A butcher that sought cover for loss of stock and profits after its store lost power has won a dispute over its insurer’s application of a flood exclusion. 

The complainant lodged the claim after the business in Ballina, NSW, lost power during the Northern Rivers floods in early March 2022. It said this caused refrigerated stock to be damaged and prevented the store from operating. 

QBE said the power outage was attributed to the deluge, citing a hydrologist report stating the blackout was “likely the direct or indirect result of flooding”. The insurer also referred to a March 28 letter from the property’s energy provider, named as EE, that reported a power supply interruption “due to severe flooding” and “extensive damage” to the energy network.  

However, the complainant noted the timeline of power outages in the region showed the energy provider had turned off power to help ensure community safety before the floods. 

The insured said more than 1000 people had been without power on March 1 and an update on the provider’s website at 11am on March 2 said EE crews had “turned their attention to ensuring the safety of customers in newly impacted areas through the de-energisation of power in Ballina”.  

An Australian Financial Complaints Authority panel says it is “not clear” why residents were without power on March 1, given the nearby river broke its bank the day after. It accepts that the claimant’s evidence suggests there may have been other causes for the power outage besides the flood.  

“The description in the web updates of EE ‘de-energising’ parts of the local network was linked to activities other than just repair due to flood, such as assessing damage and as a safety measure for the community,” the authority said. “These are only some of the possible reasons why power may have been interrupted at the insured address at the relevant time.”  

The panel also says the hydrologist report was based on “general observations about how weather can impact supply” and that it conceded the cause of the outage was “not entirely known” because there had been no electrical investigation. 

The authority agrees EE’s letter suggested the floods affected the power outages, but says its live updates provided a more “nuanced and specific” explanation of events. 

The dispute also focused on QBE’s contention that the loss of stock was not covered by the business insurance policy’s contents benefit, which responded to physical loss or damage to property. It said the refrigerated stock damage was a “consequential loss” and would have been protected only under extra cover that responded to a “direct result of damage to other property insured which is critical to your business”.  

However, the panel has challenged the insurer’s explanation, saying the insured established a valid claim for the loss and there was no reason for the stock to be considered separate from the property.  

“The insurer has not explained why the claim was only assessed under this extra cover,” the authority said. “It has not explained why the main insuring provision set out ... does not apply. In the panel’s view, it clearly does. 

“The refrigerated stock is the property insured by the policy and it suffered physical loss or damage during the period of insurance. It is unclear how such a loss could be considered consequential in such a context.”  

Click here for the ruling.