implications of the Consumer Guarantees Act
Health providers and the implications of the Consumer Guarantees Act
March 1995 Women's Health Watch
The Consumer Guarantees Act 1993 came into force on 1 April 1994. The Act has far reaching implications for suppliers of services, including health providers, as outlined in this article by Yictoria Hallum.
The Consumer Guarantees Act ('the Act') strengthens the position of consumers in our deregulated economy. It is intended to overcome the inaccessibility of existing statutes and the common law by setting out clear and meaningful standards for the quality of goods and services provided to consumers and to provide effective remedies for consumers when these standards are not complied with.
The Act applies to supply of goods and services 'in trade' to a 'consumer.' A consumer is a person who acquires from a supplier goods or services of a kind ordinarily acquired for personal, domestic or household use or consumption. The supply must be made in the course of any trade, business, industry, profession or occupation. The Act sets out a number of statutory guarantees which suppliers generally - cannot contract out of and which apply to all such transactions.
As health care and treatment are inherently services provided for personal use, it is clear that the guarantees and the remedies provided by the Act will apply to health providers.
As a result the Act raises a host of possible scenarios for health providers. These are at present all untested and it will be some time before we have any answers.
Meanwhile there are some worthwhile questions to be asked, particularly in a climate where health consumers are becoming increasingly litigious. For instance:
- Could CHEs be held accountable for their waiting lists?
- Might a disgruntled patient be able to go elsewhere for treatment and send the bill to the CHE?
- Could private specialists and doctors have their bills revised and reduced if the price is not reasonable?
- Might patients who are unhappy about the result of treatment or an operation be able to sue for compensation?
- Could patients sue for the consequences of institutional and organisational failure?
Two factors which must be taken into account when considering the application of the Act to the health sector are the primacy of the accident compensation scheme in New Zealand and the application of the guarantees to publicly funded health services.
Firstly, it is likely that breaches of the guarantees by providers of health services could lead to personal injury for consumers. This brings the accident compensation scheme and the statutory bar on suing for personal injury into play.
When there is coverage for personal injury under the Accident Rehabilitation Compensation Insurance Act it is not possible to take other actions for damages (other than exemplary or punitive damages).
Accordingly, when personal injury is involved, the opportunity to seek damages under the Consumer Guarantees Act only arises if there is no cover under the Accident 9 Rehabilitation Compensation Insurance Act.
However it is becoming well known that there are many gaps in the current accident compensation scheme. Many of these gaps are untested but it is clear that there are increasing -opportunities for damages claims in areas previously considered to be the sole province of the Accident Rehabilitation Compensation Insurance Act. Examples are:
- personal injury at the hands of a registered health professional which falls outside the definition of medical misadventure
- personal injury caused by non-registered health professionals
- clerical or administrative errors and organisational failure at an institutional level
- mental shock or mental injury situations
There are also remedies for consumers in the Consumer Guarantees Act which do not involve an action for damages and which should be available to health consumers regardless of accident compensation cover.
These remedies are the right to have the failure remedied and the right to have the failure remedied elsewhere at the cost of the original supplier.
Publicly funded services
The application of the guarantees to publicly funded health services is not clear particularly in relation to the 'fitness for purpose' guarantees (see under 'Guarantees and remedies' below)
The fitness for purpose guarantee requires that the purpose of the service be made known to the supplier before or at the time the contract is made.
In the situation of publicly funded health care the RHA/provider/consumer split means that there may be no direct contractual link between the provider and the consumer, in which case the contract of supply between the RHA and the provider may be considered sufficient.
It would seem very inequitable and contrary to the policy of the Act if private and part-paying health consumers do receive the protection of the guarantees while those in the public system do not. The conservative and prudent approach would be to assume the Act will apply to public health providers, and act accordingly.
To ensure compliance with the Act health providers need to put compliance programmes in place. A thorough compliance audit would include deciding which services are covered by the Act and assessing which customers are consumers for the purposes of the Act.
Health providers concerned with risk management and prevention should ensure that:
- they are not attempting to contract out of the Act where this is not permitted (contracting out is only permitted for business customers - any other attempts whether inadvertent or not, will be in breach of the Fair Trading Act and could attract a fine of up to $100,000)
- procedures are implemented that incorporate the rights of health consumers under the Act to have complaints dealt with and failures remedied within a reasonable time, etc.
- charges are agreed before service is provided.
- procedures are implemented s that no registered health professionals allow their practising certificates to lapse.
- liability insurance implication are considered.
Guarantees and remedies
The statutory guarantees for services as set out in the Consumer Guarantees Act are:
Reasonable care and skill. When services are supplied to a consumer there is a guarantee that the service will be carried out with reasonable care and skill.
Fitness for purpose The services (and any product resulting from the service) must be reasonably fit for any particular purpose made known to the supplier prior to, or at the time the contract of supply is made, provided the consumer relies on the supplier's skill and judgment and it is reasonable for the consumer to do so.
Time of completion. When the time of completion is not fixed, the service must be completed in a reasonable time.
Price. When the price has not been agreed, the consumer only has to pay a reasonable price for the service.
When the statutory guarantees are breached, the consumer has a number of remedies under the Act:
- If the failure is capable of remedy, the consumer can require the supplier to remedy the failure within a reasonable time.
- If the failure is not remedied, the consumer can have the problem fixed elsewhere at the supplier's cost or can cancel the contract or. seek compensation.
- If the failure cannot be remedied or is of "substantial character," the consumer may immediately cancel the contract and seek compensation.
- Compensation is available in the case of reasonable foreseeable consequential loss or damage.
- However, the supplier will not be held liable if another person is responsible for the failure or if the failure is caused by something beyond human control.
Victoria Hallum BA LLB
Victoria was a staff solicitor working within the litigation team at Buddle Findlay, a Wellington law firm.
This article was from their Health Letter 3, September 1994, and reprinted with their permission.