Flood insurance claims: What you need to know

Country Victoria has been devastated by raging storms and extreme flooding in recent years. The June 2021 floos alone left tens of thousands of Victorians without power and telephone connections.  Many were unable to return to their homes for days as floodwater cut off roads, tragically claiming the lives of two people.

The Insurance Council of Australia (ICA) confirmed that over 6,500 flood insurance claims were received by insurers in the days following the disaster. Gippsland around Traralgon and the Yarra Ranges are among the parts of Victoria that were hardest hit.

What is an 'insurance catastrophe'?

The ICA declared an “Insurance Catastrophe” for all claims that are related to the weather events that impacted parts of Victoria after these floods.

Such a declaration is most commonly declared after an extreme weather event and means that home and contents and business interruption insurance claims made by affected homeowners and business owners can be escalated and dealt with as a matter of priority.

The ICA’s catastrophe declaration means that:

• Insurers will need to prioritise claims of people affected by the floods.
• Claims will be triaged to direct urgent assistance to the worst-affected property owners.
• A direct hotline (1800 734 621) has been set up by the ICA to assist policyholders if they are uncertain of their insurance details or have general inquiries about the claims process. However, it is not a claims lodgement service.
• The ICA will mobilise people to work with local agencies and services and affected policyholders as soon as emergency services say it is safe to do so.
• Insurers will mobilise disaster response specialists to assist affected customers with claims and assessments as soon as emergency services say it is safe to do so.
• An established industry task force will identify and address issues arising from the catastrophe.

Delays in settling flood insurance claims  

It’s important to remember that even in the exceptional circumstances and the benefits that come with the above declaration, an insurer can still take up to 12 months to finalise flood insurance claims.

We take out insurance to cover us if the worst happens. And when an event like this occurs, you hope that your insurer will support you through the tough times until you get back on your feet. Unfortunately, that doesn’t always happen.

If your insurer has turned their back on you, if your claim isn’t being properly assessed, if your claim has been unreasonably rejected, or if there is a dispute over how much you are covered for, you have rights and there are steps that you can take to protect them.

The fine print in flood insurance policies

Very few of us ever read the fine print in an insurance contract, and it’s usually only when you make a claim that you learn of some potentially nasty details. And to make matters more difficult, the fine print can change significantly between policies and insurers.

For example, consumer watchdog Choice recently studied the definition of “fire cover” in 26 different insurance policies and found that there is no standard term and, worryingly, that the term is often open to interpretation.

One major insurer was even found to exclude damage caused by "heat, ash, soot and smoke when your home or contents have not caught on fire unless it is caused by a burning building within 10 metres of the insured address”.

It seems unthinkable that you wouldn’t be covered if your house has been lost due to floodwater damage but some policies will ask you to establish where the damage came from and whether the property or the contents were actually damaged by the weather event, as opposed to water inundation caused by poor maintenance of the property.

Some insurance policies will insure for water inundation caused by storms but specifically exclude damage caused by flood. This can lead to a technical dispute about what caused the damage that is being claimed for and therefore whether the losses are insured or not. 

A further issue can be establishing the value of your contents. Chances are, if your home is destroyed, you have lost all receipts and records of items and furniture collected over a lifetime - making it near impossible to make a flood insurance claim. 

Beware ‘storm chasers’

Storm chasers are companies that offer to assist disaster ravaged residents to make insurance claims by taking over the rights to collect the insurance claim payments directly before completing the repair work at low cost.

They have been known to go door-to-door to sign up vulnerable people after a storm event and may advertise themselves as insurance recovery experts or specialists in insurance restoration. 

They have been accused of unconscionable conduct as they take large chunks of insurance pay outs whilst operating without proper financial services licences: 

How to make a flood insurance claim

• Contact your insurer as soon as possible to lodge a claim
• Take pictures or videos of damage to your property and possessions as evidence for your claim before cleaning up.
• Keep samples of materials and fabrics to show your insurance assessor.
• Remove water or mud-damaged goods from your property that might pose a health risk, such as saturated carpets and soft furnishings.
• Make a list of each damaged item and include a detailed description, such as brand, model, and serial number if possible.
• Store damaged or destroyed items somewhere safe.
• Speak to your insurer before attempting or authorising any building work (including emergency repairs) and ask for the insurer’s permission in writing as the policy might not cover unauthorised work.
• Do not throw away goods that could be salvaged or repaired.
• Prioritise safety rather than doing anything that puts anyone at risk.
• Only return to your property when emergency services give a go signal.
• If water has entered your property, do not turn on your electricity until an electrician has inspected it.

Disputing the decision made about your flood insurance claim

The important thing to remember is that if you disagree with the insurer’s decision, it is not final! In our experience, insurers often rely on people not fighting back when their claim is rejected.

The first thing you can do is ask the insurer to review its decision. It is well within your rights to ask for them to undertake an “internal review”. If possible, we recommend you provide any additional evidence and/or arguments to support your claim.

If your claim is again rejected or the amount the insurer agrees to pay remains in dispute, you can then seek review by the Australian Financial Complaints Authority (AFCA) or through the Courts.

With many definitions of what constitutes flood and storm damage open to interpretation, it may be possible to argue that the insurer’s interpretation of a clause in the policy is unreasonable.  

The law is also clear that insurers cannot rely on unusual terms in an insurance policy, unless the insurer clearly informed you in writing of the effect of that provision before you signed the contract.   

Seek legal advice for your flood insurance claim options

If you find yourself suddenly facing some nasty fine print or the insurer fails to properly quantify your claimed loss, get some advice. Your rights are worth fighting for.

In addition, Maurice Blackburn will check your insurance cover and entitlements for free so that you know where you stand. If you get push back from an insurer when you should have cover, we can take your case on and fight for you. Call us on 1800 196 050.