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Turning the Tide: Floods, Insurance and you A guide to getting your insurance paid This guide is copyright. Non profit community groups have permission to reproduce parts of the report as long as the original meaning is retained and proper acknowledgment is given. All other persons and organisations wanting to reproduce material from the report should first obtain permission from the publishers. [Publications Manager, Legal Aid NSW PO Box K847 Haymarket 1238] Copies are available from the Commission's Community Education and Publications Unit (tel 02 .9219 5028) at a cost of $5.00, November, 1998. part 1 : how to use this guide part 2 : what does the policy say? part 3 : where the policy is confusing or you did not get a copy part 4 : what caused the damage? part 5 : getting organised part 6 : what if the claim is rejcted? part 7 : other issues contacts part 1 how to use this guide In recent years, parts of Australia have been ravaged by flood. Australians have lost their homes and their possessions. After the waters recede, the next battle begins: the fight with the insurance company to pay for the loss. This Guide is to assist you when dealing with your insurance company, and presents a range of arguments which may help you have your claim paid. You are now able to pursue these claims, without having to go to court, through the development of an effective alternative dispute resolution scheme. This Guide deals only with claims under home building and contents insurance policies, and not other types of insurances. It does not deal with the question of the liability of third parties such as local councils, land developers, mining companies or builders. Whether any third party should have to pay for the damage is an issue that will vary from case to case. Legal advice needs to be obtained in relation to the specific facts and circumstances of each case. Rainwater and floodwater The most common area of dispute with insurance companies is whether the damage was caused by “flood” water or “rain” water. There are three possibilities: 1. The damage was caused by rainwater 2. The damage was caused by floodwater 3. The damage was caused by rainwater and floodwater that mingled or combined before entering the house. Nearly all policies state that the insurance company does not have to pay for damage caused by floodwater. This also means that the insurance company does not have to pay for damage caused by mingled rainwater and floodwater. However, there are a number of ways in which you may challenge decisions by insurance companies who reject your claim:
b) establishing that rainwater is the effective or “Proximate Cause” of the damage and not the floodwater; or c) using Section 35 of the Insurance Contracts Act 1984 (where this applies, special rules require the insurance company to pay for loss caused by floodwater, irrespective of the actual wording of the policy). These arguments are discussed in Parts 2, 3 and 4. To get the insurance company to pay the claim you must find out where the water came from and show that it was rainwater. There is often a need for evidence from experts such as hydrologists. Such reports can be expensive so communities should organise themselves and share this cost and information amongst themselves. The evidence that is required to determine the cause of the damage is discussed in Part 5. What if the claim is rejected? The development of an alternative dispute resolution scheme for insurance companies, called Insurance Enquiries and Complaints Ltd (IEC), has made it much easier for you to chase insurance claims. This scheme is free. Where the insurance company rejects a claim, by using this scheme, you can take the matter further without the need for lawyers. The scheme has two stages:
2. if still unsuccessful, a complaint to the IEC. Decisions of the Panel are referred to throughout this Guide (eg. Decision 95-1376). It should be emphasised that the Panel is not obliged to follow earlier decisions. Each case will be decided on its merits. The Panel decisions only represent lines of argument for you to use, with the Panel being free to accept or reject them. The operation of the Panel is discussed in Part 6. What laws apply to insurance companies? The Insurance Contracts Act 1984, an Act of the Commonwealth Parliament, sets out the ways in which insurance companies must behave. The main aspects of the Act relevant to water damage claims are: (a) Duty on the insurance company to act in good faith. Section 13 of the Act imposes a duty on both the insurance company and you, the consumer, to act in the utmost good faith towards each other. The duty of utmost good faith can help you by allowing you to argue that the insurance company should:
(b) The insurance company must pay for floodwater damage under a Standard Cover contract. The effect of Section 35 of the Insurance Contracts Act is, that if an insurance company fails to clearly inform you that floodwater damage is excluded under your policy they must pay for flood damage. This is discussed at length in Part 4. Apart from the Insurance Contracts Act, insurance companies have been subject to the General Insurance Code of Practice from July 1996. The Code is referred to in this Guide where it can assist you with your claim. The information on the law and the operation of the IEC is correct as at October 1998. Is Legal Aid available for insurance disputes? In NSW, legal aid is available for disputes with insurance companies. Each application for legal aid is assessed by the Commission examining both the merits of the case and the income and assets of the person applying, and then making a decision as to whether legal aid is granted. Applications can be made through the offices of the Commission or by a private solicitor on your behalf. Should insurance companies be made to offer flood insurance? The insurance industry in Australia argues that if it was forced to cover flood damage, the cost of the premiums would be too high. In the USA, consumers can purchase insurance at affordable rates (eg. a flood insurance policy costs $300 a year for $100,000 coverage). This is due to the United States government adopting a National Flood Insurance Program. This program requires communities to take steps to restrict the damage that results from floods, thus reducing the level of future claims and allowing the cost of insurance premiums to stay low. If you believe insurance companies should provide insurance against flood or that this question should be properly investigated, you can write to your local Member of the Commonwealth Parliament. part 2 : what does the policy say? part 3 : where the policy is confusing or you did not get a copy part 4 : what caused the damage? part 5 : getting organised part 6 : what if the claim is rejcted? part 7 : other issues contacts |
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