Broker backed in fire dispute after criminal history not disclosed

A property owner who wanted a broker to cover a house fire loss costing more than $300,000 has lost the dispute after the Australian Financial Complaints Authority (AFCA) determined he failed to disclose his son’s criminal history.

The complainant on September 4 2019 instructed a broker agent to secure immediate insurance for his interest in a house through an interim cover note. He advised he was buying the home from his son, because the bank was foreclosing, and requested the property be endorsed on a current policy.

The property was damaged in a fire on the morning of September 9 but exchanged information shows the insurer was not on risk until the afternoon of the same day and it declined the claim.

The complainant says that by failing to secure immediate cover as requested, the agent breached its duty of care, leaving him uninsured and depriving him of the opportunity to seek alternative arrangements.

The broker disputed it held a duty to the complainant because it says it is not liable for the actions of the agent, who is an employee or representative or one of its corporate authorised representatives, AFCA says.

But the adjudication panel said no information had been provided that showed the agent was not entitled to issue the invoice, the agent took instructions to obtain cover, and at all material times the agent was acting within the scope of his authority as a corporate authorised representative.

The insurer, which declined to cover the loss of $342,376.42, appointed an investigator whose findings included that the son had drug-related convictions prior to the incident, including growing marijuana, and had previously had insurance renewal declined by an insurer.

The insurer says the complainant breached his duty of disclosure prior to inception and breached his duty of utmost good faith.

“Given the insurer is not a party to the complaint, the panel cannot review that decision,” AFCA says. “However, it is clear even if interim cover had been placed, the claim would still have been declined.”

The complainant asked for the property to be endorsed on an existing policy, and information regarding the product disclosure statement (PDS) has been provided by the insurer of that policy.

AFCA says no information was provided to support the position that the complainant was deprived of the opportunity to seek alternative cover, and he hadn’t shown that he would have been able to insure the property with any other provider had the information regarding his son been disclosed.

The decision was made in favour of Insurance House, with no further action required.

“The outcome is fair because while the broker holds a duty of care towards the complainant, the onus is the complainant to show it suffered a loss as a result of the breach of duty,” the decision says.

“The panel is of the view that had the complainant complied with his duty of disclosure the insurance cover would have been refused. He is unable to show he suffered a loss. It would be unfair to require the broker to compensate the complainant.”

The decision is available here.