The widespread damage and devastation suffered in large parts of Queensland and Northern New South Wales caused by Tropical Cyclone Debbie and its resultant flooding will have profound consequences for individuals, small businesses, companies, clubs and associations located in the areas affected.
Whilst the thought of dealing with significant property damage can be quite daunting, it is essential that those individuals and enterprises affected by the recent cyclone and floods take the necessary steps to secure their property, minimise opportunities for any further damage and avail themselves to any entitlements and benefits under their insurance policies.
Immediate steps to protect your property and business i ii
In the event your property or business has suffered damage as a result of a cyclone, flooding or other natural disaster, it is important that the following steps are taken as soon as possible:
- contact your insurer – lodge a claim with your insurer before you start any major repairs. Ask them to explain the claim's process and talk to them about any emergency assistance they may be able to provide. Do not worry if you cannot locate your insurance records. The insurer will have retained an electronic copy of them;
- check your property for damage – if you need help from State Emergency Services volunteers ring your local SES unit;
- take photographs and make lists – before cleaning up, take photographs of damage to your property and possessions and keep samples of materials from damaged goods. Also make a list of everything that has been damaged, including the serial number of electronics. This information will assist you to support your claim and it will enable the insurer to process your claim quicker;
- start cleaning up – consider removing water or mud damaged goods that pose a health risk, such as saturated carpets and soft furnishings, but take photos and keep samples of materials and fabrics to show the insurer's assessor;
- check with your insurer before authorising building work - including emergency repairs, and ask for the insurer's permission in writing. Unauthorised work may not be covered by your policy; and
- be careful with damaged equipment – do not use equipment or vehicles that may be damaged. Keep any items that could be repaired. If in doubt, speak to your insurer.
How long will it take for your insurer to make a decision on your claim?
The General Insurance Code of Practice commits insurers to respond to catastrophes efficiently, professionally, practically and in a compassionate manner. Policyholders, who have lodged claims following the recent cyclone and flooding, can expect an initial decision on their claim to be made by their insurer within ten business days of the insurer having obtained all relevant information and completed its enquiries. A final decision in larger, more complex claims should take no longer than four months, unless exceptional circumstances arise.
If you are in urgent financial need of the benefits under the insurance policy you hold because of loss or damage caused by the recent cyclone and flooding, your insurer may be able to fast track your claim and/or make an advanced payment to you within five business days to address your immediate financial need.
Your insurance claim has been rejected – what are your options? iii
If your claim has been rejected by the insurer, this rejection must be conveyed in writing. If the insurer telephones you and advises your claim has been refused, request that notification be confirmed in writing.
Where your insurance claim has been rejected, your options are:
- complain in writing to your insurer's internal dispute resolution service. Where possible, prior to submitting your complaint, collate any necessary independent evidence which supports your claim and/or contradicts the grounds your insurer has relied upon to reject it;
- if your insurer's internal dispute resolution service does not resolve your claim in a satisfactory manner, then provided your claim falls within its jurisdiction, you may lodge a complaint to the general insurance division of the Financial Ombudsman Service (FOS), an independent body whose functions include providing independent dispute resolution services for insurance policyholders and insurers. FOS can consider disputes between insurers and small businesses, including; sole traders, companies, partnerships, trusts, clubs or incorporated associations where the business has less than 20 employees, or if the business is or includes the manufacture of goods, and has less than 100 employees. The FOS can only hear complaints about insurers that are FOS members. Contact your insurer or the FOS to find out if your insurer is a member. The current maximum of any individual claim the FOS may review must not exceed $500,000, however, a single dispute can also contain more than one claim; and
- if FOS does not have jurisdiction to review your insurance claim, or if the FOS does not resolve your claim satisfactorily, then your remaining options are to either institute court proceedings against your insurer or accept their decision.
Rainwater v floodwater – implications for insurance claims iv
The most common area of dispute with insurers is whether the damage to the policyholder's property or business was caused by flooding or rainwater. Many insurance policies state that the insurer does not have to pay for damage caused by floodwater. You may have grounds for challenging a decision by an insurer which has rejected your claim on the basis that the damage was caused by flooding where:
- your policy wording may not exclude damage caused by floodwater in all situations or at all;
- you are able to establish that rainwater is the effective or "proximate cause" of the damage and not flooding; and/or
- if your insurer has previously failed to clearly inform you that floodwater damage is excluded under your policy.
Rejected insurance claims involving disputes over whether the damage was caused by rainwater, floodwater (or both) typically turn on their own facts. Depending upon how the exclusion clause is set out in your policy, it may be possible to have your claim's rejection overturned where rainwater was the proximate cause and the floodwater's contribution was minimal or insignificant. The proximate cause is commonly defined as the dominant, effective, immediate or direct cause.
It is also important to bear in mind that, provided your insurance policy does not exclude damage caused by rainwater, then even if a portion of the damage to the property is caused by flooding, provided some of the damage to the property can be specifically identified as having been caused by rainwater (eg damage to the roof or rainwater leaking on to the walls or other parts of the property) then the insurer may be obliged by the terms of the policy to pay for that particular damage.
For legal advice in relation to the scope of your insurance coverage, lodging an insurance claim and/or seeking a review of an insurer's decision to reject your claim, please contact Insurance partner, Robert Tidbury or HopgoodGanim's Insurance and Risk team.
i Storms, floods & fires – Natural disasters and your home insurance, published by ASIC's Money Smart, 31 March 2017
ii Insurance Council of Australia, Media Release, 28 March 2017
iii When disaster strikes – cyclones, storms and floods – A guide to getting your insurance claim paid, published by Legal Aid Queensland, updated September 2013, p44
iv Ibid, pp16-21.
Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.
2015 AFR Beaton Client Choice Awards:
Best Law Firm (revenue $50m - $200m)
Best Professional Services Firm (revenue $50m - $200m)
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.