White Island tour operators could face a maximum fine of $1.5 million if found liable under health and safety laws but any prosecution is likely to be a year away, a legal expert says.
Yesterday WorkSafe New Zealand opened a health and safety investigation into the harm and loss of life caused by the eruption which took the lives of six people and has left 30 others injured.
• White Island volcano erupts in Bay of Plenty: 6 dead, 8 missing, 30 in hospital
• White Island eruption: The dead, the missing and the injured
• White Island eruption: Blow for body retrieval - volcanic tremor 'significantly increased'
• White Island eruption: Attempt to recover bodies today, families' agonising wait for news of missing
Graeme Christie, a specialist insurance lawyer at Bankside Chambers, said the White Island tour operators would be expected to have public liability cover and director liability cover.
But that would only cover the cost of reparations to those affected and legal costs if a case was taken against them.
"You can't get protection for fines anywhere," he said.
Christie said fines for prosecutions of other adventure tourism operators had been around $500,000 but he said in those cases the level of fine had been handed out when there was one death.
The maximum fine a company could face was $1.5m.
"It is subject to prosecution deciding there is a case to answer."
Christie said a million-dollar fine would not be out of kilter with the legislation given the number of deaths in this situation.
There had been previous cases of WorkSafe prosecutions of adventure tourism companies, including a death in Nelson from a dive charter.
While larger companies may be able to handle fines, he said often smaller companies were unable to pay, resulting in a company going under.
The Herald understands people who went on tours to White Island were asked to sign a waiver form.
But Christie said that waiver would not let the companies off any legal action taken under health and safety law.
"You can't contract out of the Health and Safety Act."
In New Zealand, Christie said, waivers had limited impact because ACC covered medical costs associated with incidents involving international tourists.
"It is really designed for people to sue in the US context, which doesn't arise here."
But any legal action is a long way off.
Christie said WorkSafe had up to 12 months to carry out an investigation and lodge a prosecution and typically they were not quick.
"In most instances they have taken the full 12 months."
Once a prosecution had been lodged it would then take time to get through the court process, he said.
Police originally said yesterday that they were undertaking a criminal investigation but then pulled back on that.
Christie said he believed the police had done that as they would need to work with WorkSafe to see if there was a case.
Prosecutions can be taken against a company and individuals but Christie said it was rare for legal action to be taken against individuals.
"At this stage we have no insight into what was said or done by individuals."
Any case undertaken by WorkSafe would go through the District Court first.
Christie said overseas tourists affected would be getting to grips with what rights they have under New Zealand law and could be upset at the limitations.
He said any fine that came as a result of legal action would go to the Government, while the reparations paid to victims of tourism misadventure were typically around $100,000 per victim.
"I think for the overseas families that will cause some grief and may well lead to them trying to bring other claims."
He said one way to get around the New Zealand limitations could be prosecution of the cruise company Royal Caribbean in the jurisdiction that the cruise ship originated from, the United States.
If that was the case it would play out in the US courts, Christie said.
"They will be looking for another angle, looking for deep pockets."
What victims and their families will get
ACC will cover all medical costs for international visitors affected and those who have lost a loved one can get a funeral grant of up to $6311.
There are also grants for the surviving family members with the deceased's partner able to get a one-off payment of $6766 and the dependents under the age of 18 able to get $3383 each.
Travel insurance may pick up other costs such as a relative coming to New Zealand to support an injured family member and repatriation of the deceased.
Some of the injured may be in hospital for some time and may also need support when they go home such as a specialised bed and ongoing rehabilitation.
Jo McCauley, chief customer officer for Southern Cross Travel Insurance, said customers impacted by the event would be covered under the company's policies as, despite White Island being an active volcano, their trip was through a tour operator.
"Our policies extend beyond medical and evacuation support to provide assistance with cancellation and changes to your journey, in addition to a level of personal accident cover in some policies."
A spokesperson for travel insurer IAG Australia said: "Our customers who have been affected will be covered under their travel insurance policy and when they're ready they should contact us for help in lodging their claim."
Christie said there was a risk some insurers could exclude the event as a high-risk or adventure tourism activity.
"The wording of the policy could be quite significant here."
Christie said anything that was considered to be dangerous tended to be excluded by travel insurers.
"Whether it falls into that category depends on the insurer."
Tim Grafton, chief executive of the Insurance Council of New Zealand, said as White Island was a known tourist destination he expected people to be covered by their travel insurance.
"As coverage will depend on the policy that is purchased, we advise people to contact their insurers directly. Our thoughts go out to the victims and their families affected by this tragic event."