My understanding is that the BCC provides information about a Q100 flood (which 1974 was) and then its estimate of the mitigation affect of Wivenhoe Dam on a flood of that intensity. The council allowed building based on the estimated mitigation effect. I am not aware of any evidence that shows that this estimation was wrong. The flooding of such properties does not of itself proves any error. The 2011 flood may have been a Q120 or Q150 flood.
We have not examined policies with this question in mind. It will be a qn of policy interpretation – and a different answer in each case. It may fit the definition that excludes river flooding in some policies and it may also qualify for cover under those policies that exclude river flooding but allow for flash flooding.
Catherine – If there are 2 insurance policies, the insurer for whoever (buyer or seller) has liability for the loss, will have to take on responsibility under that policy. But its not necessarily the case that the buyer becomes responsible immediately after signing the contract as you suggest. See http://www.cartercapner.com.au/blog/?p=1096