AFCA determination stresses the importance of file notes

The Australian Financial Complaints Authority (AFCA) has found in favour of a Melbourne-based broking firm in a dispute triggered by a burglary while the premises was uninsured.

Lessons

The key lessons from this Determination are:

• Contemporaneous insurance broker files notes and emails on a customer’s decision not to take a cover option will be extremely important in convincing AFCA to believe a broker; and
• AFCA takes a conservative approach to awarding compensation for non-financial loss and expects complainants to be moderately robust and to bear the normal degree of inconvenience experienced when a problem occurs and to take reasonable steps to manage the situation.

Facts

The complainant’s association/club (the insured) was broken into and cash was stolen.

The complainant said he required a hernia operation and counselling due to the burglary which should have been covered by voluntary workers insurance cover. This cover option was not included on the policy.

After the complaint came to AFCA, the insurer accepted the complainant’s personal injury claim on a cover extension, which had previously been added to the policy. The complainant proceeded with its complaint against the broker in any case.

The complainant’s case against the broker

The complainant submitted that:

• the broker failed to purchase insurance to include protection against volunteers being injured despite being asked to do so;
• the broker did not provide the policy documents, including the Product Disclosure Statement (PDS), and that the wording of the PDS changed every year; and
• the broker should pay compensation for non-financial loss due to a long period of uncertainty regarding the claim which enhanced his anxiety and suffering.

The broker’s case

The broker submitted that:

• the broker sent the PDS to the complainant on first acquisition of the policy and was provided with renewal documents in each subsequent policy year upon renewal. The renewal documents set out the extent of cover as described in the limited advice warnings and schedules.
• the broker originally discussed voluntary workers cover with the complainant and the complainant said there was no need for the cover as most parties were retired. The broker had a file note in support of this as well as an email confirming this discussion;
• the broker had a subsequent renewal meeting with the complainant and discussed voluntary workers cover and theft but the complainant confirmed he already had this cover elsewhere. The file note also evidenced that the complainant acknowledged previous correspondence and discussion; that he had a sound understanding of the covers; and that he did not wish to insure for cover over and above what was already provided due to the budget constraints;
• in the renewal relevant to the year in which the claim event occurred, the broker had a meeting with the complainant where he confirmed that no change was required and this was again recorded in a file note.
• no loss was suffered, as the complainant was not a voluntary worker that would have been covered had the cover been arranged. the broker’s conduct did not justify any award of compensation for non-financial loss.

The AFCA decision

AFCA was satisfied, based on the evidence provided, that:

• the broker sent the PDS and renewal information to the complainant and that it was aware of the cover provided;
• the broker did not breach its professional duty to the insured or the complainant and that voluntary workers insurance was offered to the insured and complainant but was not taken up. This was principally due to the good file notes taken by the broker at the time of engaging with the complainant;
• even if there was a finding that the broker failed to put voluntary workers cover in place, it was unlikely the complainant suffered a loss as a result, because at the time of the claimed injury he was not engaged in voluntary work and was not earning income elsewhere;
• even if the cover was in place, the policy would probably not respond to the claim as at the time of the burglary, the complainant was probably at the insured premises as a guest and he was not earning income at the insured premises or elsewhere; and
• in relation to compensation for non-financial loss whilst the burglary and ensuing claims experience is stressful, based on the evidence presented, it was not satisfied the complainant incurred excessive stress or inconvenience during the claim process.

AFCA noted that it will only award compensation (capped at $5,000) if there has been an unusual degree or extent of physical inconvenience, time taken to resolve a complaint or interference with the complainant’s expectation of enjoyment or peace of mind.