience, this type of insurance remains critically important. When facing legal proceedings, professional legal and technical support can significantly accelerate the resolution process, and insurance can fund these support costs.
With fines increasing substantially and no longer being recoverable under insurance, there may be more situations in the future where businesses are simply unable to afford the penalties imposed.
We have already seen situations in health and safety cases where accountants provide financial evidence to the Court, and similar circumstances may also begin to appear in environmental cases going forward.
Liability Insurance Remains a Strong Support for Builders
In addition to covering legal consultation costs related to Resource Management and Health & Safety prosecutions, Statutory Liability Insurance may currently still provide cover for fines related to the Building Act and the Fair-Trading Act.
Next, let us look at several cases to see how liability insurance can assist builders in practice.
Health & Safety Related
Failure to Follow Safety Procedures Resulted in Worker Suffering Serious Electric Shock
WorkSafe v CPA 2022 Ltd [2023] NZDC 25842
In this case, a scaffolder was dismantling scaffolding around a residential property when he unfortunately came into contact with overhead 33kV high-voltage power lines, suffering severe electrical injuries.
Investigations found that the builder involved had failed to establish effective procedures to collect, communicate, and comply with “Close Approach Consents” and the safety requirements of site service providers. The scaffolding dismantling work also failed to follow the relevant safety guidelines.
The Court set the starting point for the fine at NZ$550,000 (with a statutory maximum of NZ$1.5 million) and also required the builder to compensate the worker for physical injury and emotional harm, as well as pay legal costs.
In this type of health and safety case, Statutory Liability Insurance can often cover part of the legal costs and compensation for physical injury and emotional harm, with the latter often representing the greatest financial risk exposure.
Resource Management Related
Illegal Disposal of Construction Waste Resulted in Court-Ordered Land Restoration
In South Auckland, a company carried out land clearance and development activities without obtaining the required resource consent, resulting in damage to native wetlands and breaching the Resource Management Act 1991, particularly provisions relating to the protection of environmentally sensitive areas.
Investigations found that the developer had failed to comply with regional planning requirements and had not carried out the necessary environmental impact assessments.
Although retrospective consent applications were later made, the Court considered the conduct serious and environmentally irreversible.
Ultimately, the Court ordered penalties exceeding NZ$120,000.
Even though the company had purchased Statutory Liability Insurance, following last month’s policy adjustment, no insurer would cover the fine itself. However, related legal costs and expert consultation fees could still be covered.
Building Act Related
Illegal Disposal of Construction Waste Resulted in Court-Ordered Land Restoration
In a residential development project in Tauranga, engineers and their company were prosecuted for issuing PS4 (Producer Statement) documents that did not accurately reflect the actual circumstances, resulting in alleged breaches of Section 40 of the Building Act involving false representations regarding building compliance.
Although the High Court ultimately overturned the conviction, the Court of Appeal clearly stated that issuing inaccurate PS4 documents may constitute criminal liability, carrying fines of up to NZ$200,000, with additional daily fines potentially applying.
In this case, if the engineers and construction company held Statutory Liability Insurance, the policy may — depending on the wording — provide cover for legal defense costs, fines, and compensation payments.
Conclusion: Insurance Is a Risk Shield, Not a “Get Out of Jail Free” Card
Although Statutory Liability Insurance plays an important role in buffering risk within the construction industry and can reduce the financial burden on businesses when incidents occur, it is not a “universal protection umbrella”.
Once an incident occurs, businesses and responsible parties may still face a series of difficult issues, including legal proceedings, project shutdowns, and reputational damage.
Truly effective risk management cannot rely solely on insurance. It must begin at the source — strictly complying with regulations, implementing robust procedures, and ensuring every stage of a project remains compliant.
Disclaimer
The content of this article is provided for general informational purposes and industry commentary only, and does not constitute legal, insurance, or other professional advice of any kind. Individual projects and circumstances may differ, and readers should seek appropriate professional advice based on their specific situation before making any related decisions.
If you would like to further discuss relevant risks or specific project circumstances, please feel free to contact us at info@prestigeinsurance.co.nz or call 09-2755888.
