Don’t forget to make sure your client’s policy is in force

A B.C. broker, his brokerage, and the brokerage’s representative nominee were collectively fined $7,500 for a procedural mix-up that left a client unknowingly without a policy in force for a year.

The broker, Amrit Singh Sidhu, received a $5,000 fine for his role in the matter.

In Amrit Singh Sidhu, Daljit Singh Sidhu and S&S Insurance Services Ltd., released in August, the Insurance Council of B.C. found Amrit Singh Sidhu didn’t follow up twice when an insurance company told him conditions had to be fulfilled before the client’s coverage was bound.

Instead, a broker who had left the brokerage marked the client as “renewed” in the brokerage’s system. The brokerage and its representative nominee, Daljit Singh Sidhu, were fined the balance for failing to follow up to make sure the client’s coverage was properly bound.

On Oct. 26, 2020, an insurance company sent an email to Amrit Singh Sidhu to remind him of the upcoming renewal of his client’s policy on Dec. 11, 2020. He responded and asked for a quote, which the insurer’s agent provided to him on Nov. 9, 2020.

On Dec. 11, 2020, another agent at the brokerage advised the insurer that the client wished to bind coverage. The client was charged $4,375 for premium fees, which were paid to the brokerage. On the same day, the brokerage provided a binder to the client showing the insurer’s logo, a binder number, and noted an effective date of coverage from Dec. 11, 2020, to Dec. 11, 2021.

However, the binder was not signed by the insurer, and therefore the policy was not valid. The binder document states: “This binder shall not be valid unless countersigned by a duly authorized representative of the Insurer.”

Three days later on Dec. 14, the insurer responded to the broker’s Dec. 11, 2020 email. It said the renewal quote required a signed application or a signed and dated quote from the insurer. Since the bind offer was now past the date of renewal, the insurer would also require written confirmation of no losses. The insurer did not confirm to the brokerage the policy was in force.

The agent who advised the insurer that the client wished to bind coverage left the brokerage.

“It is unclear if the [brokerage] was aware of the insurer’s initial response from Dec. 14, 2020, where they required written confirmation that there were no losses before the policy could be issued,” council stated in its decision. “M.M., who responded on behalf of the [brokerage] to council investigator inquiries, stated that the [brokerage] believed the policy had been renewed because of an entry made by the former agent of the [brokerage] noting that the policy was renewed.”

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Amrit Singh Sidhu sent an email to the insurer on Jan. 25, 2021, asking for a copy of the insurance policy. The insurer responded the insurance policy had not been renewed because its conditions had not been met. Amrit Singh Sidhu asked what to do to back-date and place the policy.

Since it had been more than 30 days since the policy expired, the insurer said it required a new application to consider the request. At that time, Amrit Singh Sidhu was made aware no policy was in place, the council’s investigation found.

There was no further communication between the brokerage and the insurer until Nov. 18, 2021, when the brokerage reported a claim on behalf of the client to the insurer. The insurer reminded Amrit Singh Sidhu that the policy was not renewed for the 2020 term.

The brokerage said it told the client there was no coverage, because no policy was in place. “M.M. noted that the client did the repairs themselves as the damage was minimal,” council found. “There was no complaint received from the client regarding this matter.” The insurance company ultimately made the complaint to council.

Council found the brokerage provided no correspondence to prove the client had been notified about the absence of coverage.

The matter came to a head on Jan. 5, 2022, when a broker from a different brokerage requested a quote from the same insurer for the same client, believing that the policy in question expired in December 2021. The insurer informed that brokerage that the policy in question expired in 2019.

“It is unclear whether the client knew that there was no policy in place for the 2020 to 2021 year as there was an attempt to renew the policy,” council found. “Additionally, the agent from the other [brokerage] advised the insurer that the policy had just expired in December 2021.”

The brokerage refunded the client’s premium money. It was never remitted to the insurer, since no policy was in place.

Council said it was “concerned with” Amrit Singh Sidhu’s lack of follow-up when he was notified at least twice that the client did not have coverage.

“[Amrit Singh Sidhu] was advised in January 2021 that there was no insurance coverage in place and had asked the insurer what steps would need to be taken to obtain coverage,” council found. “At this point, [he] should have taken all necessary steps to ensure the client was able to obtain coverage. Instead, there was no response to the insurer, and the client went without any insurance coverage for a whole year.”

As for the brokerage, council’s decision noted, it was responsible for the actions of its staff.

In determining a penalty, “the primary mitigating factor was that the [brokerage] nominee [Daljit Singh Sidhu] and [Amrit Singh Sidhu] acknowledged the misconduct, and that there were some staffing issues within the [brokerage] due to COVID-19,” council’s decision states. “Additionally, council considered that the [brokerage] developed new procedures for the [brokerage] and made staffing changes as mitigating factors.”

Feature image courtesy of iStock.com/gbrundin