CLAIMS FLOOD IN Definitions could have huge impact on insurance

WHILE all home insurance policies must now offer flood insurance, flood cover may not be included in many policies.

Flood cover may be provided as an optional extra.

The basic cover may not include flood insurance.

Most business and commercial property insurance policies do not include flood cover. However, water damage may nevertheless be covered, if it results from leaks or overflowing gutters in a storm.

From 2012, the law has required insurers to apply a standard definition of “flood” to consumer insurance policies, including insurance for small businesses.

The definition might be summarised as: “the covering of normally dry land by water that has escaped or been released from the normal confines of … a lake, river, creek, other natural water course, reservoir, canal, or dam.”

Inundation from stormwater systems and street gutters would not usually fall within that definition of a flood.

Business insurance policies may provide a different definition of flood, provided the insurer takes “reasonable steps” to ascertain that the business is not a “small business”, which is a business with a turnover of less than $1 million and fewer than five full-time equivalent employees.

Whether flood cover is included or not, water damage caused by roof or other leaks caused by a storm should be covered by standard building and contents insurance policies.

Damage caused by inundation from overflowing stormwater drains should also be covered.

It may not always be clear whether inundation is caused by a “flood”, or from overflowing stormwater drains.

Insurers will often rely on a hydrologist’s report to determine the cause of the inundation.

However, the opinion of a hydrologist is not necessarily determinative, and a court may, on hearing evidence of those who witnessed the inundation, make a different finding.

Inundation of a property might be caused initially by overflowing stormwater drains. Then later, the property may be affected by floodwaters that have breached the banks of a river or creek.

If it can be proved that the damage was first caused by overflowing stormwater drains, insurance cover may still be available, even if the property was later affected by river flooding.

As a result, it may be critical that good evidence of the original cause of inundation is obtained.

Any photos of the initial inundation will be very useful.

First hand testimony from witnesses about the onset of the inundation, may also be very useful.

It is important that statements from witnesses be obtained soon after the flooding event, while memories are fresh.

Tenants who have been affected by inundation should review their lease, or obtain advice to determine their rights under their lease.

Rights they may have are often only available where an appropriate notice has been given to the landlord.

>>Ian Conrad is the principal at Conrad Law in Townsville, specialising in business and succession law.