PROFESSIONALISM / AFCA Case Study
FULLY INFORMING A CLIENT ABOUT THEIR POLICY
AFCA noted that when considering if the broker arranged ‘adequate’ cover it is necessary to consider if the broker made the complainant aware of the level and scope of cover arranged, and if the complainant raised any issues, concerns or queries with the cover that were not appropriately addressed by the broker.
Facts
The complainant was a motor trades business owner who had arranged for two separate insurance policies with insurer A and insurer Q through the insurance broker. Cover was extended for “customers’ vehicles”. A customer’s vehicle suffered total loss damage while in the complainant’s care and the insurance broker lodged claims under both policies. Although both claims were accepted by the insurers, the policy with insurer A provided that the complainant was entitled to the sum insured less the salvage value of the payment, unless the insurer took ownership of the salvage. As the insurer did not retain salvage it paid the claim less the salvage value. The complainant had however settled with the customer to its own detriment by paying the market value of the vehicle, as well as allowing the customer to retain the salvage, which it could then sell. This meant the complainant was short the salvage value which it sought from the insurance broker.
The complainant’s case
The complainant alleged the broker breached their duty of care as it had: • not provided a copy of the policy documents. The complainant provided evidence that insurer A’s system showed the broker had never downloaded the PDS on the complainant’s policy and so, could never have sent it to the complainant; • not explained the salvage terms of the policy to the complainant and should have drawn its attention to the specific salvage provision in policy A; • failed to arrange adequate insurance cover, essentially because the value of the vehicle involved was higher than the sum selected for cover; • provided incorrect advice about the claim with insurer A, essentially because the
complainant settled with the customer on a full market value payment and gave them salvage, which in turn allowed the insurer to deduct the salvage value to the complainant’s detriment; and • provided incorrect advice regarding the claim with insurer Q. No reason was stated in support of this.
The broker’s case
The broker submitted that it had not failed to discharge its duty to the complainant as: • it had provided copies of both policy documents to the complainant. The policy documents for insurer A were sent with a letter to the complainant detailing the proposed cover along with clear instructions for the complainant to review the sums and enclosed PDS. The broker also explained it had not needed to download a copy of insurer A’s PDS as it already had a copy on file. The policy documents for insurer Q were provided in a later meeting between the broker and complainant where all proposals were completed, at the complainant’s request. Copies of the letter, attachments and contemporaneous notes were submitted as evidence; and • it had arranged adequate insurance cover for the complainant after careful consideration of alternative policy providers and had fully informed the complainant about the cover arranged. Copies of the ‘fact find’ results and evidence indicating the complainant had elected to take out a reduced sum to reduce the premiums were submitted to AFCA. Contemporaneous file notes were also submitted to show the complainant and broker completed the proposals together. It had not provided incorrect advice regarding either claim with insurer A or Q.
BY MARK RADFORD
Principal, Radford Lawyers
It provided as evidence a copy of a statutory declaration outlining a meeting between the broker and the complainant containing records of discussions regarding: o the relevant salvage terms; and o the appointment of an independent assessor to determine if the truck was repairable or not. The broker also submitted records of email correspondence setting out the steps the broker had taken on the claim.
The AFCA decision
ACFA found in favour of the broker because: • on balance of probabilities, it was satisfied that both policy documents were provided to the complainant based on the evidence provided by the insurance broker. In particular, AFCA considered the insurance broker’s contemporaneous notes from a meeting between it and the complainant that noted the complainant’s request for a copy of only the policy with Q and not A, suggested the complainant had already received a copy of A’s policy wording; • it was not reasonable or practical to expect the insurance broker to explain the salvage term of the policy to the complainant as the term was clear and not unusual for the type of policy in question. • on balance of probabilities, the insurance broker had arranged ‘adequate’ cover that was consistent with the complainant’s needs. The evidence showed it had completed a ‘fact find’ of the insurance needs of the complainant and had looked into alternative policy providers before proposing the cover with A. • it was not necessary to consider whether the broker provided incorrect information on lodging the claim with Q as the complainant had not suffered any loss in that regard.
NIBA.COM.AU / 19
