This fact sheet is for information only. You should get legal advice about your situation.
WHAT IS COVERED BY ‘EARTHQUAKE’?
Most insurance policies will cover you for damage caused by earthquake.
Any resulting landslide, subsidence or earth movement caused by the earthquake may be covered as well, but many policies will restrict it to a particular time period – some policies may say it is covered if it happens ‘immediately’, otherwise will set a timeframe (eg. within 72 hours) of the earthquake.
Most policies also cover ‘impact damage’, such as damage to your building if caused by falling trees and power poles. However the cost of cutting down or removing trees that have not caused damage to buildings may not be covered.
Your insurance policy (i.e. your insurance certificate and your Product Disclosure Statement (PDS)) is your contract with the insurance company and together they will outline the circumstances in which they will pay you out. The insurance company cannot go beyond the words in the policy. You should look carefully at your policy. For further assistance in how to do so please refer to our How to use your PDS fact sheet.
If, after you experienced an earthquake, notice damage to your property you should make a claim without delay.
• Safety first: Your safety is the priority. Only enter damaged buildings if it is safe to do so, and always follow directions of emergency services.
• Minimise your loss: When it is safe to do so, protect your belongings. You are required to take reasonable steps to prevent further damage.
• Make your claim: Contact your insurer as soon as you can, and seek advice about the claim process under your policy, as well as what you’re covered for. Many insurers have 24-hour call centres.
• Emergency accommodation: let your insurer know if you need this, and discuss who to organise it, and for how long and if there is a maximum limit.
• Insurance documents: Don’t be concerned if insurance documents are not readily at hand. Insurance companies keep records electronically and require only the policyholders’ name and address to find a policy.
• Inventory: Sometimes an insurer will ask you to make an inventory of damaged possessions room by room. However, if everything is lost you should ask them to just pay your total sum insured. If they insist on itemisation, ask for reasons why and seek advice.
• Evidence: Take pictures of damage to the property and possessions as evidence for your claim assessor.
• Repairs: Speak to your insurer before authorising repairs. Emergency repairs should only be undertaken in the first instance to make the property safe.
• Cash settlements: In large disasters, insurers will prioritise repairs for those most in need and may offer cash settlements. Get advice before taking a cash settlement, it may not be your best option. If you have already accepted one, and change your mind, contact your insurer and seek advice. See further below
• Claims Management Services: For home claims the use of a claim services company is usually not necessary. We have a factsheet with more information here: https://insurancelaw.org.au/factsheets/insurance-claims-management-services/ If you are thinking of using one, get some free advice first.
URGENT FINANCIAL NEED
The General Insurance Code of Practice obliges your insurer to fast-track your claim if you are in urgent financial need (Clause 64) and to make an advance payment within 5 business days of you satisfactorily demonstrating your urgent financial need. Any advance payment will be deducted from the total value of your claim.
DEALING WITH ASSESSOR/SERVICE PROVIDERS
Sometimes it can be difficult to deal with assessors, experts or other service providers (i.e. builders) appointed by the insurance company. Whilst they may not work directly for the insurance company, they still do have standards to uphold if they were arranged by the insurer. If you have concerns about the conduct of an assessor, make a note of it, raise it with the insurer directly and get legal advice.
DOES AN EXCLUSION APPLY?
If there is an issue about the cause of the damage (i.e. whether it was caused by earthquake or wear and tear over time) or the extent of damage (i.e. whether any of it was pre-existing), the insurance company may employ experts (such as an engineer) to prepare a report.
You are entitled to copies of all documents which the insurance company rely on to decide your claim.
The findings of the reports are not conclusive and can be challenged by your own evidence – however your own expert evidence is best to challenge any expert evidence the insurer has. You must be careful as this may be costly, and there is no guarantee you will be reimbursed for the cost of your report.
Possible exclusions for earthquake claims may include:
1. Landslide or earth movement happening after 72 hours
2. Cracks in buildings was pre-existing or caused by wear and tear or gradual deterioration, or defects in building design
The insurer must be able to show it is more likely than not, that an exclusion is a significant cause of the damage, acting at the same time as the insured event (eg. earthquake).
If an insured event and an exclusion were both significant causes of the damage, and acting at the same time, the insurer can reject the whole claim. For example, if the damage the earthquake caused was significantly more than it should have been because your building already had structural issues or design faults, you may not be covered. If you only had minor cracks that had little or no impact on the amount of damage caused by the earthquake, you can still argue you should be covered. These arguments often come down to expert evidence.
WHAT CAN I DO IF MY CLAIM IS REFUSED, OR IF THE CLAIM IS TAKING TOO LONG? HOW DO I RAISE A COMPLAINT?
You can raise a dispute with the insurer’s internal dispute resolution department (“IDR”). You can obtain these details from:
You should gather as much evidence as you can and provide copies to your insurer. If your insurer is relying on expert evidence, you should consider obtaining your own independent expert report to support your dispute.
You can also consider court proceedings, however you should speak to a private solicitor for advice first as court is risky and you may be made responsible for the insurer’s legal costs.
CASH SETTLEMENT OR REPAIR/REPLACEMENT
Often the insurer is entitled to make the decision as to whether to repair, replace or cash settle a claim. Sometimes they may ask you how you would prefer to settle, and you can try to negotiate.
You should be very careful before accepting a cash settlement offer. You should ask for information from them insurer about how they work and and how the decision was made (clause 79 of the General Insurance Code of Practice). Take the following into account in your negotiations:
• If an insurer chooses to repair or rebuild, the insurer is responsible for the work. Insurers offer guarantees on the works they do. Also, they manage the repair process which can sometimes be complicated. There are also times that the repair costs are uncertain which means a cash settlement may leave you out of pocket. If you agree to a cash settlement and engage your own repairer, any problems arising from the quality of repair will be an issue for you to sort out with your own repairer.
• Get your own quotes to make sure the amount being offered is fair and realistic. Quotes that the insurance company obtains may not be the actual cost to you to repair/rebuild/replace You need to think carefully to decide whether this sum will be enough before you agree to a final amount.
• In contents claims, the insurer may pay your claim in store credit instead of cash – but only if the policy contains an express right to do this. If the policy is silent on a store credit you could ask for cash as an alternative. The insurer should not reduce your cash settlement to a lower amount than the stated value of the store credit.
• You need to be clear on what you are settling, if it is the whole claim or only part of it eg. contents. You may have “Additional Benefits” on top of the amounts you are insured for building and contents. Make sure you understand what you are entitled to under your policy.
GETTING LEGAL ADVICE
You can call the Insurance Law Service on 1300 663 464 or through our website inquiry form available at insurancelaw.org.au We also have many other factsheets available there, including on delay, claims refusals, and excesses.
See our Getting help fact sheet for a list of additional resources.
Last updated: October 2021.