Auckland Floods ... Insurance recovery / Important considerations
The damage caused by the recent torrential rain events across much of the north island of Aotearoa New Zealand have been devastating, with it already labelled as one of the largest, if not the largest, climate event in New Zealand’s history. Our immediate thoughts go out to those affected.
Littered throughout media articles, as many will have seen, are details that reveal the staggering extent of damage. As reported by the Insurance Council of New Zealand, 20,000 claims had been received as of 3 February 2023 with the expectation of this number growing as echoed by finance minister, Grant Robertson.[1],[2] While Prime Minister Chris Hipkins has suggested damages to be in the millions, estimates and analyst suggestions predict a value closer to $1 billion[3].
We are seeing a number of businesses seek support following the damage caused by these rain events and one important consideration being looked into is the precise cause of damage, as this plays a pivotal role in understand the extent of any insurance cover available.
For the purpose of insurance cover, there is an important distinction between flood and storm water, particularly if you do not have insurance cover for flood.
What we have observed over the past few weeks was vast swathes of the North Island receiving record breaking levels of rainfall with Auckland receiving more than a month’s worth of rain within a few hours and the month of January receiving 40% of Auckland’s annual rainfall.[4] The high quantity of rainfall is likely to have led to combination of high volumes of rainwater run-off, water backflow from drainage and flooding from rivers and ground water. The identification of the exact cause of water damage is a relevant factor when establishing whether an insurance policy provides any form of indemnity.
There were a number of litigation cases following the 2011 Brisbane flood event, such as LMT Surgical P/L v ?Allianz Australia Insurance Ltd?[2013] QSC 181, which focused on the exact cause of damage and how this affected insurance cover. Members of EY’s Claims and Disputes team were involved in providing quantum advice on such issues for commercial insurance claims.
It is at this time that many businesses have or are in the process of placing their insurer and/or insurance broker on notice of a pending claim and considering their next steps. From our past experience the initial days and weeks following an insured event is the critical time to discuss your recovery path and the means by which your insurance coverage, if triggered, can support your business and its cashflows.
An additional consideration following large scale natural catastrophes for business directors, is how to best navigate the path of recovery for a business which will typically include managing increased pressure on cashflows.?In some circumstances this may include considering a business recovery strategy to prevent insolvency. EY’s Safe Harbour team can provide protection for directors of businesses impacted by natural catastrophes whilst insurance claims are pursued and provide personal protection for directors from subsequent “insolvent trading” claims in circumstances where they are pursuing a better outcome than insolvency.
领英推荐
Given our independence from the insurers, the brokers and the underwriting process, we are uniquely positioned to assist our clients recover their full entitlement under their insurance policy.
If you would like to know more on how EY can support you, please reach out to either Campbell Jackson or Stephen Bell of our Claims and Disputes team or David Kennedy from our Safe Harbour team.
[2] https://www.theguardian.com/world/2023/feb/01/auckland-floods-biggest-climate-event-new-zealand-history-flooding
[3] https://www.nzherald.co.nz/business/auckland-floods-insurance-claims-could-hit-nearly-1-billion/WJYKBIYZJJEZDKGR3APFAYXQDE/
[4] https://www.nzherald.co.nz/nz/weather-rainfall-records-tumble-amid-soggy-january-for-north-island/MOJSDP3H3VA4NI5FRL3D7I6CDI/
?
KC
2 年Good stuff Stephen. Thanks.