Ian and Jeanette live in a remote part of New Zealand, running a building business as well as a bed and breakfast. They arranged liability insurance for their business, as well as material damage insurance for their buildings and contents through a broker. When a fire destroyed a storage shed, containing building tools, Jeanette contacted their broker to lodge a claim for loss of about $160,000 . The broker advised that the insurance had been cancelled about three years earlier because Ian and Jeanette had not paid the premium.
Ian and Jeanette were shocked, how could their broker allow the insurance to lapse? Surely, he should have contacted them to tell them they had not paid the premium?
The broker replied that he had sent their invoice, as usual, to their PO Box. When he did not hear back, he emailed and wrote to them. When the insurance was finally cancelled, he again wrote to the PO Box. When Jeanette asked if he had tried to call, he said he had not. The broker said he was sorry, but he did not think he was liable for their loss.
Ian and Jeanette did not agree, and complained to FSCL.
Ian and Jeanette considered their broker had been negligent by failing to take all possible steps to contact them before the policy was cancelled. Ian and Jeanette acknowledged that mail to their PO Box occasionally goes missing, but said they had checked their email inbox, as well as their email junk folder, and could find no record of receiving the email from the broker. Ian and Jeanette also contacted their email provider who confirmed that no emails failed to be delivered during the relevant period. Ian and Jeanette said that part of running a successful bed and breakfast business is communication and they were adamant they had received no letters, emails or telephone calls.
The broker checked his records again and advised he had:
- posted a renewal letter to the PO Box on 13 February
- posted statements to the PO Box in April, May and June
- posted an overdue notice to the PO Box on 3 June
- telephoned Ian and Jeanette on 3 July, and left a message
- sent an email to their email address on 3 July
- posted a letter advising the policy was cancelled to the PO Box on 15 July.
With respect to the 3 July telephone call, the broker said that when he first spoke to Jeanette, he overlooked the note on his file, but is sure he made the call because the email of the same day refers to a message he left on their voicemail.
We considered the broker had taken all reasonable steps to tell Ian and Jeanette about their insurance renewal. It was reasonable for him to assume that letters sent to the PO Box, that were not returned as undeliverable, had been received. The broker had also sent an email, and provided confirmation that it had been delivered. Further we were satisfied, given the reference in the email, that the broker tried to contact Ian and Jeanette by telephone.
We also commented that in the three and a half years since the policy was cancelled, Ian and Jeanette had not noticed they were not paying insurance premiums of $5,000. This was surprising.
While we sympathised with the significant loss Ian and Jeanette had suffered, there was sufficient evidence to show that the broker took reasonable steps to advise them of the renewal and he impending cancellation of cover. In the circumstances, we could not find the broker liable for Ian and Jeanette’s loss.
Ian and Jeanette did not accept our view, continuing to maintain they did not receive any information about the cancellation. When they discovered they had no insurance, Jeanette said the broker offered to arrange new cover and undertook to speak to them if there was any risk their insurance might be cancelled for non-payment of premium. Ian and Jeanette said that this proved that the broker would not, as a matter of course, telephone a client in these circumstances. In Ian and Jeanette’s view, it should be mandatory for a broker to speak to a client before insurance can be cancelled.
Ian and Jeanette also said they changed accountants shortly after the policy was cancelled, so the new accountant did not notice the insurance had not been paid.
We took Ian and Jeanette’s further submissions into consideration, but were not persuaded to reach a different decision. On the evidence available to us, we were satisfied that the broker did not cause or contribute to their loss and we did not uphold the complaint.
Insights for consumers
While your broker will let you know that your premiums are due, and try to contact you using different means, ultimately the responsibility for renewing your insurance rests with you.