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What caused the damage to my property?

Summary

How is the cause of the damage and loss decided?

The cause of the loss or damage depends on each case’s individual circumstances. If the cause was flood damage, and this is excluded under your policy, then the insurer can refuse the claim.

What if the loss is caused by rainwater and floodwater?

There can be more than one cause of the damage, and if it was caused by combined rainwater and floodwater entering the house, then the insurer can still refuse to pay the claim.

Do hydrologists always get it right?

Insurers usually obtain hydrologist reports to confirm if the damage was caused by rainwater or floodwater. These reports recreate the events and suggest the maximum level the water would have reached if it was only rainwater. These reports are not conclusive; they can be based on false assumptions and can be inconsistent with eyewitness events. If so, they may be challenged as incorrect.


What is a proximate cause?

Where your policy excludes liability for flood damage, it is necessary to establish the cause of any damage as there may not simply be one clear cause of the damage. Where something is a direct or immediate cause of the loss, it is referred to as a “proximate cause”.

If your policy does not cover flood damage the insurer can refuse to pay the claim where rainwater and floodwater are both found to be proximate causes. The courts have said that where a loss is the result of two proximate causes, one of which is insured against (rainwater) and the second is excluded (floodwater), then the insurer is entitled to deny liability. If both contribute to or are direct causes of the loss they will be considered “proximate causes”. For example, if the mixed waters are 55 percent rainwater and 45 percent floodwater, the insurer can deny the claim.

However, each case will depend on its facts. It may be possible to get the claim paid where rainwater was the proximate cause and the floodwater’s effect was minimal or insignificant.

Proximate cause means the insurer can deny a claim when:

  • the policy excludes damage caused by flood
  • floodwater is found to be a direct or immediate cause (even if rainwater is also an immediate cause).

Case study: Where the rainwater came in first

In Decision 94–997, the rainwater entered the house first and was followed by a surge of floodwater. The panel decided:

  • the insurer had to pay for the damage caused by the rainwater
  • the insurer could refuse to pay for any damage caused solely by the increase in the water level in the house after the initial rainwater by floodwater
  • if it is not known which damage was caused by the floodwater or rainwater then the insurer should pay for the whole amount of the loss. This is important as it may be difficult to determine which part of the damage was done by floodwater after repairs have been made.

The principle of proximate cause is applied in the following ways:

  1. the proximate cause is the “dominant, effective, immediate or direct cause”
  2. the fact one cause is first or last in time does not determine the proximate cause
  3. there may be more than one proximate cause
  4. a commonsense approach is taken to finding the proximate cause.

The following principles apply to water damage:

  1. where rainwater came before the floodwater, the insurer must pay for the damage
  2. where rainwater came after the floodwater, the claim may be refused by the insurer

    However, if some of the damage to the house can be specifically identified as having been caused by rainwater (eg damage to the roof or rainwater leaking into the walls or other parts of the house), then the insurer must pay for that damage
  3. where the loss is caused by rainwater and floodwater that have mingled together before entering the house, then generally the insurer can refuse to pay the claim.

Case study: Where floodwater was not a proximate cause

In Decision 95–1369, damage was caused by water that was a combination of rainwater and floodwater. The panel reviewed the facts and decided:

  • the floodwater formed a small percentage of the water that entered the house
  • the rainwater was sufficient to do the damage without the floodwater
  • the floodwater’s volume was too low to enter the house and would not have caused any damage
  • the panel held that the floodwater was not a proximate cause of the damage to the house and that the insurer should pay the claim.

What should I do if my insurer gives me a hydrologist’s report?

Insurers often have reports from experts, such as hydrologists, to try and determine the origin of the water that caused the damage. These reports try to reconstruct ways in which water levels rose and the source and direction of water flow during the storm or cyclone’s course. These reports are not without flaws as they may rely on incorrect assumptions or information.

Insurers may provide you with copies of these reports and you should read them carefully.

You may challenge the report if it is contradicted by eyewitness accounts, or if the report has incorrect assumptions about when or how the water reached particular areas, and the time and height that water levels peaked. However, even if these assumptions are shown to be incorrect, you must still show the damage was caused by the rainwater.

It is important to get legal advice.

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