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Insurance claims, natural disasters and the law

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The following can be attributed to Slater and Gordon Lawyer Lara Nurpuri.

Five of the most common mistakes people make when disputing insurance decisions:

  1. Not reading the policy thoroughly: Exclusions vary between policies. It’s important to check the exact wording of your policy, as well as noting any unclear terms, so you know exactly what you’re dealing with.
  2. Automatically accepting a rejection letter: If your insurance company formally advises that they’ve rejected your claim, ask for reasons why and whether there is any kind of documentation or evidence that could change the outcome. Don’t be afraid to ask questions.
  3. Providing insufficient evidence: Home and business owners often make claims that lack detail or are not properly supported by evidence. Getting it right the first time can make a huge difference, but if your insurance company says you’ve missed something, ask them exactly what they need and try to provide it to them.
  4. Failing to utilise the internal dispute resolution services: Every insurance company is required by law to have an internal dispute resolution process. They have up to 45 days to complete the review and the outcome may be exactly the same, but the process can identify and correct administrative errors.
  5. Giving up: If your insurer knocks you back at every level, there are still options, including making a complaint to the Financial Ombudsman Service. They will try to mediate your claim and will make a determination if necessary. Your insurance company must accept the Ombudsman’s determination; however it will only be binding if you accept the determination as well. If you don’t agree with the Ombudsman’s final decision, you can pursue your dispute through the courts.

Common questions about insurance and natural disasters:

  • Definition of flood: There is now a standard definition of ‘flood’ that applies to every insurance product that includes flood coverage. This is guaranteed by law so an insurance company cannot try to apply a different definition.
    • The definition of flood is: the covering of normally dry land by water that has escaped or been released from the normal confines of: any lake, or any river, creek or other natural watercourse, whether or not altered or modified; or any reservoir, canal, or dam.
  • Exclusions: However, there are some common exclusions that apply to flood coverage. These vary from policy to policy, so you’ll need to check the fine print, but usually these are not covered:
    • Damage by ‘action of the sea’ (including king tides for beachfront properties)
    • Damage to retaining walls
    • Damage to boat jetties or pontoons
    • Loss or damage caused by subsidence or landslide is rarely covered. However, some insurance companies have made allowances so that damage caused by a landslide or subsidence that is caused by flood is covered.
      • You need to read the policy wording very carefully, because landslip damage is usually excluded if it is caused by erosion over time, structural fault or design fault.
      • Additionally, there are time limits that can apply to coverage for landslip caused by flood (the damage usually needs to have occurred within a few days of the flood to be covered).
  • Optional flood cover: Sometimes flood coverage is included as standard, but sometimes you need to opt-in (especially on small business insurance policies). If you don’t have flood coverage in your policy, think about the cause of the damage. Storm and flood coverage are two different things and it might be that the damage is covered under storm, rather than flood.
  • Disposing of damaged goods: Most insurance policies require ‘proof of loss’ before they will pay out a claim. In a flood or storm situation you will need to be able to show the assessor the extent of the damage. Obviously there are health concerns that require disposal of flood-damaged items and this should be taken into consideration by your insurance company. However, the best way to avoid an insurance headache is to take lots of pictures or videos of the damage and keep any items that might be able to be repaired.
  • Emergency repairs: If emergency repairs are needed, your insurer will ask that you inform them before you start because unauthorised repairs or building work may not be covered. This is obviously dependant on the situation. If a situation is life-threatening or dangerous, the first priority should be to make the structure safe. A builder’s report from the people who carried out the emergency repairs should be evidence of the extent of the damage.