A northern rivers business owner whose property was inundated by floodwaters and heavy rain has lost an appeal against their insurer’s decision to partially cover the damage following a ruling by the Australian Financial Complaints Authority (AFCA). .
The complainant lodged a claim after the building was flooded during last year’s disastrous wet weather in Northern NSW in February and March.
The claimant said they were not on the property at the time of the flood because the street had been evacuated, and only returned to it the day after it was damaged.
IAG agreed to cover the policyholder for flooding in the garage and office area, saying it was likely caused by stormwater runoff.
But the insurer said the rest of the house was damaged by floodwaters, which the insured’s business insurance policy only covered if the customer opted in, and they didn’t.
An IAG-appointed hydrologist, referred to as AD, identified the garage area as being at ground level of 1.4m Australian Height Datum (AHD), while the floor level of the house is approximately 1.9m AHD.
The AD noted that the garage’s lower level made it “likely” that it could be susceptible to flooding by runoff from a nearby car park elevated above it.
The hydrologist reported that water levels from localized ponding “may reach 1.55m AHD” while the recorded gauge water level of the nearby Richmond River, which is about 100m away from the property, was at 1.6m AHD on March 1.
The AD report concluded that the highest level of flooding on the property was caused by flows from the Richmond River. It said stormwater ponding could initially flood the garage “to a depth of up to 0.15m”.
The report also said that storm water that entered the roof caused damage to the ceiling and mold growth.
The complainant said water entered the home through the drainage and plumbing, noting a “dirty water mark” inside the bathroom that was higher than the room’s water level.
The AD acknowledged that it was possible for floodwaters to infiltrate local sewage systems, causing wastewater to rise from the building’s waste drains, but said this would happen “at the same time or moments before the water -flood exceeds the floor level of the building.”.
AD said that a possible release from the sewage system would result in higher flood levels in the room than in the rest of the home, but this would only result from flooding of the Richmond River.
AFCA supported the hydrologist’s findings and said that if wastewater entered the home, it would have mixed with floodwater and was classified as flood damage.
“Courts have determined that when rainwater mixes with floodwater, it’s all considered floodwater,” AFCA said.
“If rainwater mixes with floodwater and causes damage, the flood exception will usually apply to defeat the claim.”
The decision said IAG was entitled to its decision to partially reject the claim and correct to cover the initial flooding of 0.15m on the garage floor.
“The outcome is fair because flood damage is not covered under the policy and the available information shows that most likely, the flooding at floor level in the house was caused by flood water,” AFCA said.
It required the insurer to obtain a repair quote based on the scope of works it received and allowed it to pay the claim based on the quote with a 10% uplift.
Click here for the decision.
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