Stormy winter is reminder of need to understand how to make an insurance claim

What a winter it has been! Our thoughts go out to all who have been affected by storms around New Zealand; the damage to people’s homes, possessions and businesses is extensive.

In the hope of assisting, here is a refresher on what you should do if you need to make an insurance claim for flood or storm damage. Insurance companies will want to work with you to support you through this tough time. But if you are having difficulties with the process or your claim is declined, it is worth contacting us to understand your options.

Typically you will have one of three types of claim in this situation – home or building, contents or business interruption – as described below:

Home or building claim

While every insurance policy is slightly different, normally what you will be paid in this situation is the cost to reinstate the building to the condition it was in before the damage occurred using current building techniques and products. This can get problematic if your home has heritage features or the original products are no longer used, but this can normally be resolved with your insurer.

The steps you should take are:

1. Only go into the property if it is safe. Remember electricity and water don’t mix, so depending on the extent of the damage, you may need to turn the power off before going in.
2. Take photos or videos of the damage before you clean it up. Mark on the wall where the flood waters went up to. Generally you should not do any repairs until your insurer or EQC have had a chance to inspect, but the exception to this is that you are obliged to do any emergency repairs that are necessary to stop the damage getting worse and to make sure your property is secure.
3. Find a copy of your policy so you know who your insurer is, what your policy number is and what you are covered for. It may be that you are covered for temporary accommodation which you may need if your home is unable to be lived in.
4. In the case of flooding (and other natural disasters), all or part of the claim will be covered by EQC rather than your insurance company. The EQC process works differently depending on who your insurer is – some insurance companies will manage the EQC process themselves and some will require you to make an EQC claim first. To find out the process that applies to you, check online here or ring EQC on 0800 326 243.
5. Your insurance company and EQC set out the process for making a claim on their websites. Alternatively you can just ring them. You should notify them as soon as possible. While they may want supporting evidence of the damage, it is better to make the claim with whatever information you already have and provide the further information later.
6. Aside from emergency repairs to stop the damage getting worse, you should get their permission to do any other repairs. Therefore if urgent repairs are needed, you should discuss those with them at the time of making the claim.
7. Keep any damaged property for your insurer or EQC to inspect or get their permission to dispose of it.
8. Gather whatever photographs, invoices or other documents which show what the property was like before the damage occurred. Keep any invoices of expenses you have during this period. Keep taking photographs or videos if the damage changes.
9. Your insurance company will then assess the damage to decide how much to pay you. They may appoint a loss adjustor to advise them on this. If you are unhappy or unsure with the amount they calculate, you can engage your own professionals such as a builder to review the costs.  Normally those costs will not be refunded by the insurer so you will need to decide if their assessment is so wrong that it justifies the extra cost. It is often at this time that it is worth taking legal advice.
10. If your claim is declined, you will be told why. Again, this is often a good time to take legal advice. Your insurance company will engage with you to explain the decision and consider any further information you provide. At some point, they will deem that you are at a deadlock and there are several options available at that point to challenge the decision.

Contents claim

Normally when contents are damaged or destroyed, your insurance company will choose to: arrange for the item to be repaired; pay you what it would cost to repair the item; pay you what it would cost to replace the item with an equivalent item; or pay you the market value of the item (what an item of that age and condition is worth). It is normally your insurance company’s decision which of these options they choose. In the event of a significant loss, they may elect to pay you the total value of your contents’ insurance policy.

Once you have been paid for an item, the insurance company is the owner of it. They may agree to sell it back to you if you want to keep it, but you have to agree this with them.

The steps you should take are:

1. Similar to a building claim, only go into the property if it is safe. Consider whether you should turn the power off before going in.
2. Take photos or videos of the damaged items before you clean it up. Do what you can to stop the items suffering any further damage, i.e. move them out of the water and make sure they are secure. This may not be possible if the damage is extensive.
3. Find a copy of your policy so you know who your insurer is, what your policy number is and what you are covered for. Many contents policies provide cover for things like temporary accommodation or spoiled food, so it is worthwhile reading through your policy to be aware of the extent of your cover. If you have coverage under both your house and contents policy for temporary accommodation, you can only recover once for the same loss so choose the policy with the most cover. You may be able to claim under the other policy for any shortfall.
4. Most insurance companies set out the process for making a claim on their websites. Alternatively you can just ring them. You should notify them as soon as possible. While they may want supporting evidence of the items claimed for, it is better to make the claim with whatever information you already have and provide the further information later.
5. Write a list of everything that has been damaged or lost. If you have suffered extensive damage, this is going to feel overwhelming, but we recommend going through room by room to make a thorough list and take photographs. Repeat this process a few times as it is likely you will overlook something.
6. Gather whatever photographs, invoices, credit card statements or other documents which show what the items were like before they were damaged and what you paid for them. Keep taking photographs or videos if the damage changes, for instance if the items grow mould on them.
7. If you can, avoid throwing anything out in case the insurer asks to see them. If you need to dispose of items because you don’t have the space to keep them, discuss this with your insurance company and get their permission to dispose of them.
8. Your insurance company will then assess the items to decide how much to pay you. They may appoint a loss adjustor to advise them on this. If you are unhappy or unsure with the amount they calculate, you will need to prove that the assessment is wrong. For example, you may need valuations from second-hand dealers or screen shots of what the item is selling for on Trade Me. If there is a significant difference between you and your insurance company, it may be worth taking legal advice.
9. If your claim is declined, you will be told why. This is often a good time to take legal advice. Your insurance company will engage with you to explain the decision and consider any further information you provide.  At some point, they will deem that you are at a deadlock and there are several options available at that point to challenge the decision.

Business interruption claim

Business Interruption insurance typically covers the loss in revenue you have suffered due to your business being interrupted by the event, plus any costs you had to pay, such as wages, even though you could not trade.

The steps you should take are:

1. Find a copy of your policy so you know who your insurer is, what your policy number is and what you are covered for. Policies can cover you for events you have not considered, such as damage at your supplier’s premises. On the other hand, your cover may be conditional on a claim under your building policy. In this case, you will only be able to claim if you have suffered building damage, not if it was so wet that nobody used your business. Therefore make sure you read the policy to know what you are covered for.
2. Most insurance companies set out the process for making a claim on their websites. Alternatively you can just ring them. It is likely to be a condition of the policy that you notify them immediately so you should contact them as soon as possible.
3. You are obliged to take steps to minimise your loss. If it is still possible to still be open even though your turnover will be reduced, you should endeavour to do this. If you do not consider this is worthwhile, discuss this with your insurance company before closing.
4. Keep records of what your reduced revenue and costs were during this time.
5. Gather evidence of what your revenue and turnover was likely to be. The best evidence of this is likely to be what it was in the month prior and possibly at the same time last year. Your accountant should be able to help you with this. It is likely that your policy will cover you for this cost and it is worthwhile providing the best evidence you can to maximise your claim.
6. If your claim is denied or you are unhappy with the amount that your insurance company offers to pay, this is a good time to take legal advice.