The Bay of Plenty Regional Council is preparing for legal expenses of up to $7 million as it defends claims stemming from the 2017 Edgecumbe flood, according to council documents.
The flooding was caused by a breach in the Rangitaiki River floodwall near College Road, inundating much of the township and prompting widespread property damage.
Doug Leeder, chair of the regional council, said the case highlights significant challenges for local governments in responding to 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,” he said, as reported by RNZ.
In May 2023, just before the statute of limitations expired, the council was served with two legal claims related to the event. One lawsuit, filed by Shine Lawyers on behalf of four Edgecumbe residents and one business, seeks almost $4 million in damages, as well as additional costs and interest.
IAG announced it is joined by other insurers, including QBE, Vero, Tower, and AA Insurance, in its claims. In addition, the insurance giant stated it has also filed legal action against the Whakatāne District Council.
A December report to the council described the lawsuit as an unprecedented legal challenge for a local authority. It noted that the estimated legal costs of defending the case exceed the council’s $2 million insurance coverage for litigation expenses.
To bridge the gap, the council has approved a $5 million allocation from its Regional Fund Reserve to cover legal costs. Authority to approve expenditures related to the litigation was also delegated to the council’s chief executive.
Leeder underscored the difficulty councils face in maintaining flood defence systems capable of withstanding extreme weather events.
“It does raise issues across the sector for regional councils in terms of their approach to dealing with these issues,” he said.
He also raised concerns about the broader implications for regional councils across the country, particularly in areas prone to natural disasters such as Hawke’s Bay, Canterbury, and the West Coast.
“What is the future position of insurers going to be where there are adverse events that cause damage to property,” Leeder said, claiming that any regional council that has had a significant event will ask whether they are next in terms of insurers filing claims within the statute of limitations.
The Edgecumbe litigation comes as policymakers and industry leaders call for a more coordinated national approach to flood management in New Zealand, with climate risks continuing to intensify.
Patrick Walsh, a US-based environmental economist, is advocating for a unified strategy to improve how resources are allocated to manage flood risks.
He spotlighted that flooding remains New Zealand’s most frequent and economically damaging natural disaster.
“In early 2023, the country experienced the worst flooding in its history, with billions of dollars in estimated damages and over 30,000 insurance claims,” Walsh said.
