FSCL Case Study

The clients were a couple who lived in a remote part of New Zealand, running a building business as well as a bed-and-breakfast. They arranged liability insurance for their business, as well as material damage insurance for their buildings and contents through a broker. When a fire destroyed a storage shed, containing building tools, they contacted their broker to lodge a claim for loss of about $160,000. The broker advised that the insurance had been cancelled about three years earlier because they had not paid the premium.

The clients were shocked, how could their broker allow the insurance to lapse? Surely, he should have contacted them to tell them they had not paid the premium?

The broker replied that he had sent their invoice, as usual, to their PO Box. When he did not hear back, he emailed and wrote to them. When the insurance was finally cancelled, he again wrote to the PO Box. When the clients asked if he had tried to call, he said he had not. The broker said he was sorry, but he did not think he was liable for their loss.

They did not agree, and complained to FSCL.


The clients considered their broker had been negligent by failing to take all possible steps to contact them before the policy was cancelled. They acknowledged that mail to their PO Box occasionally went missing, but said they had checked their email inbox, as well as their email junk folder, and could find no record of receiving the email from the broker. They also contacted their email provider who confirmed that no emails failed to be delivered during the relevant period. They said that part of running a successful bed and breakfast business was communication and they were adamant they had received no letters, emails or telephone calls.

The broker checked his records again and advised he had:

•    posted a renewal letter to the PO Box on February 13

•    posted statements to the PO Box in April, May and June

•    posted an overdue notice to the PO Box on June 3

•    telephoned on July 3, and left a message

•    sent an email to their email address on July 3

•    posted a letter advising the policy was cancelled to the PO Box on July 15.

With respect to the July 3 telephone call, the broker said that when he first spoke to the client, he overlooked the note on his file, but is sure he made the call because the email of the same day refers to a message he left on their voicemail.


We considered the broker had taken all reasonable steps to tell the clients about their insurance renewal. It was reasonable for him to assume that letters sent to the PO Box, that were not returned as undeliverable, had been received. The broker had also sent an email, and provided confirmation that it had been delivered. Further we were satisfied, given the reference in the email, that the broker tried to contact the clients by telephone.

We also commented that in the three-and-a-half years since the policy was cancelled, the clients had not noticed they were not paying insurance premiums of $5000. This was surprising.

While we sympathised with the significant loss suffered, there was sufficient evidence to show that the broker took reasonable steps
to advise them of the renewal and the impending cancellation of cover. In the circumstances, we could not find the broker liable for the
clients’ loss. 


The clients did not accept our view, continuing to maintain they did not receive any information about the cancellation. When they discovered they had no insurance, they said the broker offered to arrange new cover and undertook to speak to them if there was any risk their insurance might be cancelled for non-payment of premium. They said that this proved that the broker would not, as a matter of course, telephone a client in these circumstances. In the clients’ view, it should be mandatory for a broker to speak to a client before insurance can be cancelled.

The clients also said they changed accountants shortly after the policy was cancelled, so the new accountant did not notice the insurance had not been paid.

We took their further submissions into consideration, but were not persuaded to reach a different decision. On the evidence available to us, we were satisfied that the broker did not cause or contribute to their loss and we did not uphold the complaint.

June 2019

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