With the most significant wet weather event to occur in Australia in recorded history insurance is at the fore front of everyone’s mind. Even if you aren’t effected by recent events, people begin to think about the ‘what ifs’ of insurance. Does my policy cover the events that occurred in QLD and NSW? What is flood insurance? What does it cover? What is classed as a flood?
What has occurred in QLD and NSW, on the whole, is by definition in insurance terms, a flood. But there are other wet weather terms that may not mean that a particular property has succumbed to flood. There are the broad definitions of flood, water runoff, storm and tempest.
FLOOD* means the covering of normally dry land by water that has escaped or been released from the normal confines of any of the following; a lake, a river, a creek, a natural water course, a reservoir, a canal or a dam (all usually when natural or modified)
*This definition may vary slightly in wording between insurers but on the whole this is the definition used.
In this instance anyone purchasing insurance would need to ensure that their policy extends to cover these events if they are concerned that the property they wish to insure lays within any anticipated regions where there is a likelihood of flood occurring. Australia now has extensive flood mapping which may be sourced online through various government agencies, SES and local water authorities.
In general, by default, insurers will normally exclude flood cover for appropriate policies so it in important that anyone wanting this cover must directly ask their insurer or insurance broker about the options of including it under a policy. If available, an additional premium will be charged and that premium would be dependent on flood mapping and occurrence history of flooding – this is a contentious issue as insurers premiums to cover flood, in some cases, may be financially out of reach for many policy holders so decisions are made to ‘take the risk’. In some cases, areas may simply be excluded altogether due to the regularity of flood events in the area.
As insurers can’t give advice on cover and are limited in what they may advise an insured to have, it is best to engage an insurance broker for such advice. Some insurers may also offer a set sum insured on flood cover so an insured may only choose to cover a limited amount for flood in order to reduce the premium (invariably this is never enough after the event, but at least provides some protection).
Storm and Tempest
In urban areas there can be some confusion over what is and isn’t a flood and this is generally due to the loosely used word itself (my downstairs loungeroom flooded when the water pipe burst etc.). In many urban areas widespread water damage can occur due to excess water building up and not escaping down drains and water courses, thus inundating property, causing damage. This, in most cases, is covered under the terms of ‘storm and tempest’. There could be, and usually is, argument that if a large area is covered by water that is not defined flood-prone land, storm and tempest is the claimable event used to trigger an insurance claim.
In other cases, water run off can cause major wide spread damage that may also be covered under most insurance policies. This may occur when an area experiences extraordinarily heavy rains in short spaces of time and the volume of water cannot take its normal course resulting in damage to property whilst the water finds its natural level.
Note form Editor: Sometimes there are even more complications such as the editor experienced in 2011. We had a property in South Brisbane. The storm water pipe running through the basement burst due to being overcapacity, and filled the basement about 1/3 before the flood waters rising on the road reached the basement driveway lip and flooded the rest of the basement. After a protracted argument the insurers agreed that 1/3 was storm damage and 2/3 was flood damage (Andy Glen).
The recent weather events and the increasing regularity will see insurers review premiums for such cover and even the areas they are prepared to offer such cover. Many will have heard the terms 1 in a 100, 1 in a 50-year event. The event upon us now was deemed a 1 in 500 year occurrence but with global warming, events such as this may become more regular and pose huge concerns for not only insurers but building regulations in inland areas. We have already seen construction regulations changed by local government authorities for new constructions and additions in areas with close proximity to lakes, canals and other prominent water courses.
Our empathy goes out to anyone who is experiencing difficulty in this extraordinary weather event. One thing that should be considered is the time that may be taken to progress and finalise an insurance claim, and that is lengthy delays are not the cause of the insurers as one should consider the scale of repair and rectification. The land mass involved will take an army of insurance assessors, many of which may be shipped in from all over the country and overseas and then there is the issue of material and equipment supply (which is already an issue due to Covid), labour supply and other such problems that occur in events the scale of this. Patience, although difficult, will be required.
Although the descriptions above represent general terminology, this article does not represent any declaration of how insurance claims may be treated by insurers and advice should be sought externally to ensure that any policy is fulfilling its legal obligations.
Dip Fin Serv (Broking), ANZIIF (Snr Assoc) CIP
Ian Jones Insurance Brokers Pty Ltd