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Flood, Earthquakes and Fire Claims Don O’Halloran – Ombudsman, General Insurance, FOS.

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Presentation on theme: "Flood, Earthquakes and Fire Claims Don O’Halloran – Ombudsman, General Insurance, FOS."— Presentation transcript:

1 Flood, Earthquakes and Fire Claims Don O’Halloran – Ombudsman, General Insurance, FOS

2 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. Introduction

3 Roma, Charleville, St George and Brisbane

4 Roma township, Queensland

5 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: – 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. Background

6 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. … Macquarie Dictionary definition of “flood”

7 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. The Insurance Council of Australia’s three general categories of flood definition

8 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 … 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 … Specified events … (q)storm, tempest, rainwater, wind, hail, tornado, cyclone or hurricane, freeze or weight of snow Flood definition

9 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. Standard definition of flood (issued by the Federal Government as part of their consultation process)

10 “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. Proximate Cause and the ‘Wayne Tank Principle’

11 Nothing beats an onsite inspection Topography is critical Onsite inspections may not be achievable in all Queensland or Victorian cases Collection of Information

12 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 Collection of Information

13 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 Macquarie definition of Hydrology

14 Collection of data: Rainfall leading up to event Rainfall in feed areas Recorded creek heights Historical data Topography of area Eyewitness accounts Hydrologists

15 Spoon drains High points Highways Roads Natural water courses Housing and construction Flow of water

16 Some examples of the topography The view from “Hospital Hill” at Roma – rainwater run off is likely to be down the hill

17 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

18 Spoon Drain – if water is flowing across the land, spoon drains will redirect some of the water Some examples of the topography

19 Long Drain – if water is flowing across the land, long drains will redirect some of the water Some examples of the topography

20 Natural water course that arguably helps cleanse what was otherwise muddy water Some examples of the topography

21 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 Some examples of the topography

22 Front of first residence – unsuccessful claim Four different claims

23 Close up of first residence – note the height above ground – 300mm. Height speaks against rain water runoff Four different claims

24 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

25 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

26 Third residence – raised at front but sunken entertainment area Four different claims

27 Third residence – sunken entertainment area. Claim was paid for the damage that occurred in this area of the property Four different claims

28 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

29 Fourth residence Four different claims

30 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 Preliminary Findings

31 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. Conclusion

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