Law for All podcast episode 3 transcript
Dealing with insurance and damage when natural disasters hit
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In Queensland, it seems if we're not experiencing Cyclones and storms with high winds hail and flooding, we've got fires. And occasionally, they both even happen at the same time in different parts of the state.
Today one of our senior lawyers. Paul Holmes is going to chat about what his legal tips are when it comes to dealing with natural disasters; what you can do beforehand and of course afterwards. And we hope these tips will help reduce your stress if you live in a high-risk zone.
So Paul, let's start at the beginning. You are a consumer advocate when it comes to a natural disaster, why does Legal Aid end up getting involved?
Legal Aid Queensland's there for people when Queenslanders are in trouble and following a natural disaster, people's lives get turned upside down and so Legal Aid’s in a great position to help them with issues such as debt and bankruptcy, employment issues that often happen following a natural disaster, your family law issues, crime and insurance.
So you've worked with quite a few big natural disasters…
The first major one I was involved in was flooding that started in regional Queensland at the end of 2010; the Brisbane and Ipswich floods and Lockyer Valley in early 2011 in January, and then 10 years ago now Cyclone Yasi was hitting North Queensland. And since then we've been involved with every natural disaster that's happened in Queensland and have been helping people with their insurance along the way.
So why is it that you end up seeing people about insurance?
What we see regarding insurance complaints is people who’ve either had their insurance refused when they've made a claim, or for some reason their insurance has lapsed and a seeking help about whether they have any rights. Let's be honest following a natural disaster, we see it will take people anywhere between three to five years and sometimes longer to get their lives back on track both financially and dealing with the trauma that happens in a natural disaster.
So tell us about some of the pitfalls that you've seen – what are some things that people shouldn't do?
Unfortunately, one of the things about natural disasters is that in addition to seeing the best in people, and you see some wonderful people following actual disasters, there are always people that come out offering to help for a fee and don't necessarily come good with that help they are promising. So for example, they might offer to manage your insurance claim for a fee or percentage of the claim you getting paid.
It's worth remembering that it's free to lodge an insurance claim and it's also free to complain if you feel your insurer is not doing the right thing about you to the Australian Financial complaints Authority. You shouldn't have to pay anybody any money in order to have a successful insurance claim.
The other thing that happens is you might get what I'll kindly describe as unlicensed workmen coming around to your property offering to fix your property for a fee. Generally speaking, they don't do a very good job and the added problem for you is if they do the work you don't get the benefit of the guarantees that insurers offer when they're approved workmen fix the damage to your property.
Similar thing happens with cars. If your car gets affected by a flood or a bushfire only give that car to somebody sent by the insurer, for example, the government won't pay to tow your car away for you and if somebody says that's happening, they're not telling you the truth.
Unfortunately, we've seen that as recently as last year following some storms in Brisbane.
Let's have a look at what people if they live in a high risk area, what should they be thinking about doing before any natural disasters could happen?
In our experience people don't tend to look at their insurance policy until something's gone horribly wrong. And that's often too late to work out whether you're covered by what's happened to you or not. I always think it's a great idea to check your insurance policy yearly to make sure it covers you for what you want because in our more mobile society people move property a lot more than they used to and what protects you at one property, like on if you're in a low lying area you need protection from floods, might not protect you if you move to a more arid area of Queensland where bushfires might be a risk.
So it's always important to have a yearly look at your insurance policy and make sure it protects you against these major hazards. Work out what you covered for and if you're not sure, ring up an insurer and ask, “Am I covered for this?”
What if times are a bit tough financially and say for example, you're renting, and you can't afford to pay your insurance for your house and contents.
Be careful just going for the cheapest policy because the cheapest policy doesn't always give you the best coverage and having insurance for some things is always better than having no insurance at all. Particularly following COVID, there are still a lot of us in financial trouble and times are tough, but it's important to prioritise where you can protecting yourself and your property from as much potential danger as you can afford to.
I guess I've heard people say, oh, well, I don't really have much that's worth anything to ensure anyway, but is it the cost of replacing that you know, the cost of replacing is pretty huge… and I think that's one of the hardest things for people to conceptualise.
In today's society, mostly we all have a lot of stuff. If we had to write it all down and we’d probably struggle but when you add it all up, it adds up pretty quickly and having that sort of conversation with an insurer about what amount of content [coverage] you need is a really important one because it's only once you have to start replacing things that you realise how costly it can be.
The other thing that's worth talking about in that space is the importance of if you've got a house and you've got a mortgage even if times are tough, there's still usually a requirement in your mortgage to keep your house insured and it's really important to be aware of that because if you have an uninsured house and your mortgage says you must have insurance, you're actually in breach of your mortgage. And if you're in breach of your mortgage, there's a risk that the bank might try and repossess your house from you because they are trying to protect their assets because if it's uninsured and it was to go up in flames you might end up owing the bank a lot of money.
Once you decide on insurance, what should you do?
I would keep a very clear record both of the policy and any of the important details and I'd keep that in a safe place with other important documents, like for example, your passport and other important ID documents like that because in the middle of a natural disaster, the last thing you want to have to do is madly scramble around the house to five or six different places trying to find these documents when you really should be getting out.
What's the very least in information that should be keeping in that one central place?
I'd have a passport, I'd have my insurance documents, the other thing I keep and this is a personal thing, I keep a list of the valuable property in my house so that if it happens and I'm under a lot of stress, I don't have to stress myself out even more by trying to remember what's there.
I guess keeping a document or keeping contacts in the phone of who your insurer is as well. Particularly, you know if you go through a more an insurance broker or whatever. You may not necessarily easily. Remember? No, no, no particularly a traumatic situation too.
And the other important bit about that is don't necessarily feel you need your issurance policy number there. As long as you've got your insurers name, they should be able to identify you through other means rather than the policy number.
Could you scan copies of documents and keep them on the cloud?
I think it if you're comfortable with technology and you've got a safe place online – not a bad idea at all. The thing to remember there is if you're going to do that, make sure it's cyber secure and it's not at risk of being hacked.
What we just chatted about is what you can do before a disaster happens. Is there anything you can do at the time?
The priority should always be keeping yourself and your family as safe as possible in a natural disaster. And then as soon as you can after an event jot down some notes about what you've seen, what you remember because that can be really important information if an insurer was to question the validity of your claim.
And so once things are safe again, you've been able to work out, what's been damaged or destroyed. What are the first things you should be doing? Talk us through that process.
So I would always as a first port of call make sure I lodged a claim. There's often following a natural disaster lots of rumours that go around in the community about “Oh you'll only be covered if this happened or you won't be covered if the rain hit after a particular time”. You're not the experts in the weather and you're not the experts in your insurance policy.
No listening to the bush Telegraph, lodge the claim and let the insurer make that decision based on what you've experienced and what's happened to you in your local area.
[Should] You take any pics of your property?
Absolutely the more pictures the better because it gives you as close as possible a contemporaneous record of what happened to you and that can be really important.
How soon should you do that?
Do you mean making the claim? Yeah - day after A day after would work, absolutely and be aware that sometimes following a natural disaster, there can be a bit of a wait time on the phone and if your insurer’s got an online claim option and you have access to a computer and a lot of us have internet on our phones now, that can often be an easier way. And I've spoken to some people that thinking an online claim was less stressful for them because it didn't feel like they were having to tell the story again, to somebody else, but that's a very personal decision depending on your experience.
What should you expect once you've lodged your claim then?
The first thing that happens usually is the insurer will send out an assessor to your property to look over the property and the damage that has happened to it.
At that point, I always encourage people to tell the assessor the story of what they saw if they have videos or photos of what happened that's really important information. And the reason I say that is people often think “Oh, well the experts are looking at what happened to the ground and the runoff and things like that.”
But sometimes the story that presents can be different to what people experience and that's not the assessor trying to do you out of an insurance claim, it's just sometimes the ground doesn't tell the full story of what happened to a property. So always give that information because it's so important to the success of your claim. So things like where did I see the flames come from, or in a flood the water came up down the road or out up out of the drain down at the next corner. All of those things are really important.
The other thing that will happen at that point is if your property has been totally destroyed, you're going to want to make a claim on your contents that we were talking about earlier. And if everything's gone, I'm seriously questioning what value it would be if an insurer would ask you to give you a list of everything you've lost. To me that's unnecessarily traumatising people when they're already traumatised enough and if that happens to you following a natural disaster seek legal advice about that immediately because I don't think that's an appropriate thing for an insurer to be doing and unfortunately in the past – it’s occasionally – something that clients have experienced.
What happens then is the assessor will write a report for the insurer and the insurer will look at that and make a determination around whether the damage that happened to you or your property fits under your insurance policy. If it fits you get paid if it doesn't fit, then they will deny the claim. The thing to remember is sometimes there can be a bit of a delay between you lodging a claim and you get a notification about whether you're going to be paid or not.
What kind of delay we're looking at?
The thing about natural disasters is the usual time limits that apply under the insurance code – the general insurance code of practice – don't usually apply and so it's difficult to give you a precise time there just that the insurers are expected to work through those claims as quickly as they possibly can and in the majority of cases they do do that quite quickly; where it can go wrong is when for example, they don't have enough assessors to go out and assess all the damage and unfortunately in Australia, that's a reality of what happens.
And so if your claim is paid, I understand you've got options?
If your claim is paid most people think okay, great. I can get some money and there's actually a couple of different options.
One is a cash settlement and the other is having your insurer rebuild the property for you. And there can be pros and cons to both options. The thing for me is that there are certain circumstances that if you fit into them a cash settlement can be a good idea. But if you don't fit into them, it's not such a good idea.
Give us the pros and cons for a cash settlement.
So the thing about a cash settlement is it gives you some money up front and if you're somebody that wants some control over the rebuild you would then have that control.
The danger there is most people underestimate how much work it takes to organise builders, various other tradesmen, get them to the property at the right time to do the work in the right order that's needed to properly start rebuilding the house.
And also if there are variations in cost… exactly and that's the other thing if you're asking for a cash settlement make sure it reflects the cost you will have in rebuilding the property and not the insurer because the insurer being as large as they are can get what's called economies of scale and can get that labour often and that work done often cheaper than you would be able to go as a person yourself into the community.
The other thing to be aware about a cash settlement is if for example, you've been a victim of a bushfire and you don't want to rebuild in that area, then it can be a good option for you because it allows you some cash maybe to look at moving somewhere else and building somewhere else and then you can sell the property.
The danger there for you is following a bushfire, the properties that have been affected generally aren't worth as much as they were before the bushfire.
What happens if you get the insurance, to rebuild your property then?
I'm personally a fan of getting the insurer to rebuild it because of the guarantees they offer on their work. Various insurers and some of them will offer a lifetime guarantee on the work that's done by their approved Builders not all of them, but that's pretty damn good because it allows you some peace of mind that the rebuild has been done to a really high standard.
The risk or the feedback I've had about people not liking that option is sometimes they feel it can take a really long time. I would balance that out with the idea that if anybody's got the ability to get tradesmen to an area and to get work done, it's big insurers who have logistical capability that you and I could only dream of.
Now in this process though there's some furphies out there that often come out on that bush telegraph.
So if you agree to have your insurer build the property, or have the insurer pay somebody to rebuild the property, what happens next is a scope of works will be done. And that's a complicated name for a document that is essentially a project plan which will list all of the things that the insurer says, were damaged and are covered by the insurance policy.
So you might get a list of 10 or 20 pages saying “Rght rear window needs replacing… strut on this particular portion of the roof needs replacing.” When you get that, that can initially be a little overwhelming and people are often worried about “Have we covered everything and what happens if I find something that goes wrong later on?” Let's let's lay to rest some of that stuff.
I think the key bit when you get a scope of works is usually by this point most people are pretty clear on which parts of the house are damaged and which parts aren't, so I always recommend having a good look at the scope of works and saying, okay do I think all the damage is covered, and if you don't understand some of the technical language, ask them what it means and if they can't tell you, ask more questions until somebody can explain what it means because that's the only way you'll feel comfortable that your property is being repaired properly and most insurers and builders I’ve encountered don't have a problem with people asking reasonable questions to make sure they’re covered.
The other thing is though, when a rebuild starts often further damage comes up as builders start delving into the slab and starting to rebuild. If that happens, that's okay because then what you say to the insurers is we need to vary the scope of work or we need to add to it.
So there's no problem with saying look we've uncovered more trouble?
No problem in the world. Yeah, because one of the furphies that's out there is that your scope of work has to be 100% right before a builder starts to rebuild your property. And the practical reality of that is that's just not possible in a lot of cases because not all damage is immediately apparent.
So be confident in that. There's also, and this is going back to cash settlements, just for a minute, there's also a clause in the General Insurance code of practice that if you take a cash settlement within a month of a natural disaster, you've actually got 12 further months to raise other issues that become apparent to you that the natural disaster caused.
So the doors haven't closed behind you?
Yeah, the doors haven't closed yet.
Even though they've got your money?
Even though you've got your money, so long as that extra damage can be shown to be linked to the natural disaster. If for example the damage was already there, that's not the insurer’s fault and that's where the cash settlement will often come in that we haven't talked about because an insurer might work out that they can't do their proposed fixing of the property without you fixing the existing damaged first. And so they'll often in that scenario, they will offer a cash settlement and it falls on you to fix the property in that way.
So what happens if say for example, I disagree with the scope of works or with the cash settlement figure that the insurer is offering to me then?
So if you are not happy with what you're offered, your first port of call is to ask your insurer’s internal dispute resolution area to have a look at your complaint and they’re a separate section of the insurer to the claims area and they effectively have a secondary look at your claim to see whether the insurer made the right decision originally.
It's usually not enough to say to the insurer “Look I disagree with you.”
Usually it's nice to come up with some evidence...
Yeah, it usually helps if you're able to say look you made the wrong decision because the water came from the other direction, or you made the wrong decision because the damage wasn't already there and here are photos of my house before it happened. So they will have a look at that. They generally have 45 days from when you make a complaint to review it and they'll come back to you with a decision either saying “yep we agree with you and we're paying you more” or “No, we don't agree with you, what's been offered is all we're doing” and if that happens your next option is to lodge a complaint with the Australian Financial Complaints Authority and me being me, I'm lazy and nearly always call them AFCA.
Right So how do you do that then?
So they have an option of you ringing them up, or lodging a complaint on their website, which is www.AFCA.org.au and there's a really easy to follow online form that you can enter your details in and lodge the complaint. AFCA is a free service and an independent Ombudsman who take an independent look at what's happened to you and whether they think your insurance policy covers what happened to you.
What happens if your claim is refused?
So if your claim’s refused the same complaints process applies.
Why would a claim be refused – let’s firstly touch on that?
Typically in our experience, a claim will be refused if there's an exclusion to your insurance policy. So, some people for example, will have a flood insurance exclusion in their policy, which means that if their property’s affected by a flood as opposed to a storm, then they're not covered. And the reason we recommend seeking legal advice in that scenario is it can often be a very technical discussion about whether the water but first came on your property, fell from the sky or came up from a river.
Another reason will be that your insurance policy has lapsed and that might be because – common scenarios – you might have moved and not got the renewal notice or forgotten to make the payment. The thing about that scenario is there's really specific rules in the insurance contracts act about when and how and insurer can cancel the policy and what notice they need to give you. So if that's the reason given to you for your claim not being paid, it’s often really important to get legal advice to make sure that the insurer’s done the right thing and followed the right procedures.
What if you're still insured and you've moved, but you forgot to update your address?
That's very much a case-by-case discussion about exactly what happened and what sort of notification was given, but there is a risk in that scenario that if you haven't changed the insurance policy over it doesn't apply to your new your new property.
And what also – I'm playing devil's advocate here – what also if you know there's a natural disaster on its way and you call and you get yourself a cover note?
Yeah and the thing about cover notes and applying as a natural disaster is coming is that many insurers have what's called an embargo, which means that if you ring up from a particular area within say 48 hours of that natural disaster trying to get a policy they'll probably still give you the policy, but it won't apply until a date in the future.
So reinforces what we're talking about earlier, it's important to be on top of what insurance you've got and what it covers you for, because if it gets to the stage where a natural disaster’s nearly here, it's nearly impossible to get insurance that will cover you for what's coming.
The insurer’s access to weather data and what's coming and where it's coming is highly sophisticated and often far better than any data you or and I will have access to.
We went off on a bit of a tangent there… So what does happen if your claim’s refused then?
So you make the same complaint to an internal dispute resolution area and if that doesn't change the insurer’s view you make a complaint to the Australian Financial Complaints Authority. And in the past when we've lodged a complaint with the Australian Financial Complaints Authority, we've been successful in resolving and turning around some refusals and we've lost plenty of cases too.
The thing about AFCA in my experience though, is they do their utmost to get the experience of everybody involved in the disaster, so that they can make the best possible decision they can.
And that in the past has often involved decision-makers at AFCA actually going out to your property and having a look at what happened for themselves. Not in every case, but they have done that in the past in a number of cases and to me that's a really important thing because then you know, the decision makers actually been on the ground and has a bird's eye view of the property and what could have happened to it.
So going back to an earlier comment, we were discussing the pitfalls. We've seen companies advertising that they can get insurers to pay claims. What's the deal with that?
These companies purport to be able to make insurers change their mind when they refused your claim, or they purport to be able to get them to pay more than they've offered you for resolving a claim. Sounds too good to be true… In a lot of cases I've seen it is too good to be true. The complaints processes for disputing an insurance claim refusal are completely free and they don’t require a lawyer.
You're actually able to do the work that they purport to be able to do for free and these companies will often charge a significant amount of money, or a percentage of any successful claim in order to do work that you, with the assistance of ourselves and the insurance law service are able to do for free. I'm always wary of claim services promising the world because often many of them can't deliver.
So finally, where can people go if they need help because they're not happy with their claim outcomes resulting from a natural disaster?
If you've had any legal problems arising out of a natural disaster and you want to discuss them, please call our natural disaster line, which is 1300 527 700 or jump on our website legalaid.qld.gov.au/naturaldisasters
Last updated 23 March 2021
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