A Suncorp customer who made an unsuccessful claim for business interruption (BI) losses incurred during a flood catastrophe last year has won his dispute before the Australian Financial Complaints Authority (AFCA).

The losses were caused by power cuts and lack of access, but the insurer declined the claim, citing an exclusion for damage caused by flood in the policy held by the complainant, who runs a small business and is represented in the dispute by his broker.

The complainant had made a claim for BI losses of $40,000 and stock losses of $32,262 plus statutory interest. He also wants the insurer to pay $10,000 in claim preparation costs.

A goodwill offer made by Suncorp to pay about $13,628 for four days of BI losses did not go far enough for AFCA, as it ruled the insurer failed to prove it could rely on the flood exclusion to deny the claim.

AFCA backed the complainant’s position that the losses were caused by electricity interruption and road blockages, rather than the flood event itself.

“The Panel accepts that the threat of flood likely caused the authorities to cut the power and to block roads,” AFCA said in the determination.

“However, the Panel is not persuaded that this is the same cause, for the purposes of the policy, as floodwater itself.

“The premises were ultimately not flooded. Floodwater itself did not touch the stock and the parties accept the power cut caused the stock to spoil. Neither storm nor floodwaters damaged the electricity supply.

“These factors do not support the insurer’s view that flood, rather than the threat of flood, leading to power and road closure, caused loss. The panel is satisfied that the threat of an event is too remote and not sufficiently proximate to trigger the policy exclusion.”

AFCA also rejected the insurer’s argument that the flood exclusion should apply since the complainant did not purchase the optional flood cover as was outlined in the product disclosure statement.

The dispute mediator says it is not convinced buying the optional cover would have ensured the claim would be accepted, since floodwaters did not touch the stock or disrupt the electricity supply.

Suncorp must pay the BI claim from February 2-9 last year, with the amount to be decided based on information provided by the claimant. The final amount will include interest dating back to August 9 last year, the date of the internal dispute resolution response.

The insurer is also required to pay the stock sum insured of $33,262 plus interest as well as claim preparation cost of $5000.

Click here for the ruling.