Flood,
Earthquakes
and Fire
Claims
Don O’Halloran – Ombudsman, General Insurance, FOS
Introduction
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March 2010 floods in the Queensland areas of Roma,
Charleville and St George.
January 2011 floods in the Queensland areas of
Brisbane, Ipswich, Toowoomba, Lockyer Valley.
January 2011 floods throughout Victoria including
Wangaratta, Charlton, Echuca and Murray River areas.
Lessons from Roma.
Roma, Charleville, St George and
Brisbane
Roma township, Queensland
Background
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Unprecedented rain in the Roma area of Queensland on 1
and 2 March 2010.
11 different disputes came to FOS.
Queensland disputes likely to be in the 100’s.
5000+ rejected claims in Queensland.
The issues are likely to be similar:
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Flood or rainwater run off?;
Failure to clearly inform of the flood exclusion;
Misrepresentation;
More than one inundation of water;
Inundation of water from more than one source.
Macquarie Dictionary definition of
“flood”
Flood
// / (say flud)
noun 1. a great flowing or overflowing of water, especially over land not usually submerged.
2. any great outpouring or stream: a flood of words; a flood of tears; a flood of light; a flood of
lava.
3. the flowing in of the tide (opposed to ebb): *when there came a turn in the tide of the
affairs of Micawber, he took it at the flood, and it led on to fortune. –HENRY LAWSON, 1910.
–verb (t) 4. to overflow in or cover with a flood; fill to overflowing.
5. to cover, as with a flood.
6. to overwhelm with an abundance of something.
7. Australian Rules to put all one's players in (one area of the field, especially near the
opposition's goal) to assist in defence.
–verb (i) 8. to flow or pour in or as in a flood.
9. to rise in a flood; overflow.
…
The Insurance Council of
Australia’s three general categories
of flood definition
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Flash flooding/stormwater/rainfall run-off – inundation produced by high
intensity but short duration storms producing localised flooding conditions
(covered by the majority of insurance policies)
Riverine/inland flooding/flooding – inundation caused by watercourses or
catchments (artificial and natural) overflowing their banks due to long duration
rainfall over large catchment areas. Those insurers who offer this type of
flood cover generally use their own unique definition of the type of flood risk
Actions of the sea/sea level rise/storm surge – inundation caused by the
movement of seawater
The Insurance Council of Australia says that there are more than 20 different
definitions of the term “flood” in use within the Australian insurance industry.
Flood definition
This is one example of the 6 different definitions amongst the 11 claims made
in Roma. There are many more applicable to the Brisbane and other 2011
claims.
“Words with special meanings
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Flood
The inundation of normally dry land by water from any watercourse, lake,
canal, dam or reservoir. This policy does not insure flood.
Section 2: Cover for your Home & Contents – Accidental damage
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Specified events
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(q) storm, tempest, rainwater, wind, hail, tornado, cyclone or hurricane,
freeze or weight of snow
Standard definition of flood
(issued by the Federal Government as part of their consultation
process)
Flood means the covering of normally dry land by water that has
escaped or been released from the normal confines of:
(a)
Any lake, or any river, creek or other natural watercourse, whether or
not altered or modified; or
(b)
Any reservoir, canal, or dam.
It has to be remembered that even with a standard definition of “flood” the
question of whether an insurer will provide coverage for flood events will still
be a commercial decision for the insurer based on all relevant factors,
including the location of the insured site. The standard definition will also
not remove the need and obligation of the insured to carefully read and
understand the extent of any coverage they may have under the policy for
flood damage.
Proximate Cause and the
‘Wayne Tank Principle’
“A proximate cause is the real, effective or dominant cause”.
A quote from Lord Denning, Wayne Tank and Pump Co Ltd v. Employers
Liability Assurance Corporation Ltd [1974] QB 57
Where damage is caused by two or more proximate causes, where one is a
cause for which the policy of insurance provides coverage and one is a cause
which is excluded for coverage under the policy, the insured will not be
covered under the policy (Wayne Tank Principle).
The Wayne Tank principle may be fairly easy to understand but is much
harder to apply. In this regard note the three cases referred to in the March
2011 Insurance Law Bulletin – Elidale Pty Ltd v Nonpareil Pty Ltd, Eastern
Suburbs Leagues Club Ltd v Royal & Sun Alliance Insurance Ltd and Hams v
CGU Insurance.
Collection of Information
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Nothing beats an onsite inspection
Topography is critical
Onsite inspections may not be achievable in all
Queensland or Victorian cases
Collection of Information
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Eyewitness statements
Exact time of events such as inundation
More than one inundation?
– Time of each inundation?
Direction of water flow?
Colour and clarity of water?
Topography of individual site and surrounding area?
Height of premises off the ground?
Hydrology report
Macquarie definition of Hydrology
hydrology
/ / (say huy'droluhjee)
noun the science dealing with water on the land, or under the earth's
surface, its properties, laws, geographical distribution, etc. Also,
geohydrology.
–hydrologic / / (say huydruh'lojik), hydrological / / (say
huydruh'lojikuhl), adjective
–hydrologist, noun
Hydrologists
Collection of data:
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Rainfall leading up to event
Rainfall in feed areas
Recorded creek heights
Historical data
Topography of area
Eyewitness accounts
Flow of water
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Spoon drains
High points
Highways
Roads
Natural water courses
Housing and construction
Some examples of the topography
The view from “Hospital Hill” at Roma – rainwater run off is likely to be down the
hill
Some examples of the topography
The measurement point of the Bungil Creek – note the water must rise 7 metres from
the base of the creek to flow over the roadway at this point. The high point was
ultimately measured at over 8 meters.
Some examples of the topography
Spoon Drain – if water is flowing across the land, spoon drains will redirect some of
the water
Some examples of the topography
Long Drain – if water is flowing across the land, long drains will redirect some of the
water
Some examples of the topography
Natural water course that arguably helps cleanse what was otherwise muddy water
Some examples of the topography
Driveway at claimant’s home – note the significant rise from roadway to home. Such
a significant rise may present an argument against rain water run off being the
cause of the home flooding
Four different claims
Front of first residence – unsuccessful claim
Four different claims
Close up of first residence – note the height above ground – 300mm. Height speaks
against rain water runoff
Four different claims
Second residence – failure to advise there was no coverage for flood. Note the
application of Section 35 of the Insurance Contracts Act 1984
Four different claims
Second residence – close up – Raised by 670mm so unlikely to be rainwater run off
but claim was ultimately paid because of failure to advise
Four different claims
Third residence – raised at front but sunken entertainment area
Four different claims
Third residence – sunken entertainment area. Claim was paid for the damage that
occurred in this area of the property
Four different claims
Fourth residence – no site specific hydrology report. FSP had no details of height of
house from ground and applicant had photos showing time of water inundation
Four different claims
Fourth residence
Preliminary Findings
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11 claims in Roma
5000+ rejected claims in Queensland
Preliminary findings relate to specific geographical areas
but not individual sites
Non-binding
Opportunity to provide evidence
Efficiency and economy to be considered with fairness to
all
Conclusion
Each case must be considered on its merits in
accordance with the evidence presented and
applied to the particular provisions of the policy
relevant to that claim.
The principle lesson from Roma was that all cases
are different and nothing beats an on site visit.