Flood Insurance

Warning: This factsheet only provides information and should not be relied on as legal advice.

This guide covers the following topics:

PART 1     Are you covered for flood damage?

PART 2     What is flood water?

PART 3     What caused the damage?

PART 4     Who has to determine the cause and how?

PART 5     The General Insurance Code of Practice applying to flood disasters

PART 6     Additional benefits under your policy

PART 7     How do you make a claim?

PART 8     What can you do if your claim is refused and how do you raise a complaint?

PART 1: Are you covered for flood damage?

Check your policy wording (certificate of insurance, product disclosure statement) – is flood excluded?

If flood is excluded, did your insurer ‘clearly inform’ you in writing of this exclusion before entering into the insurance contract with you or within the 14 days cooling off period (if you received your policy documents later)? To answer this question, you may need to ask:

Did you receive this information before the flooding?
Was the flood exclusion clear and unambiguous?

A failure to clearly inform you that flood is excluded means that the insurance contract becomes a prescribed contract and a prescribed contract has cover for flood damage. So your insurer would be liable for flood damage.

Prescribed insurance contracts include motor vehicle, home building, home contents, sickness and accident, consumer credit and travel insurance.

PART 2: What is flood water?

Even if your policy excludes flood damage, you may still have cover for events like storm damage or rainwater damage.

Stormwater or rainwater

The exact definition will depend on your policy wording (e.g., you may be restricted to rainwater entering from openings made by a storm as oppose to windows and doors).

In the context of flooding, this may cover the situation where your house becomes inundated by rainwater (water naturally falling from the sky and rising to a sufficient height on land to inundate.)

Flood water

The exact definition will depend on your policy wording. At present, there is no standard flood definition. If the water that caused your loss does not meet this wording, then it is arguable that your insurer is liable.

To be flood water, the source of the water is a significant factor (e.g., water from a river breaking its banks).

Some flood definitions include:

“The inundation of normally dry land by water overflowing or breaking the normal confines of any natural or artificial watercourse.”

“When water from a river, creek, lake, reservoir, dam or navigable canal overflows onto normally dry land. Water that escapes from an irrigation canal is not flood.”

“The overflow of any lake, river, stream, dam, canal or other watercourse (whether natural or altered) onto land not normally covered by water.”

PART 3: What caused the damage?

Where your policy does exclude cover for flood damage:

If the damage was caused entirely by the initial entry of rainwater – your insurer may be liable e.g., under storm cover.
If the damage was caused entirely by the initial entry of flood water – your insurer may not be liable because of the flood exclusion.
If both rainwater and flood water caused the damage it becomes a question of timing.
- The rainwater entered first and caused all the damage – your insurer may be liable.
- The rainwater entered first and caused part of the damage followed by flood water:
  - Which was the dominant or proximate cause of the damage?
    - If rainwater was the dominant cause and flood water was a minimal or insignificant part of the loss – your insurer may be liable.
    - If flood water was the dominant cause – your insurer may not be liable.
    - If both floodwater and rainwater were dominant causes – your insurer may not be liable since one of the dominant causes is excluded.
- Concurrent proximate causes – where the damage is caused concurrently (at the same time) by flood and rainwater (i.e., where flood and rainwater mix together before causing the damage) – your insurer may not be liable.
- If some of the damage can be specifically attributed to stormwater/rainwater (e.g., roof damage, damage to walls or parts of the house from leaking rainwater) – your insurer may be liable.

Although determining the cause of the damage can be quite complex, it is arguable that borderline issues of fact should be decided in your favour as the insurer is required to prove that the damage was caused by flood in order to successfully invoke the flood exclusion. (See for example, Financial Ombudsman Service Determination 098 07 6150)

NOTE: References to “insurer may be liable” above refers to where you are also able to prove damage to your house was covered under your policy. E.g., Damage by rainwater or stormwater (as defined by your policy) where you are insured for storm damage or rainwater damage.

PART 4: Who has to determine the cause and how?

You have to prove that you suffered damage from an insured event (event covered under your policy). E.g., storm damage.

Your insurer has to prove that damage was caused by flood which is excluded under the policy.

The cause is determined by asking questions like:

Can the rainwater alone rise to a sufficient height to cause damage?
Can the flood water alone rise to a sufficient height to cause damage?
What percentage of the water that entered the house was rainwater and what percentage was floodwater?
What percentage of the damage was caused by flood water and what percentage was rainwater?
What was the rainfall prior to when a creek or river overflowed?
Where did the overflowing water come from? E.g., a river or stormwater runoff.
The path the overflowing water took.
When and how the overflowing water entered your house?
Whether the water level rose in one go, increased in stages or increased at a constant and even rate?

Possible sources of information:

Hydrologist reports – if one is already provided by your insurer, it may be based on incorrect assumptions or be inconsistent with other reliable evidence (e.g., eyewitness reports), so seek an independent report.
Local Council – flood history of your local area, evidence of soil drainage in your area, water flow paths, maps showing the location of watercourses and stormwater drains in your area, council commissioned hydrology reports, contour maps etc.
Your own property survey plan – height of property, location of stormwater drains etc.
Eyewitness statements
Photos and videos or other reliable records (homemade or media based) of rainwater inundating your area and or your house.
Bureau of Meteorology – Rainfall data, when and where river levels peaked etc.
Local community of flood victims – Your neighbour for example, may have already commissioned their own independent hydrologist’s report.

PART 5: The General Insurance Code of Practice applying to flood disasters

Urgent financial need – your insurer needs to fast track your claim if you tell them you are in urgent financial need (clause 3.7a) and make an advance payment within 5 business days of you satisfactorily demonstrating your urgent financial need (clause 3.7b). Remember that any advance payment will be deducted from the total value of your claim.

Repairs to property – where your insurer has selected and directly authorised a repairer, they must:

accept responsibility for the quality of workmanship and materials (clause 3.13a); and
handle any complaint about the quality and timeliness of the work or conduct of the repairer (clause 3.13b).

Claims handling conduct – Your insurer must respond to catastrophes and disasters in a fast, professional and practical way and in a compassionate manner. (clause 4.2)

Time limit for reopening settlements – If your property claim was finalised within 1 month of the flood disaster, your insurer must give you six months from the finalisation of your claim to ask for a review of your claim even if you have signed a release (e.g., if you think they’ve incompletely or incorrectly assessed your loss). They must inform you of this right when finalising your claim and tell you of their complaints handling procedures. (Clause 4.4)

PART 6: Additional benefits under your policy

Don’t forget that in addition to claiming for damage to buildings and household items, you may be entitled to costs of demolition and removal of debris, emergency/alternative accommodation. These are also available where a prescribed contract applies due to an insurer’s failure to clearly inform you in writing of the flood exclusion. (See part 1 above)

PART 7: How do you make a claim?

If you have insurance, you should contact your insurer to make a claim as soon as possible. It does not matter that your policy documents have been destroyed/lost as your insurer can easily verify any cover you have with them. If you do not know the name of your insurer you can ask for assistance from the Insurance Council of Australia on 1300 728 228.

For information on how to make a claim on your home and/or contents insurance, please see: Making a claim on car insurance

For information on how to make a claim on your motor vehicle insurance, please see: Making a claim on home and contents insurance

PART 8: What can you do if your claim is refused and how do you raise a complaint?

For information on what to do if your home and/or contents insurance is refused, please see: What can I do if my home and/or contents insurance claim is refused?

For information on what to do if your motor vehicle insurance is refused, please see: What can I do if my car insurance claim is refused?

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