Rowan owns a tourist business near Gisborne. At the end of 2022, the business’s insurance policies were due to be renewed, including a business interruption (BI) policy. Rowan’s insurance adviser provided information about the renewal and BI policy in three emails, each attaching an ‘Insurance Report’, sent on 29 November, and 7 and 14 December 2022.
Rowan read the Insurance Report attached to the November email. He assumed that the Reports attached to both December emails were the same documents sent in November, so he did not reread them. Rowan was unaware that a 5km radius restriction was introduced into his policy’s ‘Closure of Transport Routes’ clause, which wasn’t included in the Insurance Report in the November email but was included in the December emails. The radius restriction meant that Rowan only had BI cover following road closures within a 5km radius of his business. If the road closures were beyond the 5km radius, he would have no cover.
In early 2023, the effects of Cyclone Gabrielle meant that roads were closed around Rowan’s business and several bookings were cancelled because customers could not get there. Rowan submitted a claim under his BI policy for $175,000 in losses following road closures that caused customers to cancel their bookings. The road closures occurred beyond the 5km radius, and the insurer declined Rowan’s claim.
Rowan complained about his adviser to FSCL.
Dispute
Rowan complained that the insurance adviser should have told him that the radius restriction had been added to the policy between the November and December emails, and that the documents attached to the November email were different from the documents attached to the December emails. He said that the change to the policy made it unsuitable for his needs and had he known about the radius restriction, he would have asked the adviser to find him a different policy without the restriction or tried to negotiate with the insurer to remove the restriction.
The adviser said that they had provided Rowan sufficient information about the radius restriction in their emails and that they had not caused him any loss.
Review
We found that the adviser should have told Rowan about the introduction of the radius restriction in the policy when it was being renewed, rather than assuming that he had read all of the attachments and managed to identify the changes. Despite this, we found that the link between this communication failure and the loss claimed by Rowan was too remote. Rowan was unable to provide sufficient information to show us that if he had known about the radius restriction, he would have taken steps to raise it as a concern with his adviser, sought alternative cover, and then paid the additional premium for that cover. It was also unclear whether the total $175,000 losses claimed were actually caused by the road closures, and whether Rowan would have had his full claim paid even if he had a policy with no radius restriction.
However, we did decide that the adviser’s actions meant Rowan had lost the opportunity to talk to his adviser about the option of a policy without the restriction. We suggested, and the adviser agreed, to pay Rowan $4,000 compensation for the lost opportunity, which we considered to be fair and reasonable.
Resolution
Rowan did not accept our final decision, so we closed our file.
Insights for participants
Advisers should actively point out any changes to cover in the client’s policy to the client at the time of renewal. It is not sufficient to simply tell a client to read the policy and assume that they will pick up on the changes, particularly where the changes are of direct relevance to the client’s business.
