Insurance is of course no more than a contract agreed between parties, so each claim will turn on its specific facts and policy wording. However, similar issues are likely to arise in a large number of claims.
Flood or run-off?
The awesome destructive power of the river in flood emphasises why some insurers will not offer standard flood cover in known flood plains or will insist upon payment of very high premiums for such an extension of cover. Damage by flood is often specifically excluded from cover in Australia.
Although the definition of 'flood' differs from policy to policy, some simplification in interpretation of policy wording is seen in situations such as in the recent flooding in Brisbane, where the majority of flooding occurred after or far from the relevant rainfall. The eerie situation of rising river levels under bright sun and clear skies will in most cases leave little doubt that a flood has occurred rather than damage from storm, tempest or run-off water. It is more difficult to determine the cause of water damage from the flash flooding in Toowoomba, Queensland and the Lockyer valley, where cars, houses and their occupants were swept away following torrential rainfall.
The distinction of whether the water rose across the top of the land or rose through storm water drains in these circumstances should make no difference. The crucial point is that the water rose up and out of its watercourse as opposed to flowing down and through a catchment. This will consequently minimise difficulties in determining differences between storm and rainfall damage to that caused by rising flood waters.
Multiple Exclusions
Within the trade and transport arena, loss will not only be suffered by direct flood damage to property (such as transport warehouses), but also consequentially to goods due to extensive delays or deviations as a result of inundation of road or railways in addition to the long closure of the Port of Brisbane. Act of God or force majeure clauses may be triggered to provide relief from contractual obligations but once again careful attention must be paid to the specific contract terms.
In situations where delay has given rise to a consequent loss to a third party, further consideration may need to be given to the specific cause of the loss that has arisen.
In cases where a policy may exclude loss suffered by way of delay or deviation but coverage extends to flooding (or vice versa), insureds must keep in mind the Wayne Tank principle (Wayne Tank & Pump Co Ltd v Employers Liability Insurance Corporation Ltd [1974] QB 57). Where there are two causes that have given rise to a loss and one is excluded and the other is not, the English High Court has held that the policy would not respond. This principle has generally been followed in Australia.1
All Risk Cover
Merely because a policy wording does not explicitly provide for coverage of flood damage does not of itself mean that coverage for flooding is excluded. For example, if a policy provides coverage for accidental damage to goods, or if coverage is on the basis of the Institute Cargo Clauses (A), it may be the case that this would extend to damage caused by flooding, assuming 'accident' is given its ordinary meaning of 'an unforseen or unintended occurrence'.
Businesses without specific flood coverage may claim losses pursuant to industrial or special risk policies in the hope of covering losses experienced as a result of the floods, such as damage to property and business interruption losses. In this instance, further consideration must be given to a number of factors including whether the loss has been actually caused by the flood, the basis for any calculation of business interruption due to flooding, whether cover extends to additional costs such as removal of debris, and the extent to which a policy may extend to loss suffered due to secondary damage to a supplier's or customer's premises.
Liability and other Claims?
Liability claims and recoveries are likely to flow for many years from various quarters. The vision of large numbers of pontoons and vessels, sometimes still attached to each other, rushing down the river and out to sea, starkly conveys the multitude of significant losses which have been sustained. These ultimately may require consideration of whether negligence of some party was to blame. Pontoon strength to certain water levels and flows may be rendered a moot point by the numerous unidentifiable trees and large debris carried down the river that could have delivered the crucial impact. Similar considerations apply to the adequacy of moorings in the circumstances. In Queensland an enquiry is also expected to look at the management of the Wivenhoe Dam above Brisbane and the effect that may have had on the flood levels. Salvage, towing, repair, constructive total loss and wreck removal claims will flow from the vessels left high and dry, foundered or recovered. With the cyclone season now following, loss mitigation and makeshift repair, and securing of assets remains a high priority.
The full impact of the disaster is expected to take months and years to unfold in the insurance and claims context. Early attention to crucial insurance and claims issues for your particular situation is vital to minimise dislocation and opportunity loss.
1. Peterson v Union des Assurance de Paris IARD (1995) 8 ANZ Insurance Cases 61-244
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This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.
