Turning the Tide part 3 where the policy is confusing or you do not get a copy S U M M A R Y What is a ‘Standard Cover’ Contract? Special rules apply where the insurance company has failed to clearly inform you of the risks covered in your policy. You can claim for flood damage under these rules. These are called a ‘Standard Cover’ contract. A ‘Standard Cover’ contract requires the insurance company to pay for flood damage. If the written policy excludes damage caused by floodwater and this was not explained, you can make a claim under the Standard Cover contract. How do I tell if I have a ‘Standard Cover’ contract? If the insurance company failed to clearly explain or advise you that flood damage was excluded from your policy, you will have a ‘Standard Cover’ contract which will cover a claim for flood damage. If you were not given a copy of the policy, or if the wording is unclear or ambiguous then a Standard Cover contract applies. What is a ‘Standard Cover’ contract? If you were unaware that your insurance policy did not include flood damage, you may still be able to pursue a claim through Section 35 of the Insurance Contracts Act. Section 35 requires the insurance company to clearly inform you of the restrictions and cover provided by the insurance policy before you enter into the contract. The penalty if the insurance company does not do this is that the contract will have effect according to law and this includes cover for flood. This is a ‘Standard Cover’ contract. How does Section 35 work? The insurance company has to prove that Standard Cover does not apply. Accordingly, the Standard Cover prescribed by Section 35 will apply unless the insured was: clearly informed and advised in writing of the risks covered and excluded, before the contract was entered into; or otherwise knew or should reasonably have known the risks covered by the contract. The easiest way for the insurance company to avoid Standard Cover is by providing: a) all relevant information to you, before the contract is entered into, and b) this information clearly advised you that flood damage is not covered by the policy. The documents which may include information that flood damage is excluded are: the policy, if given to you at the time you took out the policy the proposal form the notice showing payment, if this specifies that flood damage is not covered notices/information provided at renewal, as each renewal is a new contract. It is important that you check the documents you have been given by the insurance company. A copy of your policy is available from the insurance company. Standard Cover does not apply if the policy clearly states the insurance company will not pay for flood damage, and you did not read the policy or you assumed flood damage was covered. When is the contract entered into? Standard Cover applies if you were not given written information which stated the flood exclusion before entering into the contract and you did not find out about the flood exclusion in any other way. It is important to consider whether any written information was provided before or after the contract was entered into. There are two situations: 1. When the policy under which the claim is made was taken out for the first time: Usually, the policy will be entered into at the time of payment of the premium. If the information about flood damage exclusion was only provided after this time, then Standard Cover will apply. If you paid the premium at the office and the policy was sent out in the mail afterwards, then you were not informed in writing at the time of entering the contract and Standard Cover will apply. 2. When the policy is renewed: A new contract is entered into each year on renewal of your policy. If a policy has been sent to you in the mail and a year later the policy was renewed, Standard Cover would not apply. Written information about the flood exclusion would have been provided after the first policy, but before the renewal. However, insurance companies sometimes change the wording of the policy at the time of renewal. These changes may further restrict the circumstances in which the insurance company will pay for rainwater damage (for example, by saying it will now only pay for it where the rainwater entered the house through a hole in the roof). If these changes were not made clear at renewal, then Standard Cover could apply. Was there a failure to “clearly inform” you? The obligation on the insurance company under Section 35 is to clearly inform you of the risks covered, so even if you received written information, a Standard Cover claim may still be possible. Case Study Where the insurance company did clearly inform the consumer In Decision 97-5791 the consumer had made a claim under a home buildings policy. The consumer argued that a Standard Cover contract applied. The Panel saw that the consumer had been provided with copies of the policy documents in in 1991 and 1996. It found that the wording of the policy was clear and that the policy had an index which made it easy to follow. Therefore the Panel found the insurance company had clearly informed the consumer of the restrictions under the policy and so Standard Cover did not apply. The insurance company was entitled to deny the claim. Standard Cover and mingled rainwater and floodwater One important situation where Standard Cover may apply is in relation to damage caused by both rainwater and floodwater which have combined together and become one stream of water BEFORE entering the home. Under the principle of Proximate Cause (see Part 4) the insurance company could refuse to pay the claim due to one cause of the damage was excluded under your policy. Rarely is this stated in the policy. If so, it may be whether the claim should be paid if the damage is the result of TWO causes. If so, then you can argue that Standard Cover applies. In other words, if you read your policy carefully you may be able to argue equally sensibly that: the insurance company can avoid liability because one of the causes (floodwater) is excluded you can make a successful claim because one of the causes (rainwater) is an insured risk. If so, then Standard Cover may apply as the policy has failed to clearly inform you of the risks covered under the policy. It is not known how the Panel will respond to such an argument. What is paid for by the insurance company under a 'Standard Cover' contract? If Standard Cover applies, under the Insurance Contracts Regulations, the insurance company is required to pay for loss from “storm, tempest, flood” for both building and contents insurance which can include: the total amount of damage to the house the costs of demolition and removal of debris any money paid for emergency accommodation the total cost of damaged household items. Turning the Tide 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

---

You are Required to Read the Copyright Notice & Disclaimer | Webmaster | Feedback

---

The information contained on this page is not legal advice. If you have a legal problem you should talk to a lawyer before making a decision about what to do. The information on this page is written for people resident in, or affected by, the laws of New South Wales, Australia only.