AFCA finds in favour of broker – great record keeping saves the day

Author: Sheila Baker Managing Director Gold Seal

Last month we brought you an item based on an AFCA case where the decision found in favour of the complainant (click here to read the article).  It was a fictional case based on a true story, but it demonstrated a common outcome with the broker found to be at fault.

In the interests of providing a balanced view, this month we look at the non-fictional case of a Melbourne insurance broker which has had an AFCA decision made in its favour.

The case relates to a policy covering stock at pop up retail business premises to the value of $75,000 that was found to be uninsured when the premises was burgled last year. The key points were as follows:

  1. The complainant argued the broker “did not provide appropriate advice or act in a timely manner” to ensure the stock was covered when the burglary took place.
  2. AFCA agreed to some extent – and said that the broker was aware that the cover was in fact required. The email trail revealed the complainant followed up the broker on several occasions, causing him to comment in his complaint that “the broker’s conduct in this regard failed to meet appropriate professional standards”.
  3. Subsequent emails and records failed to reveal any explicit instruction from the complainant to go ahead with any cover offered and in fact the broker said he was instructed to delay placing cover until a sale event at the premises had taken place. AFCA concluded this was supported by the broker’s file notes.
  4. The adjudicator said at this point the broker “could have done more” to let the complainant know a cover note could have been issued that would allow a 14-day cooling off period; in addition the file notes didn’t show the complainant had been advised of the risk of not having the insurance. However the broker advised it had been discussed and submitted a statutory declaration in relation to that point.
  5. The adjudicator concluded that it was clear “the complainant knew there was no cover for the stock”.
  6. Furthermore there is a subsequent note on the broker’s file indicating that two days after the burglary the complainant sought to have cover backdated to prior to the sale.

It’s arguable that in the final analysis, what matters is that the finding did not go against the broker, no matter how close-run the decision may have been. It may have been more comfortable for the broker if there had been a bigger margin for error, and a minor amount of additional documentation would have provided it.

It’s a demonstration that accurate, systematic record keeping does in fact pay off; perhaps it is also true that the better the record keeping, the more unassailable the outcome is under challenge.

In any case, good news for the broker concerned.