Insurers raising the bar on flood insurance claims

The Queensland 2010/11 wet season was even wetter than 2008, with insurers raising the bar on making insurance claims for flooded pits by increasing the policy excess, re-defining an ‘event’ to mean any single 72 hour period of rainfall, and placing commodity price caps on the coal prices on which the profit margin is calculated.  This meant that our client needed to identify production impacts off more than a million tonnes of lost coal and substantiate very low true variable costs of production in order to substantiate an insurance claim above the excess. After a considerable amount of work with mining engineers and forensic accounts, we were able to prepare a substantiated claim submission for submission to the insurers. Although insurers initially assessed the losses at below deductible, a reasonable approach was taken on both sides and a ‘settlement summit’ with the 3 lead insurers was arranged in Singapore in May 2014.

Why Singapore? As a half-way point between our Australian based client and the European based lead insurers, Singapore was chosen as a neutral venue where executives from both sides could come to meet with a singular focus on negotiating a resolution without the distractions of their home office. After several days of negotiations, the claim was settled for a gross value in the hundreds of millions before application of the excess.

Mark Darwin, the HSF partner who handled several flood coal mine claims, is now involved with the ‘Mining Insurance Group’ recently formed on the initiative of a number of London based insurers, brokers, adjusters and lawyers to seek to reach consensus on a re-draft of the standard ISR policy into a form more suitable to the mining industry. We will keep HSF Blog readers updated on developments.

If you would like to know more about this initiative please contact Mark directly on +61 7 3258 6632.