by Tim O’Dwyer M.A., LL.B
The blame for many uninsured property and financial losses resulting from floods and from Cyclone Yasi can be sheeted home to banks, building societies, credit unions and other lenders.
Never mind the much-vilified insurance companies whose doubly-devastated policy-holders have found themselves not covered for flood or storm surge damage. While more than a few insurers may have failed to demonstrate any “utmost good faith” towards their policy-holders, the finger of blame in these tragic circumstances can also be pointed at a very culpable lending industry – without exception. By not making sure residential and business borrowers were fully and properly insured, banks and other lenders have failed miserably not only these customers but also themselves, and ultimately their own shareholders.
Why? Lenders always for good reason obliged their property borrowers to take out and maintain insurance, but have never – in my decades of experience in handling property buyers’ conveyancing – required borrowers to secure suitably protective flood and surge insurance. No lender, in my experience, ever asked a borrower for a flood search on a property being put up for security. (How many conveyancing solicitors raised flood and flood/surge insurance issues with buyer clients or undertook flood searches, is another question for another time).
Nevertheless, despite obtaining valuations which not unexpectedly should have indicated flood or surge risks, property lenders inexplicably never saw – until now – the advantage for customers, themselves and shareholders in specifically requiring at risk mortgaged properties to be insured against flood and surge damage.
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