This case involved a consideration of whether the inundation of a shopping centre was occasioned by water overflowing from the normal confines of a natural watercourse. The court held that it was so caused by overflow from a watercourse, such that an insurance policy exclusion applied. The court also provided valuable guidance on best practice for briefing experts.
- The source of the water which inundated the shopping centre
- Whether it was captured by a flood exclusion
The plaintiffs own land in Townsville which is the site of a shopping centre, and which was insured by the defendant insurer. On 3 and 4 February 2019, after two rainfall events, water entered the shopping centre to a depth of around half a metre. The insurer contended that this flooding event fell within an exclusion clause in the policy which limited the insurer’s liability to $250,000. The damage caused by the second flooding event far exceeded this amount. The exclusion related to damage occasioned by or happening through flood, where flood meant “the inundation of normally dry land by water overflowing from the normal confines of any natural watercourse…”.
The shopping centre was situated in what was once a floodplain of Gordon Creek. In around 2015, Gordon Creek was diverted through a man-made tunnel to a man-made lake (Lake 3). In proximity to the shopping centre was Mt Stuart and a flat area of land (Catchment A1), Racecourse Road (which bounded Catchment A1 and had a table drain and a low lying channel between its carriageways), Gordon Creek (and its various tributaries, including one which flowed via culvert under Racecourse Road, being Drain 2) and the Ross River.
It was common ground that the inundation was caused by the flow of water into the shopping centre from some other area. The plaintiff’s expert contended that after the two rainfall events, runoff from Catchment A1 travelled across Racecourse Road and then either across the table drain and into the shopping centre, or into the table drain where it mixed with water already there and entered the shopping centre. The defendant’s experts asserted that the water inundating the shopping centre came from Ross River and Gordon Creek.
The plaintiff argued:
- When the water reached the table drain, it stopped being water overflowing from Gordon Creek, and instead became water overflowing from the table drain;
- Drain 2 was not part of a natural watercourse as culverts which it ran through were akin to the pipes considered in the case of LMT Surgical Pty Ltd v Allianz Australia Insurance Ltd (LMT);
- Rainfall onto the shopping centre site was a significant contributor to the inundation damage; and
- Water from the Racecourse Road carriageway rose and flowed into the shopping centre.
The defendants relied on their expert to allege that the inundation was caused by overflow from Gordon Creek and Ross River, and therefore fell within the exclusion.
The decision at trial
The bulk of the court’s judgement involved an in-depth analysis of the expert evidence. Justice Dalton was critical of the theories advanced by the plaintiff’s expert, Dr Macintosh, and noted various inconsistencies in reasoning and unsupported assumptions in his findings. Conversely, the defendant’s experts’ evidence was accepted, as their conclusions were based on the real physical parameters of the site and were consistent with the evidence. The court also held:
- Inundation of the shopping centre was occasioned by, or happened through, water escaping from Drain 2 and Gordon Creek. The fact that some of that water might have lain in the table drain, or flowed over the table drain was irrelevant. The exclusion clause was not simply concerned with identifying the source of the inundating water, but rather, the damage excluded was damage occasioned by or happening through water overflowing from a watercourse.
- The pipes in LMT were not analogous to Drain 2, as the culverts simply allowed the water to pass in much the same way as it always had and were a formalisation of a natural watercourse. Conversely in LMT the pipes did not follow the path of a natural watercourse and were a functional replacement of a watercourse, rather than a formalisation.
- The defendant proved that the proximate cause of the flooding was water overflowing from Gordon Creek. While local rainfall and water from the racecourse road carriageway must have contributed some water to the inundation, the contribution was minimal and could not be considered proximate, so the principles in Wayne Tank did not apply.
In addition to the legal findings, the court also made several comments (see below) directed to the profession regarding the briefing of experts.
Implications for you
This decision is another example of how the outcome of flood claims often turns on expert evidence and policy construction. To this end, it highlights the importance of ensuring that experts are properly briefed, and their evidence fully analysed so the merits of the claim can be understood before excessive costs are incurred.
For the legal profession, this case is also notable for the guidance provided on the issue of lawyer’s interactions with experts, including that:
- Lawyers should ensure they properly analyse the expert’s evidence, so any contradictions, errors or gaps in reasoning can be brought to the attention of the expert and the merits of the case understood at an earlier stage.
- Insurers should avoid instructing experts directly, as it leaves the expert open to criticisms of their independence.
- Where more than one expert is briefed, and the intention is to present their evidence as two independent views to the court, then the experts should not discuss their evidence together, particularly where they have not already reduced their opinion to writing. Further, they should be provided with separate instructions.
- Lawyers should avoid briefing experts with the words of the insurance policy.