The applicant in this dispute was a body corporate that employed a broker to assist with a strata insurance policy.

Between July 2012 and November 2013, the body corporate contacted the landlord of one of the strata lots to inform them of suspected damage being made to the property by the tenant. The landlord proceeded to lodge a claim for damages under the body corporate’s strata insurance policy without notifying the body corporate or the broker.

In February 2014, the broker advised the body corporate that the insurer would not pay the claim without the body corporate’s agreement. The broker also advised that the landlord’s claim would not affect the body corporate’s no-claims bonus or subsequent premiums.

insurance brokers code of practiceBetween March and April, the body corporate advised its broker that it had not yet agreed to the landlord’s claim, as it was still seeking to discuss the claim with the landlord and receive supporting documentation. In May, the broker advised the body corporate that the insurer had not settled the claim with the landlord.

In November, the body corporate contacted the broker in regard to renewing the strata policy. The broker informed the body corporate that the insurer refused to renew their policy due to the landlord’s $23,000 claim being settled. The broker advised that it would not assist the body corporate in sourcing a new policy.

The ramifications

The body corporate inquired with the insurer regarding why the claim was settled without its consent. The insurer advised that the broker had confirmed authorisation of settlement via email in May.

The body corporate lodged a dispute with FOS regarding the broker’s conduct. The dispute was closed without resolution, as the applicant was not claiming financial loss, placing the dispute outside of the FOS’ terms of reference.

However, the Insurance Broker Code Compliance Committee is currently investigating whether the broker breached their obligations under the Insurance Brokers Code of Practice.

In the instance that the broker is found to have breached the code, the IBCCC may order the broker
to comply with a corrective sanction. The broker may be required to report the breach in their annual compliance statement and remedy the breach by reviewing their internal procedures,
auditing client files and providing the IBCCC with full copies of the product of this undertaking.