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Determination
Case number | 12-00-980545 |
Financial firm | South Coast Insurance Brokers WA Pty Ltd |
Case number: 12-00-980545 18 July 2024
The complainant held a comprehensive commercial motor vehicle insurance policy with an insurer. The cover included a Kleeman MR110 Z Evo 2 Crusher (crusher) with a value of $900,000 (original policy). On 22 November 2022 the crusher was damaged by fire and deemed a total loss. The insurer accepted the claim and paid a settlement based on the sum insured at the time of the loss.
The complainant says there were unauthorised amendments made to the policy by its broker (the financial firm) who prematurely added an endorsement to the policy which decreased the sum insured for the crusher. The complainant says it only received an insurance settlement of $833,000 but it was entitled to $1,125,000 under the original policy. It seeks that the broker pays the insurance shortfall of $292,000 (shortfall). The complainant business is represented. Any reference to the complainant is a reference to it, its director and/or its representative.
No. On balance, I am not satisfied that the complainant has established that the amendment was to be made at renewal. Therefore, the broker has not breached its duty of care in actioning the change email during the policy period. Further, the confirmation email, refund and verification email put the complainant on notice of the amendment. If the complainant considered there was an error, it ought to have advised the broker of it (but it did not). Therefore, the broker has not caused the complainant to suffer any loss and is not liable for the shortfall.
No. The broker has acted appropriately, and compensation is not warranted in the circumstances.
The complainant has not established that the broker breached its duty of care. Therefore, it would be unfair to require the broker to be liable for the shortfall. It is also fair in the circumstances that the complainant does not receive compensation.
This determination is in favour of the broker.
The broker has not breached its duty and its actions are not causative of any loss. Therefore, the broker is not required to take any further action in relation to this complaint.
No. On balance, I am not satisfied that the complainant has established that the amendment was to be made at renewal. Therefore, the broker has not breached its duty of care in actioning the change email during the policy period. Further, the confirmation email, refund and verification email put the complainant on notice of the amendment. If the complainant considered there was an error, it ought to have advised the broker of it (but it did not). Therefore, the broker has not caused the complainant to suffer any loss and is not liable for the shortfall.
Insurance brokers have a duty to exercise reasonable care and skill in the performance of their duties. The relevant standard is that expected of a competent and experienced professional insurance broker.
In addition, brokers provide services to their clients under an Australian Financial Services Licence (AFSL). This means they are 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 clients.
In considering whether a broker has acted reasonably, AFCA takes into account the requirements set out in the Insurance Brokers Code of Practice (Code), as well as good industry practice.
In pursuing a claim for compensation against a broker, a complainant must generally establish the following:
It is not in dispute the complainant took out the original policy which, amongst other things, covered the crusher for the period 8 January 2022 to 8 January 2023. The original policy covered the crusher with an insured value of $900,000 plus a buffer of up to 25% for any appreciation in its value during the life of the policy if it became a total loss.
On 12 September 2022, the broker sent an email to the complainant with the subject ‘Change to your Insurance Policy – ADD Prime Mover and 2 x Trailers’. It included a comment from the broker’s officer who said she ‘would also like to make a appointment for [the complainant] to come into the office to do a review on both polices…as I will be on leave and not back until beginning of December, and the policy…is due in January, and December is a very short month, and as we will be closed over the Christmas and New year period’.
A meeting was arranged for 21 September 2022 (meeting) and the complainant requested copies of the policies to review beforehand. These were provided to the complainant by the broker on 14 September 2022.
On 15 September 2022, the complainant sent an email advising there had been a double up of certain insured equipment and attaching an annotated copy of its certificate of insurance (COI) for the original policy. The annotated COI provided updated handwritten insurance values for various equipment including the crusher (change email).
On or around 15 September, the broker took various steps to action the change email, including amending the original policy to reduce the value of the crusher from $900,000 to $700,000 (amendment).
On 20 September 2022, the broker sent an email to the complainant with the subject ‘Change to your Insurance Policy – Insurance Endorsement’ (confirmation email). It says:
Further to your recent instructions, we confirm our advice to amend your current Commercial Motor insurance policy as per the attached endorsement invoice.
Attached is our invoices confirming this change and showing the return premium due. This amount will be paid back to *** Funding once it has been received from the underwriter, and will come off the monthly funding contract.
Invoice Number 86061 $2171.93 Credit – to delete duplicated items that are insured under policy for ***
Invoice Number 86064 $1415.13 Credit ‐ to reduce the sum insured on the machinery as per your schedule.
As our advice is also based on information we currently hold on file, there is a risk that our advice is based on information that may be no longer current or is incomplete. Therefore is it important that you review the attached for appropriateness in light of your current circumstances before proceeding.
Please carefully check the invoice to ensure it is correct and notify us immediately of any errors and/or alterations you wish to make. It is important that you notify us of any matter that needs to be disclosed or updated to the insurer prior to their acceptance of cover. We highlight the Important Information included within the attached schedule, however if you are unsure whether a particular matter needs to be disclosed or not please contact us.
There was a tax invoice attached to the confirmation email which confirmed the refund of $1,415.13 for machinery and included the following:
The complainant subsequently received the abovementioned refund.
There is no dispute about the specific steps required to be taken following the change email. The question is whether the steps were to be actioned immediately or at renewal.
The complainant says the broker has breached its duty of care by completing the amendment on the policy earlier than it should have and without its express instructions. It says:
Due to the broker’s error in making the amendment earlier than it should have, the complainant has suffered a loss. Therefore, the broker should pay the shortfall.
The broker says it processed the amendment on the policy as per the changes requested by the complainant in the change email. The broker further says if the complainant intended for the amendment to be made at renewal it would have:
However, it says the complainant did none of the above. The complainant has not provided any positive evidence the amendment was to be made at renewal in January 2023 rather than when the change email was received. The broker says the complainant’s conduct is wholly inconsistent with the assertion that the amendment was to be made at renewal.
The broker also says there has been no communication to it that indicates the change email was not to be actioned and was for discussion at the meeting only. Further, the arranging of the meeting for 21 September 2022 does not of itself exclude the possibility the complainant wished to make the amendment in advance of the meeting. In addition, it was not necessary to refer to the cover for the crusher being reduced at the meeting since this was already confirmed in its confirmation email the previous day.
Insurance brokers have a duty to exercise reasonable care and skill in the performance of their duties. The relevant standard is that expected of a competent and experienced professional insurance broker.
Based on the exchanged information, I cannot be satisfied the broker failed to carry out the complainant’s instructions correctly and, therefore, breached the duty of care it owed.
On balance, there is insufficient evidence to establish the complainant intended for the amendment to only be made on renewal and not earlier. None of the exchanged contemporaneous information makes any reference to actions to be taken at renewal. Therefore, I consider it was reasonable for the broker to carry out the instructions in the change email when it was received.
Further, if there was any misunderstanding or miscommunication about when the instructions in the change email were to be carried out, the complainant could have advised the broker of this on a number of occasions. At no point did it advise the broker of any error in its implementation of the change email.
The complainant had several opportunities to instruct the broker that the amendment was not to be made until renewal. This includes when it provided the annotated certificate of insurance attached to the change email, when it received the confirmation email, at the meeting and/or when it received the verification email. The complainant also has not made any submissions that it did not receive any of the relevant correspondence or that it was not aware of the refund which was only received because of the amendment.
Therefore, I consider the original policy has correctly been changed in accordance with the amendment and that the crusher was insured for $700,000 at the time of the total loss event.
I acknowledge that the broker could have better communicated the actions it was taking. Specifically, it could have once again confirmed at the meeting the content of the confirmation email, including that cover for the crusher and other equipment was being reduced and the duplicate cover removed. I accept that the broker failed to do this at the meeting or any time before the fire. However, I do not consider this failure of itself is sufficient to constitute a breach of the broker’s duty of care. This is because the broker did in fact communicate the steps it had taken to action the complainant’s instructions in the confirmation email and the verification email.
The complainant has the onus of establishing the broker’s alleged breach caused it to suffer a loss. I consider the broker acted in a manner consistent with the complainant’s instructions. However, it is worth noting that even if the broker did breach its duty of care (which I am not satisfied it did), I do not consider there is a loss which flows from the broker’s actions.
If the complainant believed the broker had acted prematurely in making the amendment before renewal, it had several opportunities to tell the broker that it did not want the amendment to be made until renewal. Had the complainant done so, it is likely the amendment could have been withdrawn or reversed such that the original policy terms and conditions remained.
The complainant’s failure to inform the broker of what it says were its true instructions, represents a break in the chain of causation. Accordingly, there is no loss that flows from the broker’s actions.
The current complaint is brought against the broker. Therefore, it is not appropriate or necessary to determine whether the insurer has properly assessed the claim in accordance with the policy in effect at the time of the loss. s
No. The broker has acted appropriately, and compensation is not warranted in the circumstances.
Under paragraph D.3 of the AFCA Rules, we may award compensation for non-financial loss (capped at $5,400) where the financial firm’s actions have caused an unusual amount of:
physical inconvenience;
time taken to resolve the situation; or
interference with the complainant’s expectation of enjoyment or peace of mind.
We take a conservative approach to compensation for non-financial loss. It is not awarded when a person suffers the normal degree of inconvenience when a problem occurs.
The complainant says the broker processed the amendment prematurely and that it was only meant to be completed at renewal in January 2023. Based on my findings above, I consider the broker has acted reasonably and has not breached its duty of care. Further, I consider the broker has acted appropriately and reasonably in responding to the claim made against it.
In the circumstances, I do not consider any form of compensation is warranted.
The complainant has not established that the broker breached its duty of care. Therefore, it would be unfair to require the broker to be liable for the shortfall. It is also fair in the circumstances that the complainant does not receive compensation.
AFCA has determined this complaint based on what is fair in all the circumstances, having regard to:
The respective parties have completed a full exchange of the relevant information, and each party has had the opportunity to address any issues raised. We have reviewed and considered all of the information the parties have provided.
While the parties have raised a number of issues in their submissions, we have restricted this determination to the issues that are relevant to the outcome.
AFCA is not a court of law. We do not have the power to take or test evidence on oath, or to require third parties to give evidence.
When we assess complaints, we consider:
We give more weight to documents created at the time the events occurred. If there are no relevant documents, we will decide what most likely occurred based on the available information.
If there are conflicting recollections and these are evenly weighted, we may find that a claim cannot be established.
