A recent court case could lead to insurers excluding flood risk
Insurers could have the option to withdraw flood cover from household policies as a result of a landmark ruling.
In the case of Tate Gallery vs Duffy Construction, the judge declared that “flooding” could be defined by the “unnatural” presence of water in a building – a departure from previously accepted interpretations.
The case involved an incident when the temporary water pipe that supplied water to the construction site was damaged by Duffy.
Duffy was required to repair the pipe but it subsequently burst again causing damage worth £5m.
The judge found that the flood was caused by the burst of the pipe.
David Crichton, visiting professor at the Benfield Hazard Research Centre said the court saw flood as an accumulation of water. It did not matter how the water got there.
“For the first time in 30 years, there is now a sensible legal definition of ‘flood’,” he said. “This opens the way for insurance companies to offer household and small business policies subject to a general exclusion of flood risk.”
Crichton said consumers could either be given the option to buy back cover for an additional premium based on the risk, or to have a large excess for flood damage claims applied at renewal of the policy.
“Much will depend on whether the mortage industry accepts such general limitations of cover,” he added.
But lawyers have played down the impact of the ruling. Robert Welfare, legal director at DLA Piper said: “This specific case doesn’t have wide ranging implications for flood risk.”
“Even though it provides helpful definition, decisions will remain on a case to case basis.”
Despite this, Welfare acknowledged that the courts had a role to play in the matter. He added: “There are a number of legal settlements that can and will impact on the issue of flood risk”.
The ABI said it was a matter for individual insurers if they wished to change their policies.
