FSCL Case Study

A woman bought a new house in 2018. She asked her insurance broker to arrange home and contents insurance for the property.

When she filled out the application form, she omitted a few details about locks and the alarm system because she needed to be at the property to provide them. She noted on the form she would provide these details once she had moved in. The broker told her everything in the form “looked fine”.

The broker couldn’t progress her contents cover without the missing details, and forwarded her the details of her home insurance policy which was called a “Maxi-cover” policy. She paid the premiums due.

A year later, a valuable bracelet worth about $4000 was stolen from her house. She asked her broker for a claim form. The broker told her she didn’t have contents insurance in place so she couldn’t make a claim.

She thought this was unfair because she had asked her broker to arrange contents insurance cover and didn’t know her application had been unsuccessful. She complained to FSCL.

She assumed the Maxi-cover policy included both home and contents insurance, because the broker didn’t tell her she didn’t have contents insurance. Even though she missed details in the application form, she didn’t realise these were key to getting contents cover. In any case, the broker had assured her “everything looked fine” in the application form.

The broker said they thought the client should have known the missing details were key to getting contents cover and should have followed them up to progress her application. The broker also thought she should have read the Maxi-cover policy and queried the lack of contents cover with them if she had wanted to progress it.

FSCL reviewed all the correspondence between the client and the broker, along with the Maxi-cover policy.

Insurance brokers have an obligation to act with reasonable care, diligence and skill.

FSCL agreed with the client it was misleading for the broker to advise “everything looked fine” after she provided her application form. It didn’t agree she should have known the missing details on the form were key to getting contents cover. Acting with reasonable skill, care and diligence, the insurance broker should have highlighted to the client that her contents cover application had been unsuccessful and told her the missing details were required to progress it further. FSCL also thought the word "Maxi-cover" could suggest there was more than one type of cover in place.

However, FSCL also thought the client had contributed to her loss. She could have followed up the missing details once she was able to. FSCL also thought a reasonable person would have looked at their insurance policy to check they had the right cover in place. If she had looked at the Maxi-cover policy, she could have queried the lack of contents cover.

FSCL recommended the insurance broker compensate the client for two-thirds of her claim, taking into account one-third of contributory fault on her part. The parties agreed this was a fair outcome and the complaint was resolved.

December 2020

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