You’re offline. This is a read only version of the page.
Determination
Case number | 12-00-1007346 |
Financial firm | Ausure Pty Ltd |
Case number: 12-00-1007346 28 June 2024
The complainant held a business insurance policy arranged by the financial firm (broker), through the services of S, the broker’s authorised representative. The policy included cover for both property damage and business interruption.
A claim was lodged with the insurer following the events of the Covid-19 pandemic.
The insurer declined the claim based on the terms of the policy. The complainant has accepted this decision by the insurer.
The complainant however says that neither S nor the broker provided it with the correct policy wording (PDS18), only the previous policy wording (PDS15).
The complainant says PDS15 was materially different from PDS18 because PDS15 did not contain a conformity clause, which the insurer relied on to decline cover.
The complainant says the broker has breached its duty by not providing the correct policy terms to it and as a result it has caused a considerable financial loss.
The broker says that it did not breach its duty of care and in any event the complainant has not suffered any loss resulting from any alleged breach.
1.2 Issues and key findings
Yes. The broker breached its duty by failing to provide to the complainant PDS18 prior to renewal of the policy.
No. The complainant has not shown the failure by the broker to provide a copy of PDS18 prior to renewal has caused it to suffer a loss.
No. In the circumstances of this complaint the broker is not required to pay non-financial loss.
The outcome is fair as it is consistent with the exchanged information, accepted law and AFCA’s Rules regarding brokers.
This determination is substantially in favour of the broker
The broker is not required to make any payment to the complainant.
There has been a full exchange of all material information relied on for the purposes of this determination and each party has had the opportunity to address any issues raised by the other.
This complaint has been determined based on what is fair in all the circumstances, having regard to the relevant law, good industry practice, codes of practice and previous decisions where applicable.
A panel has determined this complaint. The panel consists of the panel chair ombudsman, a representative with extensive experience in the insurance and broking industry and a representative with extensive experience in consumer claims.
While the parties have raised numerous issues in their submissions, for the purposes of this determination commentary has been restricted to those issues considered directly relevant to the outcome only.
Yes. The broker breached its duty by failing to provide to the complainant PDS18 prior to renewal of the policy.
Under applicable law, the broker owes a duty to exercise reasonable care and skill in the performance of their duties. The standard of care in exercising this duty is that of a competent and experienced broker exercising the special skill of that profession. This standard is also extended to its agents or representatives; in this case S. It is not disputed by the broker that S was the broker’s agent or representative for the purposes of its dealing with the complainant, neither has the broker said that S acted outside the scope of its authority. This means any acts or omissions of S also extend to the broker for the purpose of this complaint.
As a broker provides services to its clients under an Australian Financial Services Licence (AFSL), it is also required to do all things necessary to ensure that its services are provided efficiently, honestly and fairly.
The complainant bears the onus of establishing, on the balance of probabilities, that is more likely than not, that the broker breached its duty of care and the breach caused loss. If the complainant can establish this, the broker will be liable for any loss the complainant has suffered because of the broker’s breach.
The complainant used the services of the broker to arrange business insurance.
In August 2020, the complainant lodged a claim for business interruption. The claim was lodged to cover the period commencing on 16 March 2020 for a space of 159 days. The complainant says the policy ought to respond because the business was forced to close because of the outbreak of human infectious or contagious disease occurring within a 20-kilometre radius of the business. The complainant says this fell under the disease component of the Murder, Suicide and Disease extension within the policy.
The relevant insurer determined the following:
Cover under b. and c. under this extension of cover does not apply in respect of High Pathogenic Avian Influenza in Humans or other diseases declared to be quarantinable diseases under the Australian Quarantine Act 1908
The complainant accepted the decision of the insurer but says it was only provided with PDS15 by S when taking out the policy. It said it never received a copy of PDS18 from either S or the broker prior to making claim. PDS15 does not contain a conformity clause.
The complainant says the broker breached its duty because by not providing the complainant with PDS18 and advising it on the implications of the change, it limited the opportunity for the complainant to explore other policies like PDS15, which it says would have provided it cover.
The complainant says because of this it suffered significant financial loss following the insurer’s decision to decline it’s claim. The complainant says the broker is required to compensate it for the loss in the same terms as if PDS15 had applied to the claim.
The broker says it did not breach its duty of care because at all relevant times
The broker’s duty includes communication of the terms upon which cover is provided or is to be provided.
In the panel’s view the broker has breached its duty because:
No. The complainant has not shown the failure by the broker to provide a copy of PDS18 prior to renewal has caused it to suffer a loss.
The available information establishes the broker has failed to act in accordance with the standard of care expected of an experience broker. This is because it did not pass to the complainant the updated policy wording (PDS18) prior to the renewal of the policy.
The issue to be resolved is the extent of the complainant’s loss because of the broker’s breach of its duty to the complainant.
The complainant says the extent of its loss is the full value of its business interruption for the period commencing from 26 March 2020 (159 days). It says this is because the broker’s failure caused it to lose the opportunity to explore other policies which would have responded to its claim.
The panel having considered the information and submissions of both parties is not persuaded that the complainant has shown it has suffered a loss because of the complainant’s breach. This is because:
No. In the circumstances of this claim the complainant is not entitled to non-financial loss compensation.
AFCA’s rules enable it to award compensation to a complainant for non-financial loss outside of the policy terms (capped at $5,400). Compensation for non-financial loss is limited. AFCA may decide an insurer should compensate a complainant for such a loss only where there has been:
AFCA takes a conservative approach to compensation for non-financial loss and expects a complainant to be moderately robust and bear the usual degree of inconvenience when managing a claim.
Non-financial loss is intended to compensate a party for personal distress, inconvenience and other factors which impact complainants in a personal capacity. As outlined in AFCA’s public “Approach” document to non-financial loss claims, awards for non-financial loss are not usually made by AFCA to companies because they are not ‘natural persons’ and so it is unusual for them to meet the criteria necessary for such an award.
While the panel accepts that likely one or more persons within the complainant suffered because of the broker’s failure, in the circumstances of this complaint, in the absence of specific evidence, it is not appropriate to vary AFCA’s practice.
The outcome is fair as it is consistent with the exchanged information, accepted law and AFCA’s Rules regarding brokers.
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.
