How can floods bring Professional Indemnity claims? Perhaps we should start with Insurance Professionals such as Brokers who are likely to be lined up by some Insureds affected by the recent floods here in Queensland. In what way? We cannot always get flood insurance for our clients. However, we must be seen to have discussed this risk with the client. We must have this documented. We need to suggest to them they manage the risk either with a transfer if possible to an insurer, or to reduce the chance by relocating or having a catastrophe plan in place. If we fail to do this, we will be accused of breaching our professional duty by omitting to provide this advice.
If an Insured makes such an allegation, your defence includes file notes of these discussions, copies of correspondence confirming the Insured’s wishes or instructions, demonstrated requests for flood insurance with insurers (where it has been requested but cannot be provided). The old CYA or CYB principal applies.
On top of this, when a client rings wanting to make a claim for flood but you have not arranged such cover, do not tell them they do not have the cover. You can tell them that they did not have specific flood cover but submit a claim anyway and have the insurer go to the effort to make the decision. The insurer has to demonstrate why the claim is not covered. It is not an Insurance Brokers job to do this. It could be that a Storm caused the flood, water may have come back up through pipes causing damage, it could be due to overflow of gutters due to heavy rain. You do not know until the claim is investigated. Deal with the decline as a Broker on the basis you must prove your loss.
Flood is often defined as inundation of normally dry land by water from any natural water course or water way. So an Insurer must prove that was the case if Flood is an exclusion.
On top of this, many ISR policies by simply not even mentioning flood automatically provides it.
Desperate people take desperate measures to blame professionals when they see a chance. It is most upsetting for a professional who has dealt with a client in absolute good faith and having a fantastic business relationship with them, suddenly level accusations against you but with good documentation, a demonstrated effort to deal with their risks and involvement of insurers in the claim, you have given yourself the best chance.
Previously I mentioned about the risk to us Insurance Brokers from our clients uninsured from the recent flooding here in Queensland. No doubt there will be many investigations into the damage caused to lots of property and many other Professionals could be called to account. Examples include:
These are just some examples. Human beings are not all that forgiving and if the opportunity arises to be compensated where they are unable to by other means like their own insurance policy, they may look for other ways. We are living in an increasingly litigious society.