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On a floodplain but no flood cover: Elders wins $30,000 claim dispute

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Farmers claiming $30,000 to repair flood-related damage to a Tweed River property after Cyclone Debbie have lost a dispute with its insurer.

On the morning of March 31, 2017, the farm - located on the southern floodplain of the Tweed River and consisting of numerous residential and commercial buildings and out buildings – was inundated with water, flooding the ground floor of a two-story main building to almost two metres.

The farmers - who did not have flood cover - disputed Elders’ assessment that their property was inundated by Tweed River floodwater from the southwest of the property.

They argued the damage was caused by a shallow overland flow that formed prior to becoming flooded.

The Australian Financial Complaints Authority (AFCA) said Elders was entitled to deny a subsequent claim for substantial damage as its farm policy specifically excluded loss or damage arising out of flood.

The farm insurance policy was taken out several years prior to the claim and the owners were made aware their policy did not have flood cover at numerous renewals.

Legally, once rainwater mixes with flood water it is all considered flood water and so where this causes damage, a flood exclusion will usually apply to defeat the claim.

AFCA ruled Elders was entitled to deny the flood damage and was only liable for $675 for plaster repairs and $2,480 for repairs to the roof for storm related damage.

The farmers’ policy covered physical loss or damage caused by storm (including cyclone or hurricane) and/or rain. Flood was not covered and was defined as the covering of normally dry land by water released from the normal confines of a lake, river, creek or other natural water course, or a canal or reservoir.

An Elders hydrologist performed a number of site inspections and determined the water inundation was due to Tweed River floodwater. By the time the property was affected, unusually heavy rainfall the night before had almost ceased and rainfall intensities would not have generated sufficient runoff to cause stormwater inundation of the property, the hydrologist said.

Stormwater runoff inundation usually correlates with maximum intensity rainfall and is no more than 50 centimetres while the farm building was inundated to 1.9 metres. That “suggested that there was flood damage rather than damage caused by rainfall as rainfall runoff does not rise to such depths of water”.

The peak rainfall intensity occurred about four hours prior to the first reported inundation and there had been a significant drop off in rainfall in the preceding hours.

“There was little rainfall on March 31 2017,” AFCA says. “The panel accepts that stormwater runoff is generally associated in the time with intense rainfall periods and that the inundation did not occur during such period.”

AFCA said its panel accordingly accepted the “conclusion that the inundation at the complainants’ property was not caused by stormwater runoff and the inundation was the result of floodwater from the Tweed River”.

See the full ruling here.