loading icon

Cyclone Debbie May Create Complex Claims Issues for Insurers

Cyclone Debbie and the subsequent rain and flooding events across Queensland, Northern NSW and New Zealand have caused significant damage to property and infrastructure, limited rail access, closed ports and caused damage to numerous roads and bridges. Rail closures in Queensland are likely to endure and we have been and will be actively monitoring any developments as they occur.

We anticipate this damage may give rise to a number of Contingent Business Interruption claims made under Prevention of Access / Dependency extensions, even in the absence of any direct Material Damage losses to their property.

For businesses that are reliant upon the road and rail network to bring in supplies as well as to distribute their products and ports for inward and outward logistics, damage to this infrastructure may give rise to Contingent Business Interruption / Contingent Extra Expense claims if such coverage is provided under the policy; typically in the form of Customers and/or Suppliers extensions.

CBI Claims

These claims can be complicated for a number of reasons, including but not limited to:

  • Identification of supply chains and drivers of revenue streams.
  • Identification of cause of loss and whether there are any other contributing causes of loss such as loss of attraction.
  • Costs of transporting products to alternative ports or destinations; which should include a savings allowance for normal transportation costs.
  • Contributory physical damage and concurrent economic loss.
  • Application of separate sub limits, waiting periods and time or value deductibles.
  • Consideration of any government assistance.

Coal Operations in Queensland

Queensland produces in excess of 50% of the world’s seaborne coking coal with the majority exported to Asian Markets from approximately 50 coal mines and 5 Ports. Coal produced in Queensland is also utilised domestically to provide fuel for coal fired power stations.

Cyclone Debbie has had a major impact on the Bowen Basin region in Central Queensland as detailed below:

Mines

Initial reports have suggested Cyclone Debbie did not cause significant damage to plant and equipment; however, the subsequent rainfall had varying levels of impact due to the volume of water entering the pits.

While the direct impact on mine sites is expected to be limited, the main concern for miners, is their ability to transport coal to their customers via rail to the ports.

Insurance implications at the mine, including event specific deductibles and sublimits, could include the following:

  • Coverage issues with flooding and dewatering of flooded pits;
  • Impacts on mining operations due to flooding and/or damage, which could include:
    • Capacity of ROM pads and ability to stockpile at the mine;
    • Ability to continue mining activities; such as pre-stripping;
  • Supplier Dependency (Specified / Unspecified) due to inability to transport coal via rail or through ports – including consideration of any capacity within the networks;
  • Denial of Access including to Roads, Bridges, Tunnels or Cargo Loading Facilities;
  • Loss of Utilities or Services;
  • Interdependency on related sites and stockpiles; and
  • Consideration must be given to concurrent causes of loss.

Power Stations

There have been no reports of damage to power generation assets within Queensland; however, many of the largest generators in Queensland are dependent on the supply of coal from nearby mines, which depending on the source, may be unable to supply.

Insurance implications, including event specific deductibles and sublimits, could include the following:

  • Suppliers Dependency (Specified or Unspecified) due to the inability to receive coal from mines either due to damage at the mine or due to rail network damage.

Rail Network

Cyclone Debbie has had a significant impact on the operations of Aurizon’s network in the Bowen Basin with all 4 rail lines closed. The most significant impact has been to the Goonyella rail line, which is responsible for transporting 50% of Queensland’s coal to port.  At this stage, the Goonyella rail line is expected to be closed for at least 5 weeks (from 28th March).

With flooding in South Eastern Queensland having just peaked, further impacts to the rail network in this region is still possible.  This could impact coal shipments in these regions, including the Blackwater rail line.  The full extent of the damage will not be known until the flood waters have receded and engineers have had an opportunity to inspect the line.

Insurance implications, including event specific deductibles and sublimits, could include the following:

  • Direct losses to Rail Operators, including consideration of any capacity within the network;
  • Direct losses to Network / Track Operator, including consideration of any capacity within the networks;
  • Separation of damage into storm and flood related damage;
  • Impacts of Customers (Specified / Unspecified) dependencies due to the inability of mines to provided coal for transport or ports to receive shipments;
  • Isolation by Landslide or Flood;
  • Damage to Bridges, Roadways, Tunnels and Railway Tracks; and
  • Consideration must be given to concurrent causes of loss.

Ports

The main coal ports have generally reported minimal damage with the Port of Gladstone recommencing operations immediately after the cyclone had past. North Queensland Bulk Ports at Hay Point and Abbot Point appear close to recommencing operations with surveys of berths and arrival and departure paths almost complete.

Insurance implications, including event specific deductibles and sublimits, could include the following:

  • Customer dependency (Specified / Unspecified) due to the inability to receive coal from mines / rail network;
  • Impacts due to damage; and
  • Consideration must be given to concurrent causes of loss.

Please feel free to reach out to any member of the MDD team, we would be happy to discuss the above with you in greater detail.

Chris Ehlers CPA – Partner
E: cehlers@mdd.com
O: +61 2 9005 1000
M: +61 47 8647 778

Cullum Weston CPA – Manager
E: cweston@mdd.com
O: +61 2 9005 1000
M: +61 448 728 511

David Maritz CMA, CFE – Senior Manager
E: dmaritz@mdd.com
O: +64 9363 3826
M: +64 21 2985 159

Flemming Jensen CPA, CGMA – Partner
E: fjensen@mdd.com
O: +44 203 384 5499
M: +44 7711 416 462

Leave a Reply

*