Flood risk and Flood Re

Flooding has been a common event in the UK over the last few years. Most recently, December 2015 to January 2016 saw record levels of rainfall and flooding in Cumbria and other parts of northern England, as well as Scotland. Insurance claims for damage caused by these floods have been estimated at anywhere between £1.3bn and £5bn.

While natural phenomena may be the driving force behind property damage, the actions
of individuals and companies in relation to flooding may also give rise to claims. Vernon Knights Associates v Cornwall Council [2013] is the most
recent case that highlights a landowner's duties towards their neighbours in relation to flood damage.A landowner owes a measured duty in both negligence and nuisance to take reasonable steps to prevent natural occurrences on their land
from causing damage to neighbouring properties.

In determining the content
of the measured duty, the court must consider what is fair, just, and reasonable as between the two neighbouring landowners.
It must have regard to all the circumstances, including the extent of the foreseeable risk, the available preventive measures, the costs of such measures, and the resources
of both parties.

Where the defendant is a public authority with substantial resources, the court must take into account the competing demands on those resources and the public purposes for which they are held. It may not be fair, just, or reasonable to require a public authority to expend those resources on infrastructure works in order to protect a few individuals against a modest risk of property damage.

Even though the individual's actions may not have caused
the damage, landowners nonetheless have a responsibility to take steps
to prevent or minimise any foreseeable damage.

Leaving aside responsibility, from the viewpoint of those affected by flooding, affordable insurance can be difficult to source via traditional providers
if the applicant resides in an area that is prone to repeat flooding. To address the issue, insurance companies and the government have worked together to develop a different way of dealing with flood insurance.
The flood reinsurance scheme - known as Flood Re - has been launched to help support households at highest flood risk. Established through BLM's connections with the Association of British Insurers, BLM trainees supported Flood Re from the company's infancy through to its testing phase.

The scheme, which enables insurers to offer competitive premiums and lower excesses to high-flood-risk homes across the UK, has to date secured £2.1bn in reinsurance cover, and is aiming to provide assistance to an estimated 350,000 households in the UK. At present, Flood Re only covers residential property; it may be that going forward the scheme could be extended to include commercial property.

Given recent history, incidents of flooding are likely to increase, and so too will the likelihood of claims. Recent case law sets out individual and company responsibility and prescribes the steps that should be taken in relation to property damage as a consequence of flooding. For policy holders, Flood Re offers comfort to those who are financially affected by the likelihood of repeat property damage. SJ

Cathy Hawkins is a partner and head of property damage at BLM

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