General Insurance - Domestic Insurance - Home Contents Storm water damage policy exclusion flood damage

Transcription

1 Determination Case number: General Insurance - Domestic Insurance - Home Contents Storm water damage policy exclusion flood damage 4 April 2011 Background 1. The Applicants insured their home contents against loss or damage caused by insured events for $70, On or about 15 October 2010, the Applicants locality suffered extensive storm conditions of torrential rain and high winds which resulted in some of the Applicants contents stored in a metal shed on their property being damaged by stormwater. The contents damaged were considered to be a total loss with an estimated replacement cost of $7, The Applicants property was flooded by stormwater runoff and stormwater that flooded from a water catchment area. 4. The Financial Services provider (FSP) denied indemnity to the Applicants on the ground that the class of water that had caused the damage to their property was excluded under their policy of insurance. Summary of Applicant s Position 5. The damage to their property in D Street was caused by the inundation of what was considered to be overland water. The FSP s loss assessor assessed their claim and agreed that they had a fair and just claim. 6. They contacted the FSP in both Sydney and Melbourne on many occasions but failed to get any response other than it was processing their claim. 7. Some weeks later someone from Melbourne inspected where the floodwater had come from and informed them that the amount of rainwater that fell would not have been stopped. He also informed them they should not have any problem with their claim. They again contacted the FSP about their claim and were informed that there were equal grounds to pay or dismiss their claim. The FSP decided to reject their claim because there was only a small amount of money involved. Case No: Determination Page 1 of 5

2 8. They have purchased a new mower and whipper snipper for about $975 but are yet to replace white goods and a ride-on mower which the assessor estimated would cost $6,000. Summary of FSP s Position 9. The FSP appointed an external loss assessor to inspect and report on the damage to the Applicants property. In response to the loss assessor s report it formed the view that a hydrology report was required. 10. The hydrologist reported: Based on discussions with the property owner (the applicant); and the resident of number 46 D Street east of the subject site (the applicants property); and direct site observations at the time of inspection, it is concluded that flooding in the town of The Rock in general, and at the subject site specifically occurred through two dominant mechanisms: 1. Properties immediately adjacent to Burkes Creek (i.e. flooded properties in N Street, D Street etc) flooded due to catchment wide intense rainfall across the large (760 square kilometre) Burkes Creek catchment area upstream of the township of The Rock producing elevated volumetric flows and water level rise in Burkes Creek; and 2. Flooding along D Street was caused by a combination of elevated flow rates and water levels in the eastern drainage canal in conjunction with the elevated flow rates and water levels in Burkes Creek impeding the drainage of flood waters from the canal into the main Burkes Creek channel. 11. In his summary, the hydrologist stated: Following investigation of this property it can be stated that flood damage to the subject site at [number] D Street, The Rock is a result of: Catchment wide intense rainfall across the large (760 kilometre) Burkes Creek catchment area upstream of the township of The Rock producing elevated volumetric flows and water level rise in Burkes Creek; and Elevated flow rates and water levels in Burkes Creek impeding the drainage of accumulating flood waters from the eastern drainage canal, forcing floodwaters west along D Street at the location of the (closed) wooden bridge. 12. The FSP contends that the hydrologist s report is clear that the damage to the Applicants contents was not as a result of flash flood, rather it was caused by the combination of: river flow; and the mixture of onsite rainwater and flood water coming from the water catchment system flowing into the Applicants property, both of which are not covered under the policy. Case No: Determination Page 2 of 5

3 13. Therefore, the FSP relies upon the policy definition in respect to rain, river flood and water catchment system to deny indemnity. 14. If it was determined that the Applicants have established that they have suffered a loss caused by an insured event, the FSP would argue that river flood has at least contributed to the loss suffered by the Applicants and accordingly the exclusion relating to flood prevails. See Wayne Tank & Pump Co Ltd v Employers Liability Assurance Corp Ltd (1974) QB The FSP relies on the following policy/contract provisions etc: Definitions (The Meaning Of Some Words) Some words and expressions in this policy have a specific meaning which is given below. flash flood means what occurs when there are heavy, intense bursts of rainfall, usually during thunderstorms where so much water falls in a very short time that it cannot get away quickly enough and collects and flows into your home. but does not include when rainwater on the site: cannot run off into a water catchment system, because it is overflowing in flood; and mixes with the flood water coming from the water catchment system and then flows into your home. river flood means when water that is normally contained in a water catchment system increases because of rainfall or snow melt (whether in the immediate region or elsewhere) or is deliberately released by an authority, and the water overflows onto land that is not normally covered by water into your home. water catchment system means: SECTION 1 a river, creek, other natural watercourse or lake, whether they are in their original state or have been modified, are named or unnamed, or normally dry that only run during period of rain; a dam, reservoir, storm water channel or canal. INSURED EVENTS CAUSING LOSS OR DAMAGE YOUR BUILDING AND/OR YOUR CONTENTS This policy insures you up to the amount of the sum insured for loss or damage to your building and/or your contents caused by an insured event listed below Storm, Rain Or Flash Flood You are insured for damage to your building and/or your contents caused by storm, rain, or flash flood. Case No: Determination Page 3 of 5

4 We will not pay for damage caused by: River flood; Erosion or earth movement Issues 16. Whether the FSP is entitled to rely upon any policy exclusions to deny indemnity to the Applicants for the storm water damage to their property. Reasons for Decision 17. The Applicants policy of insurance provides cover against loss or damage caused by storm, rain or flash flood. However, the FSP contends that the damage was caused by a combination of river flood and the mixture of onsite rainwater and flood water coming from the water catchment system flowing into the Applicants property. 18. In the FSP s external loss assessor s report dated 26 October 2010, he stated that the Applicants township, The Rock, is a relatively flat town and it was likely that the water damage was as a result of both storm water build up, overflowing drains and river flood. However, the Applicants were adamant that the water that affected their property was not from the river. 19. The loss assessor also stated: We can confirm that your insured is not immediately adjacent to the river bank with several streets in between. As such it is likely that damage at your insured s property was as a result of overflowing storm water drainage perhaps contributed to by river flood as well however a hydrologist would be required to accurately determine the cause of water entry to your Insured s property. 20. Under his heading Comments he stated: To accurately determine the cause of water entry to your Insured s property a hydrologist would be required. However we are satisfied that the damage on this occasion would include some storm water runoff. However, the loss assessor reversed this opinion in response to the hydrologist s report. 21. The hydrologist interviewed the male Applicant who offered the following comments: He observed the low lying flood storage area east of Urana Street rail crossing between the Olympic Highway and the rail line filling up during Friday afternoon and evening; Case No: Determination Page 4 of 5

5 He noticed flood waters coming along the street towards his property from the eastern end of D Street; Flood waters were moving at an estimated 4km per hour; and His property was vacated late on Friday night with the peak flood level estimated to have occurred between 11pm and midnight. 22. As stated above, the hydrologist was of the opinion that: Flooding along D Street was caused by a combination of elevated flow rates and water levels in the eastern drainage canal in conjunction with the elevated flow rates and water levels in Burkes Creek impeding the drainage of flood waters from the canal into the main Burkes Creek channel. Determination 23. There is no evidence that the Applicants property suffered damage from runoff stormwater before rising water levels in Burkes Creek prevented the drainage of accumulating flood waters from the drainage channel, running parallel to D Street and close to the Applicants property, flooded. On the balance of probabilities, storm water overflowing from a drainage channel caused flood waters to flow onto the Applicants property. 24. The insured event Storm, Rain Or Flash Flood excludes damage caused by river flood. The policy of insurance defines river flood as water that is normally contained in a water catchment system and overflows onto land that is not normally covered by water. 25. Further, water catchment system includes a dam, reservoir, storm water channel or canal. 26. Therefore, I find that, on the balance of probabilities, the water that flowed onto the Applicants property causing damage, escaped from a water catchment system and the damage caused thereby is excluded from cover. 27. Accordingly, I determine that the FSP is entitled to rely upon the policy exclusions to deny indemnity to the Applicants for the damage to their property. Case No: Determination Page 5 of 5