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Determination
Case number | 988948 |
Financial firm | Resilium Insurance Broking Pty Ltd |
Case number: 988948 29 May 2024
The complainants hold a commercial landlord policy which has been arranged for them by the financial firm (broker) since 2016.
The complainants say the broker breached its duty of care owed to them by communicating directly with their tenants, and not with them, regarding the policy. They say the broker colluded with the tenants to reduce the premium which was payable by the tenants pursuant to their commercial lease.
The complainants want a refund of the policy premiums paid from the period 2016 – 2022.
The broker says it did not breach its duty to the complainants. It says the complainants have not suffered any loss and are not entitled to a refund of the policy premiums.
Yes. I am satisfied, on balance, the information shows the broker breached its duty of care to the complainants.
No. I am not satisfied the complainants have established that they suffered any loss as a result of the broker’s breach of duty.
Yes. I am satisfied the complainants suffered undue stress because of the brokers breach of duty and payment of $1000 compensation for non-financial loss is warranted in the circumstances.
While I accept the broker has breached its duty to the complainants, it would not be fair for them to receive a refund of the policy premiums where the breach has not caused them to suffer any loss.
I consider the breach has caused the complainants undue stress and it is fair for the broker to pay them $1000 compensation for non-financial loss.
This determination is substantially in favour of the broker.
Should the complainants accept this determination, within 14 days of being notified of their acceptance the broker is to pay the complainants a total amount of $1000 compensation for non-financial loss.
Yes. I am satisfied, on balance, the information shows the broker breached its duty of care to the complainants.
Legal principles require insurance brokers to exercise reasonable care and skill in the performance of their duties. The relevant standard is that expected of a competent and experienced insurance broker. Brokers are held up to the same standard as any professional person.
It is generally accepted that when a broker arranges an insurance policy for a consumer, it must ensure the policy covers the risk necessary to the consumer’s disclosed or ascertained needs.
The broker’s duty is to undertake reasonable inquiries to ascertain the consumer’s needs. In complaints lodged with AFCA, we will consider if the broker, having undertaken reasonable inquiries, would have ascertained that the matter in question was relevant to the consumer.
AFCA must consider whether the broker’s failure caused the consumer to suffer the loss being sought.
This loss is assessed as the amount necessary to restore the consumer to the position they would have been in if the failure had not occurred.
If the consumer is found to be no worse off than if the failure had not occurred, no compensation would be awarded.
The complainants purchased a policy for their jointly owned commercial investment property in November 2016, through the broker.
The complainants say from November 2020 they did not receive the policy renewal documents. The documents were sent to the complainants’ tenants instead.
The complainants say the tenants and broker made changes to the policy without their knowledge or consent. They say the following inaccurate changes were made:
The complainants say the broker’s employee inspected the warehouse in late 2019 and was aware of the material used to construct the building and that the alarm system in place at the warehouse was not in working order.
The complainants became aware of the changes in the policy in June 2022 when they received an email from the broker. The complainants asked for the errors on the policy to be corrected. The corrections were made to the policy on 23 July 2022.
The complainants say the incorrect information on the policy meant it was void for a period of 19 months and 3 days. They also say the actions of the broker destroyed their relationship with their tenants causing them to lose rental income.
The complainants allege the broker colluded with the tenants who were motivated to reduce the premiums because it was an obligation of the tenants’ lease agreement to repay the premium amount to the complainants.
The complainants’ tenants paid the premium pursuant to the lease from 2016 until 2022. There were two amounts paid by the complainants in the 2021/2022 policy period which the complainants say the tenants refused to reimburse. These were $155 and $1195.03.
The complainants want a refund of all premiums paid on the policy between 2016 and 2022.
Broker says it did not breach its duty to the complainant
The broker says it did not breach its duty to the complainants, and it strongly denies the complainants’ allegation that it colluded with the tenants against the interests of the complainants.
The broker says it started communicating with the tenants at the inception of the policy. On 16 November 2016 the tenants advised the broker it had the landlords’ authority to obtain an alternative quote for insurance. A quote was sent and on 21 November 2016 the tenants confirmed that the landlord had authorised them to go ahead with the policy.
The broker says one of the complainants contacted it in May 2018 to provide his contact details and request a copy of the certificate of insurance. The broker says he indicated as long as the tenant was paying the premium and the property was insured he was OK with the broker arranging cover with the tenants.
The broker also says:
The broker says if an event giving rise to a claim had occurred and the complainants had lodged a claim, the policy would not have been void and the claim would not have been denied based on the errors in the building materials listed in the policy.
It says the complainants have not suffered any loss and it should not be required to refund the premiums, which were in fact paid by the tenants and not the complainants.
Information shows, on balance, broker breached its duty to the complainants
As stated, a broker’s duty broadly is to fully canvas and record the consumer’s insurance needs and undertake reasonable efforts to arrange a policy suitable to the consumer’s needs.
The complainants were at all times the policy holders and owners of the insured property. Where the broker has not communicated with the complainants about the policy and made changes without consulting them it cannot have met its duty to them in this regard.
I am satisfied, on balance, the broker breached its duty to the complainants by:
Whilst I understand the tenants arranged the initial quotation and there appeared to be consent from the complainants for these arrangements which caused some confusion as to the correct contact, the broker is held to the same standard as any professional person.
I consider the broker’s conduct has fallen short of that standard in the circumstances.
There is insufficient evidence to show the broker and the tenants colluded against the interests of the complainants or acted fraudulently. I do not consider the complainants have shown, on balance, that conduct of this nature occurred.
No. I am not satisfied the complainants have established that they suffered any loss as a result of the broker’s breach of duty.
The complainants say the errors on the policy meant it was void and therefore their building was not insured, and they would have suffered a loss if the building was damaged.
There is no evidence to support the policy would have been cancelled or void had a claim been made during the time cover was active. Without a clear statement from the insurer that it would not have accepted the risk, I cannot accept the policies were void.
Regardless, it is not necessary to consider whether the insurer would have denied claims under the policy because the complainants did not make any claims during the period 2016 – 2022 that were denied. The fact a loss may have occurred but did not is not a loss suffered by the complainants for the purposes of an award of compensation.
I also note the complainants did not pay the policy premiums. They were paid by the tenants who were liable for the premium amount under the lease agreement. The complainants say there are some premium amounts still owing to them by the tenants, however the complainants retain a right to recover this amount from the tenants under the lease agreement.
The complainants also say they suffered a loss because the policy dispute has caused the breakdown of their relationship with their tenants leading to a loss of income from the property.
An email from the tenants to the complainants dated 15 January 2023 shows that the relationship had broken down for several reasons, including the complainants making complaints without notice to public authorities and a dispute about the roof leaking and rental payments. The information also shows the complainants and their tenants are involved in legal proceedings regarding disagreement over their lease agreement.
I am not satisfied, on balance, the actions of the broker have caused the breakdown in the relationship between the complainants and their tenants and therefore caused the complainants to suffer a loss.
I am not satisfied the complainants have shown they have suffered any loss because of the brokers breach of its duty and in these circumstances a refund of the premiums paid under the policy is not warranted.
Yes. I am satisfied the complainants suffered undue stress because of the broker’s breach of duty and payment of $1000 compensation for non-financial loss is warranted in the circumstances.
Under paragraph D.3 of the AFCA Rules, we may award compensation for non-financial loss (capped at $5,400 for complaints lodged before 1 January 2024) where the broker’s actions have caused an unusual amount of:
We take a conservative approach to compensation and expect a complainant to bear a normal degree of inconvenience during a claim.
One of the complainants has provided an impact statement as to the effects of the broker’s breach of duty which caused him a great deal of distress and anxiety.
The impact statement lists the contributing factors as being:
The complainant also repeats his allegations that the broker lied and colluded against him and the other complainant with the tenants which I have found not to be supported by the exchanged material.
The complainant says all these stresses have caused him to seek the assistance of his general practitioner who has helped him by way of a mental health plan.
While I empathise with the complainant’s recent health difficulties, I do not consider most of the causes of his ill health detailed in his statement are related to the broker’s breach of his duty.
Despite this, I accept the breach has caused the complainants interference with their expectation of peace of mind. The information shows they had genuine concerns about their exposure to risk upon learning changes had been made to the policy without their knowledge.
I consider a payment of $1000 compensation to be warranted in the circumstances.
While I accept the broker has breached its duty to the complainants, it would not be fair for them to receive a refund of the policy premiums where the breach has not caused them to suffer any loss.
I consider the breach has caused the complainants undue stress and it is fair for the broker to pay them $1000 compensation for non-financial loss.
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 the information the parties have provided.
While the parties have raised several 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.
