Seafood firm raises stink after power cut
A seafood business has won a dispute over stock losses caused when power was turned off in an area hit by storms and flooding, leaving it without refrigeration for a week.
Its insurer applied a flood exclusion and declined its claim, but the industry ombudsman says the power cut was mainly due to safety concerns.
Energy supplier information showed the electricity was switched off at 8.56pm on March 1 2022.
“Flood conditions” caused extensive damage to the overhead and underground network and it was not until March 8, after emergency services provided access, that power was restored to all customers.
QBE said that if not for the flooding, the power would not have been cut, and the complainant had not added a deterioration of stock option under the policy’s machinery breakdown section.
The seafood distribution business noted a news article relied on by the insurer reported water rose in the town with the high tide at 9pm, and power was cut before the flood.
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A power supplier letter cited safety concerns, and its flood conditions reference encompassed torrential rainfall, with overhead networks damaged, the complainant said.
The Australian Financial Complaints Authority finds the insurer’s exclusion of damage “caused by” flood requires a more direct nexus than “arising from” or “connected with”.
“Even if a flood is what caused the supplier to turn off the power, that would not make the flood the proximate cause of the stock loss – the cause would still be the action of the supplier in turning off the power,” it says.
“That is because power being switched off would have caused the loss on its own and the flood would not have caused the loss without the power being switched off, especially given that floodwaters did not enter the complainant’s premises.”
The claim should be paid under the policy’s property damage section, and not having optional stock deterioration cover is irrelevant, AFCA says.
The insurer must cover $119,824 in stock losses and $17,884 for business interruption, but not $3180 claimed for clothing, shoes and a painting. The complainant also successfully sought $17,731 for claim preparation costs.
Interest is payable on the total, and a $500 excess applies.
The decision is available here.