Determination
Case number: 234622
General Insurance - Domestic Insurance - Home Building - FSP Decision –
Flood - Denial of claim
14 September 2011
Background
1.
The Applicant held a Landlord Home Building Insurance policy (the policy) with
the Financial Services Provider (FSP).
2.
The Applicant lodged a claim on 18 January 2011 seeking indemnity for
damage to his tenanted (insured) property which occurred on 12 January 2011,
after it was inundated by water during a severe weather event experienced in
the area.
3.
The FSP declined the claim on the basis that the property was inundated by
floodwater and “Flood” is not an event insured under the policy.
Summary of Applicant’s Position
4.
The FSP agreed to provide insurance and the Applicant paid the premium in
good faith, with the belief that he was covered and the FSP should honour its
responsibility.
5.
The Applicant does not accept the FSP’s contention that the loss is the result of
floodwater. He maintains that the tenants of the property confirmed that the
water came up through the drains.
6.
The damage is the result of a “Flash flood” which occurred due to rain that fell
within 24 hours of the inundation of the property.
7.
Parts of Riverhills (property location) experienced 3-4 metre flood levels with
properties completely inundated. The Applicant’s property however
experienced a flood level of approximately 0.9 metres. Therefore, it would be
reasonable to assert that the damage is the result of the most recent rain that
fell on 11 January 2011.
8.
The report relied upon by the FSP is a generalisation of the area and does not
reflect what actually happened at the insured property.
Case No: 234622
Determination
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9.
The main focus of the FSP’s hydrology report is the level of the Brisbane River
and how it rose. There is no reference in the Applicant’s policy to reflect that
cover is dependent on the level of a river.
10. The Applicant maintains that the report is an interpretation of events and of
what could or may have occurred. The author cannot be absolutely sure how
much and where the water originated.
11. The Applicant acknowledges the author’s knowledge in his field, however, he is
still putting forward estimates in ranges of 10%. The Applicant maintains that
had there been 10% less water, the property would have escaped being
inundated.
12. If it had not rained on 11 January 2011, the insured property would not have
been inundated. The Applicant is seeking a further payment of $7,000 in
addition to the $10,000 payment received from the FSP’s Compassionate
Fund.
Summary of FSP’s Position
13. The Applicant has not discharged the onus of proving that the cause of the loss
was by “Flash flood and stormwater run-off”, as alleged.
14. If flash flood or stormwater run-off were a proximate cause, then flood was also
a proximate cause of loss and as such, by applying the Wayne Tank principle,
the policy does not respond to the loss.
15. The FSP primarily relies upon, its own detailed hydrological investigations into
the cause of flooding in Brisbane, as opposed to the report obtained by the
Insurance Council of Australia (ICA). The conclusions of its investigation are,
however, consistent with the findings of the ICA report.
16. The consultant’s report obtained and relied upon by the FSP confirms the
insured property does not appear to have been inundated by stormwater run-off
or local run-off.
17. Storm cover under the policy does not cover loss or damage resulting from rain,
hail or snow after it has reached the ground. The nature of storm cover is for
loss or damage caused by strong winds, rain and hail hitting the property
directly. There is no evidence to suggest the damage is the result of rain before
it hit the ground.
18. The evidence suggests, the inundation of the property was due to rain that fell
over the Wivenhoe Dam catchment from 9 January 2011, which had the effect
of raising the level of Brisbane River. Therefore, the cause of the rise in the
level of the Brisbane River was rain that fell more than 24 hours prior to the
loss.
Case No: 234622
Determination
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19. As the Applicant’s property was inundated on the afternoon of 12 January
2011, it is reasonable to conclude that not all the rain that fell on 11 January
2011fell within the specified previous 24 hour period.
20. The proximate cause of the loss is the Wivenhoe Dam releases raising the level
of the Brisbane River.
21. The FSP relies on the following policy provisions:
“[FSP] Product Disclosure Statement (PDS)
Words with special meanings (page 10, 11, 12)
Flood
Rising water which enters your home as a result of it running off or
overflowing from any origin or cause. This policy does not cover
flood unless we have agreed and it is shown on your certificate of
insurance.
Flash flood and
stormwater runoff
A sudden flood caused by heavy rain that fell no more than 24
hours prior to the flash flood or stormwater run-off.
Storm
A violent disturbance of the atmosphere associated with strong
winds including a cyclone, lightning, heavy rain, hail or snow, but
not continuous bad weather by itself.
Insured events you are covered for (page 17,18)
Damage caused by weather
What is covered
What is not covered
Storm
X caused by rain, hail or snow
after it has reached the
ground
…
Flash flood and stormwater run-off
Loss or damage caused:
A sudden flood caused by heavy rain that fell no more
than 24 hours prior to the flash flood or stormwater
run-off
X by flood
…
The most we will pay for home claims (page 27)
What is covered
What is not
covered
Flash flood and stormwater run-off
We will pay up to 50% of your home sum insured or $25,000
whichever is higher.
Optional covers for extra peace of mind (page 53)
What is covered
Case No: 234622
What is not
covered
Determination
Page 3 of 8
Flood and storm surge
This policy does not cover flood unless we have agreed and it is
shown on your certificate of insurance
Home and/or contents cover
We cover you for loss of or damage to your home or contents caused
by flood or storm surge which happens during the period of insurance
at the property address.
We will pay up to the:
Home sum insured, if your home is insured;
Contents sum insured if your contents are insured for damage
caused by flood or storm surge.
We will pay for loss or damage in the same way and in the same
amounts as we do under Insured events cover.
Issue
22. Whether the FSP is obliged to provide indemnity to the Applicant in line with the
terms of the policy.
Reasons for Decision
23. The Panel is satisfied that a full exchange of information has taken place
between each party and that each party has had the opportunity to address any
issues raised.
24. As advised to the parties, FOS has considered it appropriate to expedite the
dispute in accordance with the FOS Terms of Reference. This is due to the
circumstances of the dispute. This dispute has not been the subject of a FOS
Recommendation and has proceeded directly to Determination.
25. This decision has been made by a Panel consisting of an Ombudsman, a
representative with extensive experience in the insurance industry and a
representative with extensive experience in consumer claims.
26. The Panel’s Ombudsman (TPO) attended at the insured premises with
representatives of the FSP. For personal reasons, the Applicant was unable to
attend on that occasion. TPO subsequently spoke by telephone with the
Applicant and he confirmed the details of his previous submissions.
27. The Applicant maintains that the low level of inundation of his property in
comparison to other properties in the area, would suggest that had it not been
for the rain that fell the previous day (11 January 2011), his property would
have escaped water inundation.
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Determination
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28. Therefore, it is his contention that the damage to his property was the result of
rain that fell within 24 hours of the loss and as such falls within the scope of
cover provided under the insured event “Flash flood and Stormwater run-off”.
Statement submitted by (hydrologic and hydraulic engineer) S
29. Consideration has been given to the site specific statement submitted by the
FSP’s appointed consultant S. This statement maintains:
Inundation caused by stormwater run-off is generally very site specific.
The author in providing his opinion has relied upon his knowledge and
experience of such events, metrology data, rainfall data in Brisbane River
and Wivenhoe Dam catchments and stream gauge data for Brisbane
River.
There was a substantial amount of rainfall in the Brisbane River and
Wivenhoe Dam catchments over 9 January 2011 to 11 January 2011.
Bremer River contributed in the order of 15-25% of the Brisbane River’s
peak flow. However, the overwhelming influence on the flooding of
Brisbane River was the rain that fell some days (before the date of loss)
over the Wivenhoe Dam catchment and subsequent water releases from
the dam.
When considering terrain data, the main thing that S considered is
whether the property is higher than the surrounding areas. This would
suggest a lower likelihood of stormwater and / or flash flood issues.
The level of the property varies between approximately RL 11.4 meters
AHD to RL 14.5 meters AHD.
There is stormwater infrastructure on Sumners Road, including curb,
channelling and stormwater pits. The property is significantly (2-3 metres)
higher than the level of the street.
The time of inundation of the property coincides with the timing of the rise
in Brisbane River.
Rain that fell between 6.00am and 4.00pm on 11 January 2011 would be
a minor contributing factor in the inundation compared to the flows already
in the Brisbane River caused by rain that fell in the upper catchment more
than 24 hours before the loss.
Not all the rain that fell on 11 January 2011 is to be taken into
consideration in determining whether the property was inundated by rain
that fell within the 24 hour period.
The property was inundated in the afternoon of 12 January 2011, as such,
rain falling before the afternoon of 11 January 2011 falls outside the
previous 24 hour period.
S maintains that the intensity analysis shows the rainfall was of very low
intensity throughout this period (11 January 2011), i.e. a less than one in
one year event; he therefore considered it unlikely that rainfall of this
Case No: 234622
Determination
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magnitude would cause stormwater or other run-off inundation of the
Applicant’s property.
S concludes that the cause of the inundation of the property was the rising
level of the Brisbane River, which was itself caused by rain which fell
more than 24 hours earlier.
ICA Hydrology Panel report (ICA report) “Flooding in the Brisbane River
Catchment January 2011, Volume 1 & 2”.
30. The following are relevant matters contained within this report:
There were three distinct rainfall periods across Brisbane City LGA (Local
Government Area) during the period of 9 January 2011 to 13 January
2011. (pi Para 2)
The first occurred from around 0900 hours to 2100 hours on 9
January.
The second occurred from around 0600 hours to 1000 hours on 10
January.
The third occurred from around 0600 hours to around 1600 hours on
11 January.
Wivenhoe Dam release (9.3 p60)
Large releases were made from Wivenhoe Dam over the period from
0600 hours, possibly as early as 0300 hours on 11 January 2011
until around 0300 hours on 12 January 2011.
It was concluded that the dam release flood from Wivenhoe Dam
was the immediate cause of flooding along the reach of the Brisbane
River downstream of the dam.
There was little or no rainfall across the LGA after about 1800 hours
on Tuesday 11 January (9.1 p59)
Location of the Applicant’s property
Maps of the area show that the Brisbane River flows in close proximity to
the Applicant’s property from the rear and to one side.
The Applicant’s property stands 2 to 3 metres higher than the Sumners
Road street level.
31. Consideration has been given to the Applicant’s contention that, he is entitled to
indemnity in line with the policy, which provides that damage resulting from
flooding resulting from rain that fell 24 hours prior to the loss is covered.
32. The Panel is satisfied that it has been established that there were three rainfall
periods experienced in the area/region where the property is situated between
9 and 12 January 2011. Of these, the last period of rain occurred between
approximately 6.00am and 4.00pm on 11 January 2011 with little or no further
rainfall after 6.00pm.
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Determination
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33. According to the Applicant, the property was inundated in the afternoon on 12
January 2011, which establishes that the inundation occurred at least 18 hours
after the last period of rain.
34. This raises concerns in respect to the Applicant’s contention that he should be
covered under the provision relating to a sudden flood occurring as a result of
heavy rain falling within 24 hours of the inundation of her property. These
concerns are:
It is not just a matter of rain falling within 24 hours of inundation, rather it
needs to be established that a sudden flood occurred due to the rain
which fell within the previous 24 hours. In this instance only a few hours of
low intensity rain that fell on 11 January 2011 can be categorised as
falling within a discrete 24 hour period leading up to the property
inundation.
There is no evidence which establishes that the recorded low intensity
rainfall on the afternoon of 11 January 2011 and any subsequent localised
falls that may have gone unrecorded caused flooding in the area, such as
to trigger the flash-flood/stormwater run-off provision of the policy.
35. The water inundation at the Applicant’s property is consistent with the rise in
the water level of the Brisbane River and the subsequent breaking of its banks
after the Wivenhoe Dam releases on 11 and 12 January 2011.
36. The policy defines flood to include water that runs off or overflows from any
origin or cause; in this instance the overflowing of the Brisbane River matches
that description.
37. The fact that the water which inundated the Applicant’s property may have
included rainwater does not assist the Applicant. The Wayne Tank legal
decision provides that where there are two proximate causes of a loss (flood
water and rain water) and one cause leads to coverage under the policy
(rainwater runoff / flash flooding) but the other is excluded (flood) then the
whole of the loss is excluded.
38. The policy does not cover loss or damage caused by flood, unless the FSP has
agreed and noted this additional cover on the policy of insurance which was not
the case in this instance.
39. The Panel has also considered the Applicant’s contention that the inundation of
the property was the result of water coming up from the drains.
40. The available evidence provides that flooding experienced prior to Brisbane
River breaking its banks after the release of water from Wivenhoe Dam, would
in all probability, be the result of back flow from the drainage infrastructure due
to the rising level of the river.
41. It is established law that such water is still classified as flood water, when it
otherwise would have drained into the watercourse, but is not able to because
the watercourse is full. The relevant case that dealt with this issue is K Sika
Plastics v Cornhill Insurance (1982) 2NZLR 50(CA).
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Determination
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42. Having considered the evidence made available by the parties to this dispute,
the Panel is satisfied that, on the balance of probabilities, the inundation of the
Applicant’s property was initially due to backwater flooding due to the rising
level of the Brisbane River followed by subsequent flooding after the Brisbane
River broke its banks.
43. In the Panel’s opinion the evidence leads to the conclusion that, on the balance
of probabilities, the FSP has discharged the onus that rests with it to show the
damage claimed does not fall within the cover provided by the policy.
Determination
44. On the basis of the available information the Panel determines that the FSP
was entitled to deny liability for the claim.
Case No: 234622
Determination
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