Reader question about proximate cause in tsunami incidents
Dear Professor Manning,
Firstly thank you for your blog and books which I refer to almost daily. In my career I have learned more from your writing & seminars than from any other source.
My sister is a geologist and tsunami expert who writes articles & papers about how to prepare for a tsunami. She recently asked me some questions about insurance for which I would greatly appreciate your feedback. In these questions we looked at the cover provided by the Chubb Masterpiece policy wording as a reference.
Allan thank you for reading my email and thanks in advance for your reply.
Questions and answers:
1. How do insurers differentiate between flooding and tsunamis? For example, the impact of a tsunami is greater near to rivers and streams, as the water preferentially goes inland along those channels. So how would you prove the damage to your riverfront house that is 5km from the coast was from a tsunami, and not just a ‘regular’ flood?
It really comes down to the facts. If there was a reported earthquake followed by a tsunami and there were no heavy rains, dam failures or other normal causes of riverine flood then it would be a case of res ipsa loquitur (Latin for “the thing speaks for itself”).
If on the other hand, it was the other way around, ie a cyclone or hurricane, torrential rain in the catchment area of the river and no reported earthquake, again an easy determination.
The one that will cause the grief is when you have the two working together. I am sure it has happened by I cannot recall any claim like this in my working life where you say had an undersea earthquake while a cyclone or torrential rain was falling in the catchment area. If the damage for both can be separated then the damage from the tsunami can be distinguished from the riverine flood due to the torrential rain, then the tsurami damage would be paid and the other flooding denied. If they cannot be differentiated then the basic rules of the application of exclusions applies. In Australia it is known as the Wayne Tank Principle but it goes way back in English law before that decision. What this means is that if you have an excluded peril operating at the same time as an excluded peril and the damage cannot be separated out, then the entire claim fails.
In this example, I speculated that insurers may consider Flood and Tsunami to be concurrent causes of loss. Given that the Chubb policy covers Tsunami but excludes Flood, the Wayne Tank principle would apply and the entire loss would be excluded. Would you agree?
Yes, I read this after I wrote the above. You are perfectly correct.
2. What about damage from a relatively small tsunami that is amplified because it happened at high tide (and therefore is partly a consequence of the tide)?
In this example I considered that “high tide” is an uninsured peril but not an excluded peril, therefore according to Wayne Tank this loss would be covered. Would you agree?
I agree here as long as the high tide on its own would not have caused any damage in its own right. The proximate cause would appear to be the Tsunami here.
3. Chubb’s definition of tsunami is very narrow:
We do cover damage caused by tsunami. Tsunami means a sea wave caused by a disturbance of the ocean floor or by a seismic movement.
What about a tsunami caused by meteorite impact? Would this be covered?
I have not researched this but if a tidal wave was caused by a meteorite impact then it would not be regarded as a tsunami under the ordinary meaning of the word nor any policy which is as typically close to Chubb’s definition in my experience.
In such a case you would need the peril of flood or damage by meteors.
4. Finally, my sisters interest is mostly centred on New Zealand, but my expertise in insurance is mostly Australia based. Do you have any feedback on how NZ insurance legislation deals with tsunamis, particularly in relation to the New Zealand EQC reinsurance pool?
To my knowledge exactly the same rules of policy interpretation apply. While I have had experience with the New Zealand EQC over the Canterbury /Christchurch earthquakes, I have not had any involvement with tsunami damage in New Zealand. I have copied in Mr Tony Howie, our New Zealand manager as I am sure he will be able to throw some light on this topic.
Further input from LMI Group’s New Zealand branch manager, Tony Howie:
Following on from Allan’s response and in answer to your enquiry in respect to EQC Cover, as you will undoubtedly be aware, EQC only relates to residential policy.
Under section 18 of the Act, residential buildings with a contract of fire insurance are insured under EQCover against physical loss or damage occurring as the direct result of a natural disaster. Natural disasters are defined as (a) an earthquake, natural landslip, volcanic eruption, hydrothermal activity, or tsunami or (b) natural disaster fire [which is fire caused by a natural disaster in (a)] or (c) in the case only of residential land, a storm or flood.
Tsunami is not defined in the act, therefore the normal definition would apply. I note that Wikipedia defines a tsunami as a series of waves in a water body caused by the displacement of a large volume of water, generally in an ocean or a large lake. Earthquakes, volcanic eruptions and other underwater explosions (including detonations of underwater nuclear devices), landslides, glacier calvings, meteorite impacts and other disturbances above or below water all have the potential to generate a tsunami.
Our insurance policies have a similar definition of natural disaster.
Unlike in Australia, we do not generally have flood exclusions on our policies, so differentiating between flood damage and tsunami damage is not an issues.