Broker Ordered to Compensate Client for Uninsured Fire Losses
Broker Ordered to Compensate Client for Uninsured Fire Losses
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A recent ruling mandates an insurance broker to pay nearly $300,000 in compensation to a client after an insurer, QBE, declined a fire claim and cancelled the policy due to nondisclosures.
The fire, which occurred in October 2022, severely damaged the commercial premises.
QBE asserted that they would have denied coverage had they known about asbestos on the property, among other unreported issues.
The dispute review by the Australian Financial Complaints Authority (AFCA) supported QBE’s decision to refuse coverage. However, AFCA held the Community Broker Network responsible for not thoroughly investigating the property or accurately completing the policy application. The broker claimed to have visited the property in 2016 or 2017, identifying only a single building and not noting asbestos or other hazards. Unfortunately, records substantiating this were unavailable due to their age.
The AFCA noted that the lack of documentation regarding critical client information showed a deficiency in the broker's duty of care. While the broker acknowledged omitting 'manufacturing' from business descriptions, they argued that QBE should have recognised the tenant's business nature, a health food operation, from past dealings. Despite this, the AFCA found no breach concerning the insurance amount chosen, as it aligned with the client's request to lower premiums.
Subsequent to policy cancellation, the client managed to secure coverage from another provider. In light of these circumstances, the AFCA ruled that the broker must compensate the client with $296,951, inclusive of interest, and cover legal expenses up to $5000. The panel deemed the broker's failures as the cause of the insurance gap that left the client unprotected against the fire loss and necessitated reimbursement for those damages.
The decision underscores the importance of comprehensive risk assessment and accurate record-keeping in the broking process, reinforcing brokers' obligations to their clients in arranging sufficient and appropriate policy coverage.
Published:Friday, 15th Aug 2025 Source: Paige Estritori
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Dictionary
Insurance Policy
noun
Broadly, the entire written contract of insurance. More narrowly, the basic written or printed document, as distinguished from the forms and endorsements added thereto.
