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Determination
Case number | 12-00-1022971 |
Financial firm | Arthur J. Gallagher & Co (Aus) Limited |
Case number: 12-00-1022971 15 July 2024
The complainant, which is a business, is represented by its owner (Mr C). For ease of reference, I have referred to the complainant and Mr C as ‘the complainant’.
The complainant holds an equipment insurance policy underwritten by an insurer, which was arranged through the financial firm (broker). With the broker’s assistance, the complainant lodged a claim for damage to an insured floor scrubber. The insurer declined the claim because it says the damage was caused by malfunction, which is excluded under the policy. The complainant says the broker did not:
No. I am not satisfied, on balance, the broker breached its duty of care owed to the complainant.
The outcome is fair because I am not satisfied the broker:
It would therefore be unfair to require the broker to compensate the complainant for the issues raised in this complaint.
This determination is in favour of the broker. The broker is not required to take any steps, or pay the complainant any compensation, in relation to this complaint.
No. I am not satisfied, on balance, the broker breached its duty of care owed to the complainant.
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 professional insurance broker.
A broker provides services under an Australian Financial Services Licence (AFSL). A broker is required to do all things necessary to ensure the services they provide are done efficiently, honestly and fairly. A broker is also required to act in the best interests of its client. In considering if a broker has acted reasonably, AFCA notes the requirements set out in the Insurance Brokers’ Code of Practice (Code) and what it considers to be good industry practice.
Where a complaint is made against a broker, a complainant will need to establish:
The complainant says the broker:
The broker says:
For completeness, I note the complainant has raised various reasons why the insurer’s decision to decline the claim was incorrect. In particular, the complainant raised issues about the decline being based on a ‘wear and tear’ exclusion.
In this complaint, I have not considered:
This is because the insurer is not a party to this complaint. I note, however, there is no information to show:
Th exchanged information shows the complainant transferred the policy to the broker in 2019. At that time, the broker:
The complainant does not dispute the policy the broker arranged was the same policy as the complainant’s previous broker had arranged. The quote documents show the broker verbally explained to the complainant why the cover was chosen. The complainant has not raised any specific issues that the initial discissions were not appropriate, or he had concerns about the policy chosen. There is also no information to show the complainant instructed the broker to arrange a different policy.
Not all loss or damage is automatically covered by an insurance policy. The product disclosure statement (PDS) applicable when the complainant’s previous broker handled the policy contains the same exclusion as the insurer relied on to deny the claim.
The complainant did not raise issues about the scope of cover under the policy until the insurer declined the claim for the damage to the floor scrubber. However, the fact that the insurer declined the claim in this instance, does not in itself mean cover was inadequate or not suitable for the complainant’s needs.
The broker says cover for breakdown or malfunction in general use on portable cleaning equipment is not available with the comparable policies it considered. The complainant:
It is not enough for the complainant to consider the policy was not suitable for its needs. The complainant has the onus to establish it was prejudiced by the broker’s failure to obtain suitable cover. This means there must be an alternate product which is available and within the complainant’s acceptable price range. No such option has been specified.
The exchanged information also shows the complainant made three previous claims on the policy, which the insurer accepted. This is not indicative of inadequate cover for the insured equipment.
Considering the exchanged information, I am not satisfied, on balance, the complainant has shown the policy was inappropriate for its needs.
The complainant says the broker did not advocate for it throughout the claims process.
The Code sets out the broker’s requirements in relation to claims management. Relevantly, section 7.1 (c) of the Code says:
If a claim is unreasonably denied or reduced by the insurer, we will act as claims advocates on behalf of our clients to try to get the claim paid to the extent covered by the terms of engagement.
The broker’s contact notes show the broker:
The electrician’s report the complainant provided the broker and the insurer says:
I Inspected [the complainant’s] Floor Scrubber on the 14/07/2023. The unit had appeared to have a moisture/condensation issue that had caused a small motor failure, as such his employee noted smoke coming from the windings. The steam floor machine Duplex 420 floor steam scrubber definitely needs repairs and is not functional nor safe to use.
Based on, among other things, this report, the broker was satisfied the insurer had not unreasonably declined the claim. I am satisfied this was appropriate in the circumstances.
Further, section 7.1 (f) of the Code says:
If the insurer declines to pay the client’s claim, we will explain the reasons for the insurer’s decision and outline what further steps can be taken, including steps to make a complaint.
The exchanged information shows the broker gave the complainant sufficient information about:
The exchanged information does not show the broker pressured the complainant into withdrawing the claim. Rather, it provided the option to do so. I acknowledge the complainant was not satisfied with the insurer’s decision to decline the claim. However, I am satisfied the broker appropriately assisted the complainant with the claim.
In this case, the complainant’s main concerns appear to be about the insurer’s decision to decline the claim. As stated above, I cannot consider the insurer’s claim decision in this complaint.
Considering the above, I am not satisfied, on balance, the insurer breached its duty of care to the complainant. The broker is not required to compensate the complainant for any of the issues raised in this complaint.
The outcome is fair because I am not satisfied the broker:
It would therefore be unfair to require the broker to compensate the complainant for the issues raised in this complaint.
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.
