An insurance broker arranged insurance cover for a couple’s home, including a swimming pool. Insurance premiums were increasing and the client asked the broker if he could find a cheaper policy. He offered the couple an alternative policy with the same insurer, explaining the only difference was an increased excess. They accepted the advice and changed to the new policy.
About a year later the insurer terminated its broker arrangement with the broker, and he arranged for his client to transfer to a new broker. The new broker rolled over the policy previously arranged by the previous broker.
Almost a year later the Kaikoura earthquake damaged the couple’s swimming pool. They submitted a claim to their insurer, but the insurer declined the claim because the new policy would only cover swimming pools if the pool was listed on the schedule and an additional premium paid. The pool was not listed on the schedule, so was not covered by the policy.
Dispute
They complained to both brokers, saying they had trusted them to place appropriate insurance. The first broker knew they had a swimming pool, yet failed to list the pool on the schedule of the new policy. When the second broker took over, he simply rolled over the cover without checking it met their needs.
The first broker acknowledged his error, but said that he was not the broker at the time of the loss and therefore not liable.
The second said that he had not provided any advice and had simply rolled over the existing cover on the same terms, as it was not his error, he considered he was not liable.
The couple complained to FSCL, and asked us to decide who should be liable for their loss.
Review
We considered that both brokers shared some liability for the error. The first made the original mistake, but the second had failed in his obligations, when renewing cover, because he did not check the clients’ cover was appropriate for their needs. It seemed to us that the best way to resolve the complaint would be for both brokers to attend a conciliation conference with the clients.
They were all keen to resolve the complaint by conciliation.
Although the new broker was a FSCL member at the time the policy was rolled over, his company was in the process of being wound up. By the time the complaint arose, his company was no longer a FSCL member and had been deregistered on the Financial Service Providers Register. While he initially contributed to the conciliation, he withdrew before a decision was made.
Resolution
We reached a conciliated resolution for the couple and their first broker. They received compensation for about half the cost of the damage to the pool. Unfortunately, because the second broker had withdrawn from the process, and we had no ability to require his co-operation, we were unable to help resolve that complaint.