NAT: Not covered for Flood? Here are some things you need to know

This article is about what you can do if your strata building has no flood insurance.

With flooding impacting various parts of South East Queensland & New South Wales, we thought we would outline considerations and advice for buildings impacted that do not have flood cover.

Safety is Paramount

In a major catastrophe event, insurance is the last thing that gets resolved. Safety of those that reside inside lots is the number one concern and owners should take reasonable steps to maintain their duty of care to others. You should follow the warnings provided by local authorities.

What is Flood?

If your policy excludes flood, it will say so. Generally, the definition of flood is the covering of normally dry land with water released or that has escaped from the normal confines of any watercourse, river, lake, creek, reservoir, canal or dam (please check your policy wording for the exact definition).

The flood exclusion can often be mistaken for other water damage claims (which are not excluded) including, build-up of water from severe down pour (localised flooding), burst pipes, roof leaks etc. (provided such water does not come from the normal confines of any watercourse, river, lake, creek, reservoir, canal, dam or the sea).

How the flood exclusion determined?

Insurers will use a range of resources available to them to determine whether a flood exclusion applies.

What is considered flood vs other water (not excluded) can sometimes be difficult to determine. In cases where there may be doubt, what will likely happen is the insurer will appoint a hydrologist who will then provide further findings on whether the waters are flood or other water damage not excluded.

In some instances, it can be impossible to provide definitive answers in relation to cover without the hydrologist report.

Keep a Record of Events

It is important to note if there is a dispute about flood cover, the onus falls on the insurer to demonstrate on the balance of probabilities that the flood exclusion applies. This means the demonstration of an exclusion is more onerous on an insurer than a policy holder.

There are several examples in past flooding events where policy holders have successfully disputed a denial for flood claims.

If you have been inundated by waters and there is question over whether the flood exclusion applies, where possible we recommend you document a record of events. This should include:

1. A statement of events with dates and times;
2. A description of what you saw;
3. Details of the property that was being damaged
4. Supporting evidence such as photos & videos of the water inundation or damage (if available).

We highly recommend documenting any factors that may be considerations for a hydrologist in their flood determination including:

• Arrival of water prior to the declared flooding events (such as localised flooding);
• Failure of pumps that are designed to pump out flood water;
• Water entering through utility infrastructure such as sewerage pipes;
• Failure of other infrastructure such as council backflow valves;
• Water damage from blocked or overflowing pipes, drains, gutters etc.
  Whether there are other factors at play;

Hydrologists will rely on eyewitness accounts as part of their hydrology report and this has in the past influenced cover. Prior to meeting with any assessor or hydrologist, if you believe that there may be some contention of the flood exclusion you should speak to your broker.

Wayne Tank Principle

Where damage comes from a combination of flood water (excluded) & other water (not excluded) it is our understanding the following principles apply:

• Where damage occurs from water events not excluded and flood water (excluded) concurrently (at the same time) cover is excluded in accordance with the well published case of Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corp Ltd [1974] QB 57;
• Where damage occurs from water events not excluded and flood water (excluded) consecutively (one event after the other as separate events) there are better prospects of a successful claim. However, the insured damage must happen first.

Covers Available under other Policies

In addition to Strata Insurance, owners should have contents or landlord’s insurance cover. Cover under landlords or contents insurance may provide owners with some relief should the strata policy not respond to claims.

Firstly, owners should check whether there is a flood exclusion under the policy – if flood is not excluded, owners should investigate whether any of the following covers are available:

• Loss of rent or Temporary Accommodation following a claim for insured damage –
• Most policies will have a provision in it for loss of rent (landlords) or temporary accommodation (owner occupiers) where there has been damage to the contents insured that causes the property to be uninhabitable (such as carpets and floating floors);
• Prevention of Access – When you or your tenant do not have access to your property due to damage to other property – Loss of rent/Temporary may be available;
  Spoilage of food (owner occupiers only)

Owners should contact their contents insurer or broker in the first instance to discuss covers under their landlords or contents insurance policy. We also recommend landlords advise their tenants to speak to their insurer if they have a contents insurance policy.

Repairing damage

If there is question over flood cover in your policy, based on past experiences with Townsville floods (a smaller event), the initial outcome may take up to 6 months or possibly longer if there is a dispute. Knowing that the insurer’s first priority will be determining cover, you may consider taking measures to tend to cleaning and repairs at your own cost and should a claim be indemnified, those costs can be recovered.

You should act as a prudent uninsured – that is take actions you would normally take if you were not insured and document all costs associated with the repairs.

The act of repairing damage, will not affect whether the insurer accepts the claim, however if the claim is denied, you will be responsible for the costs of those repairs.

Government Assistance

Whilst insurance claims are being reviewed and assessed, there may be opportunities, subject to eligibility, to utilise both State and Federal Governments assistance packages.

Australian Government Disaster Assist has details that can be accessed here.

QLD Service has information relating to Government support packages here.

Service NSW has information relating to Government support packages here.

Tyrone Shandiman
Strata Insurance Solutions
E: [email protected]
P: 07 3899 5129

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.

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