Bills

Water Industry (Compensation for Loss or Damage) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 22 June 2016.)

The Hon. J.M.A. LENSINK (16:55): I rise to make some remarks in relation to this private member's bill which has been promulgated by the Hon. Mr Robert Brokenshire. I understand this bill was prompted by the appalling spectacle of water leaks that we have had in this state this year. My colleague the member for Unley, Mr David Pisoni, has attended many of the water leaks to meet with local residents and to talk to the media about our plans for what we would do if we were in government in relation to this issue and the complete absence of the Minister for Water. This has led to The Advertiser coming up with a corflute which appears regularly on its pages as an indication of the minister's absence—not only his absence physically but his absence in this policy space whatsoever.

I think it was the situation at Paradise which was the most appalling. I understand the minister's office was in touch with members of the media and there was some discussion about whether he would attend. One may only guess as to whether he made the decision to attend or not based on what they said, but he certainly does not have oodles of compassion for people whose houses have been flooded by an error of his agency by offering them some sort of comfort, as one might hope for. At least he could say, 'I am really sorry about this. We will do everything that we can to rectify the situation.' We were reminded of Clovelly Park earlier today by the Hon. Mr Lucas. Indeed, I think we saw a similar situation there with this particular minister. It is strange that he seems to be a Labor man, but he does not really care too much about people.

However, that distracts from the matter at hand, which is a piece of legislation that has been drafted to address the situation where people who are affected by burst water mains are seeking some sort of compensation. I think it is a reflection on the current government that a number of people are having difficulty. From what I understand from a radio transcript I read maybe four weeks ago or certainly last month, some of the people of Paradise were still not able to live in their homes and had not received an adequate response from the government.

I think this particular piece of legislation is well intentioned, but we are not convinced that it is going to rectify the situation, and let me explain why. Parliaments need to be very, very careful about unintended consequences of legislation that are drafted with good intent. Our concerns are that this legislation, if it comes to pass, may discourage the taking out of insurance by individuals, which I think is always undesirable.

People do need to try to cover themselves with home and contents insurance. I think that is a fairly basic matter and, if some individuals are discouraged from taking out insurance, that just places the burden on everybody else. Certainly, we on this side of the chamber believe that people should try to be self-sufficient and people should not be discouraged from taking responsibility for their own property by not taking out insurance.

I think it also has great potential to create legal ambiguity regarding liability for damage. It shifts, and I think it would create a precedent in South Australia where we would have a situation where there was a new entity or new piece of legislation that would provide some sort of recompense which is different from other states, and I think that is also not desirable. It also may encourage insurers to drop the coverage of damage from leaks and bursts from their policies in South Australia, and I think it is also quite undesirable for that situation to occur.

As we know, many consumers do not read the fine print in their insurance policies. Lots of policies run to many pages and can be in small print these days. If that were to be the situation, then I think we may well find ourselves in quite an invidious position in South Australia and at a disadvantage to other states.

We sought feedback from a range of industry bodies, and I think I am accurate in saying that I do not think they had been contacted by the mover of this bill, which I think is naughty, if I can put it that way. We always try to seek to do due diligence, so the Water Industry Alliance, the Master Plumbers Association of South Australia and the Insurance Council of Australia were those we thought, at the very least, were the relevant stakeholders who may have a view.

The advice that we received was informal, so I will not name which association it came from, but their concern was that this may well have an unintended consequence on consumers. I would urge the mover of this bill that in future he try to ensure that he formally contacts the relevant stakeholders and provide the feedback to this chamber that those organisations provide to him because I think it is a fairly basic thing to have to do.

I am quite happy to do it. I think it is just a question of due diligence and everyone ought to do it. In fact, it is one of the things we often find the government has not done. With all their resources that nobody else in the parliament has, they often do not consult adequately. I think it is a very important part of the process to make sure that we are not causing unintended consequences and, therefore, further hardship to the people of South Australia. With those comments, as I have indicated, we will not be supporting this bill.

The Hon. G.E. GAGO (17:02): On behalf of the South Australian government, I rise to oppose the private member's bill introduced by the Hon. Robert Brokenshire proposing to amend the Water Industry Act 2012. The bill proposes to impose a legal liability on all water bodies such as SA Water when a person suffers damage or loss as a result of a water main burst or leak. We oppose this bill, not because the state government has a lack of regard for the damage and distress caused by burst mains, on the contrary, we already have robust policies in place to deal with those issues and welcome feedback about how we can do better.

No, we oppose this bill because it is unnecessary and based on false assumptions. This bill plays politics by taking advantage of the recent spike in media coverage regarding leaks. Both the media coverage and this bill refuse to acknowledge that SA Water already has a well-established claims management process for people whose properties are impacted by bursts and leaks. SA Water's current claims management process treats each case on its merits to minimise the financial impact on affected customers.

The immediate response involves clean-up of the property following water damage, both indoors and externally, such as vacuuming and mopping out water, and pressure cleaning external hard areas. If the premises are subject to a sewer overflow, clean-up is more extensive and may involve extracting all sludge and fluid, washing and sanitising affected areas, and fumigating if required. At the same time, a number of steps are undertaken to address the needs and claims of affected residents, including:

offering alternate or cask water if the water supply is interrupted;

offering to refund temporary accommodation if the residence is flooded/damaged, making the house unfit for habitation;

providing guidance about contacting their insurer to notify them of the incident;

offering to reimburse any insurance excess payment required following settlement of an insurance claim;

negotiating with people affected who are uninsured and paying reasonable costs of damage or loss; and

considering payment of out-of-pocket expenses.

In addition, in March this year SA Water established a dedicated customer response team that is available on a 24/7 basis to assist people affected by significant water main bursts and sewer overflows. SA Water also has a standard customer contract, which has been endorsed by the independent economic regulator ESCOSA. It includes general obligations relating to SA Water's infrastructure and, in the case of unplanned interruptions, requires SA Water to:

use its best endeavours to ensure damage or inconvenience to a customer is minimised; and

compensate customers for any loss, damage or injury occurring at the supply address as a result of a burst, leak, blockage or spill occurring within SA Water's network to the extent caused by SA Water's negligence.

It is important to note that SA Water's claims management process is comparable to the schemes offered by the major water companies interstate, and the process appears to be working well. SA Water has no record of complaints about the level of compensation paid or any other aspect of the claims management process, and has not been involved in any litigation concerning the reasonableness or otherwise of the process.

The other problem this bill raises is that it obliges a water body to compensate irrespective of fault. Not only does no other jurisdiction in Australia have such a mandatory compensation scheme, it also has the potential to impose very substantial costs on all water industry entities, including councils, several private companies and SA Water. I wonder if the Hon. Robert Brokenshire consulted with councils about this bill—I doubt it.

There are also a number of unintended consequences that could arise from this bill that should give us pause. For example, the imposition of a liability without negligence is likely to set a precedent for many utility providers, such as gas, electricity and telecommunications providers, as well as other institutions. The resulting economic cost certainly has not been assessed—not that the Hon. Robert Brokenshire has provided, at least—but is likely to be beyond the state's capacity to pay.

In addition, the bill would also make water industry entities responsible for damage caused by on-property infrastructure. In simple terms, this could impose obligations where internal or on-property pipework fails or does not meet minimum plumbing standards, as determined by the national Building Construction Code (Plumbing Standard).

Currently, SA Water's responsibility for its infrastructure has been accepted to end at the meter on the customer's property. The bill's extended scope of responsibility would transfer the responsibility of a landowner for its infrastructure to the water industry entity. This bill, if passed, could also create a disincentive for a person whose property is damaged to claim on insurance. This in turn may also impact on the insurance industry's approach to coverage; for example, the industry may choose to no longer include this type of flood damage in its building insurance products.

The bill's provision is likely to be contentious, and may result in many cases resorting to litigation between water industry entities and insurance companies, adding unnecessary costs and delays in settlement of claims. By requiring a water industry entity to compensate for all damage and loss, the bill effectively makes the water body a de facto insurer. This includes having to assess the damage and the claim, forcing water industry entities to enter an industry in which they have no particular skills, and imposes costs which drive up prices.

The Hon. Mr Brokenshire has alleged his advice is that if SA Water does damage to other agencies, such as DPTI or any other government agency, SA Water has to fully compensate the other agencies for all the costs of repairing it back to its original state. This is not strictly true. Where SA Water unwittingly damages another utility's infrastructure, pipes, cables, etc., in the normal course of carrying out its activities or works, SA Water will fund the cost of repairing the damage (for example, reinstating a road that has been dug up to repair a pipe).

SA Water may dispute the claim; for example, if SA Water damages an unknown cable which is not registered on Dial Before You Dig or not laid to a particular standard. Where damage occurs to another utility's land (for example, a sewer overflow onto council land) SA Water will clean up the spill and the council will need to deal with any associated damage through its insurer in the same way as an individual property owner in the same circumstances.

There also remains a number of unanswered questions. For example, what consultation has occurred or is planned with people and groups, including within government, who may have an interest in this proposal? There is not much evidence of very much consultation, if any. What are the impacts and risks associated with this proposal and how will they be managed? Considering all these points, I feel very strongly that this bill should not proceed and honourable members should not support it.

The Hon. R.L. BROKENSHIRE (17:11): I will sum up and I thank honourable members for their contributions. First and foremost, I would say that I did not go and speak to the Master Plumbers Association on this one; I spoke to and had representation from the people who were actually affected by SA Water infrastructure causing damage to their properties. It is one thing to run around and get near the cardboard cut-out, jump up and down and demand that things are fixed so that we do not have any more bursts; it is another thing to represent constituents and get some legislation tightened to ensure that these people do not have to go through the trauma that they are going through.

There are people still going through trauma and who are still financially disadvantaged months and months after their properties have been damaged. So, no, on this occasion I consulted with people who were directly affected. I also listened to the massive amount of talkback radio and general media on this matter. There is no doubt that the absolute majority of people believe there should be due and proper compensation, and have lost trust in the government.

The government says that they now have a customer response team. Do you know when that customer response team was set up? In March or April this year. Do you know why it was set up? Because the government was getting belted for the lack of concern and the lack of response to these people who are affected, and the arrogance of SA Water. It was set up to try to appease some of the media that was out there attacking the government, and rightly so.

Family First will often undertake broad consultation. On this occasion, just like the government and the opposition—there have been lots of examples of the government bringing in quite interesting pieces of legislation and us being told that the government themselves have not consulted anyone outside of their own departments, so you look at it on its merits.

I refute the technical debate the government put up when it talked about not compensating other government departments with words like 'unwittingly', etc. I asked the minister, 'Were they compensated or not if a main burst or did the other department have to pick it up?' The reality is the other department will not pick it up and SA Water will ensure that everything, at their expense, is put back to where it was before the burst.

This is about burst water mains outside of properties, and the legislation does not interfere—there are no unintended consequences once you go to the privately-owned side of the water meter and there are no changes there whatsoever; this is external to the property. People who can afford to—and I encourage everyone to make it a priority to have their own insurance—are still always going to have the insurance, and they need the insurance.

Most of the time, people claim house and contents insurance for claims other than flooding through a burst water main. It may be that the stormwater pipe of some neighbour next door fails and floods their property or it may be an internal pipe on that property itself, but there are also claims when you have trees fall on roofs of houses and when other things happen. The reality is that people will not give up their insurance.

The legislation clearly addresses double dipping, and ensures that insurance companies will not be let off, which was the government's main concern. At the end of the day, I still believe that this is the right and proper legislation to look after these people. Both the major parties have a different view, and I would suggest that the reality with government and opposition (alternative government) is that they are looking at the fact that, if this legislation was to be passed, it might affect the bottom line profit from Treasury's cash cow, SA Water, and Treasury would not like that.

The opposition—and if this is the case, rightly so—is concerned that if they get the keys to the State Administrative Centre on the third Saturday of March 2018, they are going to see one hell of a mess from Treasury when the books are really opened up; therefore, they are being very cautious on any legislation that may pull away further money.

From my viewpoint, this is about looking after people who go about their business and come home from work, shopping or wherever they have been, to discover that a main has burst. All of a sudden, they cannot live in their home, and it is a hell of a job for them to try to get their lives back together with their family. At the moment we are dealing with constituents, and the builders have told them that it could be five years before they know the absolute extent of the damage by SA Water. It is one thing to run around with a few plastic bottles full of water and give them out, but it is another thing to properly compensate them.

I do not apologise for introducing this bill. I am doing some consultation with the Housing Industry Association at the moment, because they are a peak body I should consult with on a particular matter, but this is totally focused on the people who are affected and, frankly, insurance companies will not be getting let off the hook. I do not know what the master plumbers have to do with it anyway, and from a council viewpoint there is already legislation there that deals with indirect pipelines, with purple pipes, with common effluent schemes and all those sorts of things.

I hear what the two majors are saying—I do not agree with them, but at least I have put up this bill on behalf of constituents and I will continue to fight for a fair go when people, through no fault of their own, are affected by burst water mains through SA Water.

Second reading negatived.