A Townsville veterinary clinic’s flooring damage claim has been upheld after the Australian Financial Complaints Authority (AFCA) found ponded stormwater runoff inundated the property before Ross River flooding caused later damage.

The disputed claim relates to the torrential rainfall that fell on Townsville during January and February last year, leading to the Ross River breaking its banks.

IAG’s Insurance Australia Ltd subsidiary initially agreed to cover roof damage caused by the rain, but assessed the floor inundation was due to river flooding and was therefore excluded under the policy.

A hydrologist’s report said surrounding paving sloped “slightly” up towards the building, stormwater pit inlets were nearby and rainfall in the hours before the initial inundation at around 10am on February 3 was insufficient to cause stormwater to enter the property.

The hydrologist said the topography would allow water to freely drain away from the building, while any backflow from the drains due to high tailwater levels in the Ross River would mean in those circumstances that flood would be considered the root cause of inundation.

The policyholder submitted reports from other experts who said inadequate consideration was given to the sheer volume of rainfall that fell during the 13-day event, and the hydrologist did not analyse the local stormwater drainage network.

The claimant provided photos showing clear-coloured water pooled in the streets, on the footpaths, nature strips and paving, and said there had been so much rain over a number of days that the drainage system was unable to cope and the water had nowhere to go.

AFCA’s decision says it was not persuaded that the sheer volume of pooled water in the streets and the nature of the stormwater drainage system could be discounted as relevant factors.

It also disagreed that water unable to drain away through the stormwater network should be considered flood, and pointed to the policy definition of flood which refers to “water that has escaped or been released from the normal confines” of a river.

“The panel does not accept that water which cannot enter the Ross River through the drains and other infrastructure due to the amount of water already in that river, is water which has escaped or is released from the Ross River,” it says.

The AFCA panel says that on balance it can’t be satisfied the insurer has established that the exclusion for damage caused by flood applies for the initial inundation.

“It is entirely possible that ponded stormwater runoff caused the initial above-floor-level inundation of the insured property, in which case the policy responds.”

Spillway gates were fully opened later that evening causing the Ross River to later overtop its banks in the vicinity.

AFCA ruled the insurer is still entitled to refuse payment for damage 50mm above the floor, in accordance with the policy wording, as the problems at that height were caused by the later river flooding.

The decision is available here.