FOS determinations highlight brokers’ duties

Brokers’ obligations and duty of care have come under the spotlight recently in three FOS determinations, with the ombudsman finding a breach in one instance.

In the first case, a client made a claim on its insurance policy for a vehicle that had been involved in a single vehicle accident only to be rejected because it had been deleted from the policy schedule of cover.

The client claimed that the broker had been only been instructed to change the registration number for the vehicle not delete it from the policy.

The broker maintained it had been instructed to delete the vehicle and noted that the client had reviewed the policy documentation, made a number of amendments to the policy schedule and so should have been aware that the vehicle was not included.

FOS found that the broker had not appropriately communicated the changes to the schedule to the client, and by deleting the vehicle from cover, it was in breach of its duty of care. It might have been a genuine mistake but a broker is under a duty to exercise reasonable care and skill, FOS said.

However, FOS also noted that the client had processes and procedures in place to check its policy and schedule so should have checked to ensure it covered the vehicles required to be covered.

“Although the Panel accepts the breach of duty of care may have contributed to the loss, the Panel is also satisfied that the applicant had the opportunity to have the vehicle reinstated on the policy schedule prior to the loss …” FOS found.

In the end FOS decided that the broker should bare a degree of responsibility and the broker had to pay the client $25,000 in settlement (see

Another vehicle case went the other way, with FOS finding that the broker had met its obligations to advise the client about its policy (see

In this case, the client claimed on its Used Car Dealer Policy for a theft of one of its vehicles on its premises. The insurer refused the claim as the PDS provided an exclusion for stock in trade.

The client argued it had not been advised on this limitation or received the PDS.

FOS considered the exchange of material and was satisfied the client had received the PDS and what’s more that the limitation of coverage had specifically been requested by the client at the original inception of the policy.

Finally, another broker was found not to have breached its duty to provide advice and assistance in determining the client’s policy requirements and ensuring she had a policy appropriate to her needs (see

A client claimed on her insurance policy for boundary fencing at her farm that was destroyed in a bushfire and was paid out $30,000. However, she believed she had insured the fencing for $70,000.

It was agreed that she had been told replacement costs would be calculated by the kilometre and she had advised that the length of fencing should be reduced from 13km to 6km. The broker had claimed then that the client was aware that the change would consequently reduce the sum insured.

FOS accepted that there might have been a misunderstanding between the parties but noted that the client had been provided and reviewed two versions of the quotation which showed the cover was for $30,000 on a per kilometre basis. Therefore it was reasonable for the broker to proceed with setting up cover as quoted.