Inundated: UK floods hit thousands of householders and businesses, but what about their insurers?
Property Insurance Aware 2
It is difficult to estimate the human impact that this winter’s unprecedented rainfall is having on those affected by the current floods. Many are turning to their insurers and understandably, they expect a quick response. Pressure from policyholders and Government means that insurers will undoubtedly be focusing on settling claims in order to get policyholders back into their homes and their businesses back up and running. Here we revisit the key legal principles in flooding and escape of water cases which can arise. An understanding of those issues is important to appreciate whether any third parties may be liable for the damage caused, whether the policyholders themselves may be culpable and the possibility of insurers recovering their outlay from a third party.
What has caused the damage?
It is not always possible to determine the cause of the damage because the evidence can be difficult to access and is often destroyed in the initial clean up process. This question is however, crucial for any insurer facing property damage claims because it determines:
- whether the claim is covered;
- whether the insured is likely to bear any degree of culpability for damage to third party property; and
- whether any party is at fault from whom the insurer can recover its outlay.
The appropriate response to determine the issue will differ on a case to case basis. In certain circumstances, evidence will need to be gathered for subsequent examination and it may be necessary to engage the services of expert engineers or surveyors.
Legal liability – it’s not just about the initial flood damage
In certain circumstances, damage caused by flooding will be entirely accidental, in the sense that no third party can be identified as having caused the flood which results in damage to property. In those circumstances, there is unlikely to be a legal liability. Of course in situations where ground water levels rise, causing rivers to burst their banks, it is difficult to envisage a situation where a party will be liable. However, legal liability in flooding cases goes beyond who or what caused the initial flood and looks also at the response of each party involved. The two need to be considered separately.
Liability for the flood/escape of water and the initial damage
This depends on whether the cause of the initial flood can be identified. If it can, the question is whether it was due to a single and unforeseen catastrophic event or a gradually operating cause which someone ought to have acted upon. If the damage has been caused by a sudden and unforeseen event, establishing a legal liability will be difficult. If however, there is evidence that the flood occurred because of something which occurred over time, such as a lack of maintenance of drains for example, the party responsible for that maintenance may have a liability for any resultant property damage.
Liability for the flood response
Even if no one is at fault for the initial flood or escape of water, that does not mean that liabilities cannot arise out of the way the parties respond to the floods, they can. The response of each party involved may come under close scrutiny where water escapes from one person’s land on to that of another and causes damage. Some of the legal principles which underpin liability in those circumstances are set out below. Legal liability in flooding cases is not straightforward and may involve breach of contract, breach of duty of care in the tort of negligence, liabilities for private nuisance and statutory liabilities. The facts of each case need to be carefully considered and the acts and omissions or each party must be measured against the duties which exist at law.
For that reason it is important to identify all parties who are involved where there is an escape of water and to understand what role they play in the events which have resulted in the damage and the clean up process. For an insurer, getting involved at the stage where property is under water, that can be a very challenging exercise. For example, a claim in negligence may exist if it can be proven that the responsible party breached the duty of care owed to the Insured and that breach caused the damage. Alternatively, it may be possible to establish a claim in nuisance if the acts and/or omissions of the person who is alleged to be at fault have caused an unreasonable interference with that person’s use and enjoyment of his or her land.
Another avenue for recovery for an escape of water may be via breach of contract
For example, where a plumber fails to carry out work with reasonable care and skill which results in a leak from pipe work which causes damage. The terms of the contract and the facts of the case need to be carefully considered in each situation. Finally, in certain circumstances, laws enacted by Parliament impost statutory obligations on certain parties. If those obligations are breached, which causes damage to property, the party in default may be liable. For example, the Water Industry Act 1991 (WIA 1991) is relevant to damage caused by the escape of water from water pipes. Section 209 of the WIA 1991 provides that: “Where an escape of water, however caused, from a pipe vested in a water undertaker causes loss or damage the undertaker shall be liable [subject to certain exceptions] for the loss or damage.”
Some common examples
Water pipes and water mains
S209 of the WIA 1991 imposes a strict liability on water companies for burst pipes but it has narrow application. A water company will only be liable if it can be established that the escape of water originated from a pipe which is vested in the undertaker. Establishing those facts may need some investigation. If the pipe is privately owned, it will be a case of looking at whether the owner has a liability in negligence or nuisance.
Sewers or drains
Ownership of the sewer or drain needs to be established. If the sewer or drain is vested in a water undertaker the water undertaker may have a liability for damage caused by water escaping from those pipes subject to establishing what has caused the escape. S94 of the WIA 1991, provides that a sewerage undertaker has a duty to cleanse and maintain sewers to ensure that they remain operational. Where the sewer or drain is privately owned, the owner may have a liability in negligence or nuisance depending upon how they have acted.
Rivers and streams and culverts
Whether natural or man made, the court’s approach to the escape of water from water courses is similar. The courts often draw a distinction between the direct acts of a party which cause flooding and those where the escape has been caused by a failure to act. In the case of direct action, there is likely to be a liability imposed on the party responsible in nuisance or negligence where those acts are shown to have caused the damage or the interference with use and enjoyment of that land. However, where a party has failed to act, the court will usually look at the reasonableness of that party’s response, taking into account the means that the party has at their disposal, financial and otherwise, and the nature and extent of the flood.
Water percolation downhill
Disputes can arise between neighbours where water travels from land at a higher level to land at a lower level which causes damage or interference with the use or enjoyment of the land at lower level. The approach taken by the court has been to find that water percolating naturally downhill is a process of nature and the owner of the lower land cannot complain about that natural discharge of water. However, the owner of the lower land can take steps to protect his land by barring the influx of water without facing liability provided that his acts are reasonable. If however, the higher neighbour deliberately drains water onto his lower neighbour’s land or does something to make the flow of water onto that land more concentrated, the owner of the higher land is much more likely to face a liability.
Is the policyholder at risk of liability?
Even if the policyholder is not primarily liable for the flood damage, bear in mind that if water on the policyholder’s land escapes and causes subsequent damage to third party property, the policyholder may be exposed to the risk of a claim for that subsequent damage. The key to defending any such claim is likely to be based on establishing that the policyholder’s actions were reasonable and so keeping accurate records of events after a flood and during the entire clean up process is advisable.
Is there a recovery?
Whether any insurer can recover its outlay is extremely fact specific. A careful assessment of the precise cause of the damage and the acts or omissions of each party is crucial in order to establish liability. On that footing, whilst insurers will understandably wish to put their policyholders needs first during this difficult time, it is worthwhile giving some consideration at the early stages of any claim to the evidence at and around the insured’s property which may be central to any recovery once the flood waters have subsided.
- Gather evidence as to the source and cause of the escape of water and flooding.
- Take a detailed account of the facts from the policyholder and any parties on site.
- Keep a diary of events, ask the policyholder to do the same.
- Prepare a directory of all the parties involved and their role.
- Obtain any relevant documents such as contracts or correspondence.
- Consider whether expert evidence is required to identify the source and cause of the escape of water.