The recent catastrophic flooding in Queensland and New South Wales has had a devastating impact on both people and property over a huge portion of Australia. If you’ve been impacted by such flooding, insurers will play a pivotal role in getting you back on your feet. Insurance companies may, in natural disasters such as flooding, delay, underpay or deny valid claims made by affected individuals and businesses. It is, therefore, essential that the correct steps are taken in the moments following such an event to reduce the risk either no or adverse action being taken by insurers.
- What to do when a potential Insured Event Occurs
As has been seen, the effects of floods can be devastating and has caused much destruction and extensive damage to homes and business assets. If you’ve been impacted, you should:
- see what events your policy covers. This can be found in your policy document;
- contact your insurer and/or insurance broker as soon as reasonably practicable, even if you are unaware of the extent of the damage. Doing so will speed up your claim and allow insurers to dispatch assessors to evaluate the damage;
- when it is safe to return to the affected area, take photos of all the damage yourself before you move objects or clean anything up. Don’t remove or replace damaged items until a full assessment has been conducted by the insurer and obtain an independent report/evidence that will support your claim;
- document (write down) any damage that you consider is a result of the flood or natural disaster; and
- keep all records of the above including phone calls or emails to the insurer and when the calls were conducted. Receipts should also be maintained where there any emergency work was conducted.
- Understanding why a claim may be denied
There are a number of grounds upon which insurers may attempt to deny or reject claims for flood damage. These include:
- damage not being caused by the disaster;
- failure to disclose prior insurance claims, criminal offences, existing damage, etc;
- operation of a condition or exclusion clause within the policy; and
- pre-existing defect in the property.
It is important to note that you cannot insure against damage which has already taken place. It is therefore important that you take out and maintain an insurance policy covering damage arising from floods and other natural disasters. A policy can be refused where the insured person has caused a loss by allowing it to happen. It is also important that you stay up to date with your insurance premium payments as insurers can, subject to their arrears conditions, reject flood claims where premiums are overdue.
- Policy flood Exclusion
Some policies will contain an exclusion clause in relation to flooding, and insurers will rely on this exclusion clause to reject a claim. In instances where the insurer has applied this exclusion clause and rejected your claim, there may still be grounds for recovery. For example, if rainwater entered your house or business at the same time, you may still be entitled to a claim (although the extent of damage covered by the insurance will likely differ).
An example of the application of flood exclusions can be found in the case of Wiesac Pty Ltd v Insurance Australia Ltd (No 2)[1]. In that case:
- The Second Plaintiff suffered damage resulting from the 2011 floods in Brisbane;
- The Second Plaintiff, the operator of a law firm, rented offices from the First Plaintiff;
- although the flood water did not directly reach the building, the Plaintiffs suffered damage as a result of water entering the basement of the building;
- There was evidently an exclusion from damage resulting from a flood in the policy and the question was whether the policy responded to the water damage in the basement;
- the Court:
- accepted that the water that caused the damage was derived from multiple sources, however, it primarily derived from river water;
- applied the ‘Wayne Tank Principle’[2] which is said to be that, where there are two proximate or substantial causes of the one loss and only one falls within an exclusion clause, the insurer may rely upon the exclusion and avoid liability;
- as a consequence (in part) of the application of the Wayne Tank Principle, found in favour of the insurer.
Good quality independent expert evidence and the specific wording on each independent policy will play a pivotal role in determining the outcome of a claim where the application of a flood exclusion is in dispute. It is, therefore, essential that even where a flood exclusion may apply, a claim is submitted anyway. This claim should be submitted without delay and policy holders should ensure that they take all necessary and appropriate steps to mitigate their losses.
- What you can do if an Insurer rejects your claim
If an insurer rejects your claim, you can apply for an internal review and internal dispute resolution for a claim. If a matter is not resolved, a complaint can be made to the Australian Financial Complaints Authority and, if not resolved at that stage, proceedings can be commenced against the insurer.
Salerno Law is a leading firm in providing strategic, high-end and quality legal advice to individuals as well as Australian and international corporate clients on complicated insurance and litigation matters. We regularly represent domestic and international insurers, intermediaries and underwriters in addition to policyholders (individuals and businesses) throughout all stages of litigation and dispute resolution.
If you require any advice or assistance in the claims process, please feel free to get in touch with one of our specialist insurance lawyers.
[1] [2018] QSC 171.
[2] Wayne Tank and Pump Co Ltd v Employers Liability Insurance Corporation Limited [1974] 1 QB 57.
By Matt Krog