Broker not liable for engine damage despite duty breach

A broker has been ruled not liable for losses caused after the wrong fuel was put into a truck, despite the Australian Financial Complaints Authority (AFCA) finding a breach of duty.

The cover was arranged by the complainant’s son, an existing client of the broker, who had sold the truck to his father’s business. The son provided the bank details and other information and instructions for the new policy on behalf of the father.

The following year the complainant’s truck engine failed after the additive adblue was put into the diesel tank. Adblue helps to prevent exhaust pollution in some engines.

The insurer declined cover due to an exclusion for damage “caused by an incorrect fuel type or additive or the use thereof”.

The complainant says the broker failed to provide him with the cover requested, which was for all possible damage, and that he had not been provided with the product disclosure statement (PDS) so he could check the policy.

AFCA says virtually all the evidence supports the view that the complainant had authorised his son to communicate with the broker in arranging the insurance.

“The complainant has relied on his son to arrange the policy as his intermediary. The son was provided the relevant documents and there is no information that he was misled as to the cover provided,” it says.

Nevertheless, it found the broker, MGA Insurance Brokers, had erred in not sending a hard copy of the insurance documents to the complainant’s company address, which had been provided.

AFCA says it appears unlikely the son provided the PDS, while there was also no suggestion the complainant had requested the information, or that he would have sought further information if the exclusion was brought to his attention.

“On balance I find the broker did breach its duty of care to the complainant by not taking sufficient steps to ensure the complainant’s company received copies of the PDS and Certificate of Insurance,” the decision says.

“However, there is insufficient evidence to show that the complainant would not have suffered a loss had he received the PDS.”

Accordingly, it would be unfair for the liability for the engine damage to be passed on to the broker, AFCA says.

The decision is available here.