FOS clarifies broker duty of care

Sending a proposal for a client to check and confirm with a written duty of disclosure notice is not enough to meet a broker’s duty of care to their client, according to a recent FOS determination.

FOS did however find in favour of the broker in this instance because the client had been aware of the circumstances and failed to notify the broker.

Indeed FOS found that when incepting a new policy, it was good practice for the broker to sit down with the client and work through each of the disclosure questions to confirm the information provided was correct.

The approach taken by the broker in this case was considered to be not an effective method of obtaining information compared to a face-to-face meeting or telephone conversion.

“A verbal discussion allows the broker to draw each relevant piece of information to the client’s attention and provides an opportunity for the client to question anything which is unclear,” the decision stated. “A completed proposal form or other document reflecting the conversation can then be signed as a record of the matters discussed.”

The dispute arose when an insured’s claim under a landlord’s policy for damage to several of their properties from the January 2015 hail storm was refused because they failed to disclose that the roofs were constructed out of fibro cement.

There had been conflicting information regarding the source of the information about the construction of the properties when signing up to the policy in 2011. But on renewal of the policy in 2014, the insured became aware that the information was incorrect yet failed to notify the broker or insurer.

The proposal the insured signed outlined their duty of disclosure and required acknowledgement that the information provided was accurate and complete.

“In these circumstances, it is appropriate that the [insured] bears the loss arising from his non-disclosure,” the FOS found.