10 minute read
What does AFCA consider in a complaint against a broker
WHAT DOES AFCA CONSIDER IN A COMPLAINT AGAINST AN INTERMEDIARY?
BY MARK RADFORD
Principal, Radford Lawyers
Facts
The complainant was a motor car trader who had purchased an insurance policy for its vehicles at the recommendation of the broker. The complainant later lodged claims on this insurance policy for damage sustained by two of its vehicles. The damage had been sustained after the complainant had leased the two courtesy cars to E who had in turn rented them out to customers.
However, these claims were denied by the insurer which stated that the policy would only cover ‘Loan Vehicles’ as defined in the policy. At the time of the incident, neither vehicle met this definition as consideration was charged for the use of the vehicles so they were not within the cover for Loan Vehicles.
The Complainant’s Case
The complainant submitted that: • in December 2015, the complainant engaged the broker, dealing with the individual V, to arrange the policies; • the policies were arranged on or around 7 February 2016 and the relevant documents were sent to the complainant; • the vehicles (a 2015 Lexus and a 2014
Hyundai i30) suffered damage on 13
March and 26 May 2016 respectively while allegedly being used under the policies; • the broker was aware of the complainant’s arrangement with E as: o the complainant had mentioned the arrangement with E to V in several conversations between December 2015 and January 2016, before the vehicles were damaged; o an email was sent to the insurer on 16 June 2016 which stated that ‘one service (the complainant) offer(s) is providing loan vehicles to repairers to be used as a courtesy vehicle for their customers’. • Hence, the broker had breached its duty of care towards the complainant by failing to recommend an adequate policy which would have mitigated this loss.
The Broker’s Case
The broker submitted that: • the complainant had not informed it of the rental arrangement and that it was not entitled to compensate the complainant for the losses incurred as a result of the two denied claims.
The broker submitted a file note dated 22 December 2015 as evidence which merely stated “[J] advises there are four loan vehicles”.
The AFCA decision
AFCA set out its approach to insurance broker disputes: • At law, an insurance broker owes a duty of care when acting on behalf of its client. This includes exercising reasonable care and skill in the performance of its duties. • The standard of care in exercising this duty is that of a competent and experienced broker. • In addition, the broker provides services to its clients under an
Australian Financial Services
Licence (AFSL). This means it is required to do all things necessary to ensure those services are provided efficiently, honestly and fairly. It also requires the broker to act in the best interests of their customer. [We
note that AFCA did not qualify that the best interest duty under Part 7.7A of the Corporations Act only applies in relation to retail clients under the Act where personal advice is provided]. • In considering whether a broker has acted reasonably, AFCA takes into account the requirements set out in the Insurance Brokers Code of Practice, as well as good industry practice. • The broker will only be liable for the costs incurred by the complainant if: o the broker breached its duty to the complainant, and o the broker’s breach of duty caused the complainant to incur a loss.
Based on the provided evidence, AFCA concluded that the email was contradictory to the complainant’s claim that it notified the broker of its rental arrangements.
Thus, AFCA decided that: • it did not accept that the broker had breached its duty of care towards the complainant by arranging the policy; • the evidence provided failed to show that the complainant disclosed the specific rental arrangements to the broker when having the policy arranged or prior to the damage; and • the email dated 16 June 2019 refutes the complainant’s claim and the contemporaneous records did not support it either.
AFCA stated that the broker had not breached their duty of care towards the complainant as they had exercised reasonable care and skill while arranging the policy. The broker was not required to take any further action and was not liable to compensate the complainant for the loss.
NIBA WELCOMES ADAM SQUIRE
Get to know Gallagher’s Adam Squire, the latest addition to the National Insurance Brokers Association (NIBA) Board of Directors, who looks forward to bringing his claims voice to the accomplished group.
INTERVIEW BY TANAYA DAS
Insurance Adviser: What does your appointment to the NIBA Board mean to you and what do you hope to achieve during your term?
Adam Squire: NIBA is the peak industry body for insurance brokers and plays a vital role in representing brokers and the value they provide to modern day society. I am honoured to have the chance to contribute at this level, particularly as insurance brokers face some real challenges in terms of how the profession evolves and works in the years ahead.
Personally, I know I will learn a tremendous amount, but I am also looking forward to being the ‘claims voice’ at the table, given claims advocacy is one of the key roles an intermediary plays.
IA: You have been at Gallagher for almost a decade, what have you enjoyed most in that time?
AS: Time flies when you are having fun. During my time here two things stand out to me; one – Gallagher is a dynamic business and every day is different and a great challenge. I love the fact that I’m never bored. Two – eight years at an organisation gives you plenty of time to put together a high performing team. I am obviously biased, but our team of claims professionals are fantastic to work with and it has been brilliant building that team.
IA: Why is insurance a fascinating career choice to you?
AS: There are so many different skills that are needed in insurance that we have fantastic opportunities for people with a very diverse set of skills. From lawyers to actuaries, top class salespeople to wording specialists and claims advocates to underwriters, we have the capacity to utilise a varied range of proficiencies.
One is always learning, growing and coming across situations not seen before. It is diverse and dynamic while being present in nearly every single country. As a part of this industry there is very little one cannot achieve. Want to travel (post COVID)? Insurance is your passport.
IA: What have been the highlights of your career so far?
AS: There have been many; from becoming London Claims Manager for CGU at 29 through to leading the Gallagher Broking Claims Team through multiple claims catastrophes. However, when I see members of teams that I have been lucky enough to lead, go onto bigger roles or just achieve a personal outcome they didn’t think possible, I get a huge kick out of that.
IA: What are some of the greatest challenges you have encountered over the past few years? And what have you been most proud of?
AS: Working in claims you always get challenged by big natural disasters and in the last year we have had our fair share: bushfires; hail storms and COVID-19. Every one of these events were ‘big’ and I am proud of how the team have run at these, always trying to help clients through the stressful times.
We made a really smart decision about two years ago to invest in new digital claims technology for clients and that has allowed us to manage these events so much better than we used to.
On a very personal level a previous CEO threw an extremely large operational efficiency challenge at me about five years ago. It was probably the biggest work challenge I have ever had but I am pleased to say I succeeded, thanks to the team I work with, and actually ended up enhancing client service as well as significantly improving efficiency.
IA: There was much discussion at the Royal Commission about governance and culture. What role do you believe company culture plays in the success of a business? And how has culture differed in the different organisations you have worked within?
AS: An organisation’s culture is absolutely critical to its success. Anywhere I have worked that had a fractured culture did not achieve what it should have.
Gallagher are well known for being the only insurance broker to have been awarded the Global Ethisphere, as one of the world’s most ethical companies. They’ve held the accolade for 10 years, that’s no accident. Every day we live the ‘The Gallagher Way’ which are a set of shared values Robert Gallagher came up with in 1984.
What I love about these values are the fact that they are real and ‘from the heart’ and not just something that is on a ‘corporate to do list’, it is how we do things.
IA: What will be your focus over the next 12 months?
AS: There will be a million things that I have to do but two are really prominent:
At the top of my list is the COVID-19 Business Interruption Claims situation and ensuring Gallagher clients get the best outcome. Secondly, for Gallagher staff, clearing roadblocks, so they can maximise their potential and client outcomes. All this while trying to work out what the post COVID-19 workplace will look like as vaccines do their job.
IA: Why is NIBA important to you?
AS: Insurance brokers play such a critical role in helping their clients transfer risk using insurance. Without them, modern day economies would struggle to function. Brokers need a strong body to represent their interests and the vital role they play in modern day society; NIBA is that body.
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