Flood definition under fire

When is a flood not a flood? That vexing question was explored by Queensland Supreme Court Justice David Jackson in a case that arose following the 2011 Brisbane floods.

He found an insurer was unable to deny indemnity, saying its liability was not negated by the policy’s flood exclusion. Justice Jackson said inundation of the premises was through back-flow from pipes running from the river bank, not water overflowing from the natural confines of the Brisbane River.

Medical equipment supplier LMT Surgical Pty Ltd’s premises, at Milton, in inner-city Brisbane, were inundated by water from two storm water drainage pipes on January 11, 2011. 

LMT sued Allianz Australia for rejecting a claim on its industrial special risks policy, which had a clause exempting the insurer from liability if “damage [was] occasioned by or happened through flood”. 

The policy defined flood as the inundation of normally dry land by water overflowing from the normal confines of any natural watercourse or lake (whether or not altered or modified), reservoir, canal or dam. Allianz argued the water came up stormwater pipes, which met the definition of a canal, and declined coverage. 

But Justice Jackson took a different view. “In the context of the flood exclusion ‘canal’ does not include the pipes.”  He said the “most troubling” part was the exclusion’s requirement the water overflow be from the normal confines of a river. The area was not flooded by water over-topping the river bank, but because water backed up through the pipes, which Justice Jackson said were not a natural watercourse.

Allianz spokesperson Nicholas Scofield told Resolve the Financial Ombudsman Service had taken the opposite view to Justice Jackson on similar 2011 Brisbane flood cases on the flood exclusion’s definition.

Justice Jackson was clear that his decision was based on the current case alone. “The cover or exclusion of damage caused by flood is an everyday subject matter of contracting for insurance cover. The scope of the exclusion and the cover depends on the language deployed in the particular policy on that subject matter. Different insurers deploy different language for similar policies. An insurer and insured may bargain over the scope of the cover and the extent of the risk by adding to the cover provided for under the insurer’s usual form of policy by endorsement. The permutations and combinations possible are many,” he said. 

Regardless, there are many who see the decision as opening a potential floodgate for more disputed claims to go before the courts. It is perhaps another argument in favour of the standard flood definition that many insurers are now introducing into their policies.

Quake rocks NZ capital

The magnitude 6.5 earthquake that rocked New Zealand’s capital city, Wellington, on Sunday, July 21, was another reminder of the volatility of seismic activity in “the shaky isles”. 

Fortunately damage seems relatively minor, but our thoughts are with those in New Zealand who live in the capital and the surrounding region.

AILA national conference

The AILA National Conference Wide Exposure, Safe Harbour and AIDA Presidential Council meeting  was held on September 18-20, with conference sessions at Doltone House, Jones Bay Wharf, overlooking Sydney Harbour.

The program offered a range of international and domestic speakers, including the Chief Justice of the NSW Supreme Court Tom Bathurst; NIBA CEO Dallas Booth; and Zurich CEO Daniel Fogarty. The social program provided a great opportunity to catch up with friends and colleagues while enjoying fine Australian food and wine. 

AILA was honoured to host the AIDA Presidential Council meeting on Tuesday, September 17, before the conference proper began. A fine way to celebrate AILA’s 30th anniversary.