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Gap in consumer protection

Chan purchased a property from a developer. As part of the purchase, an insurance adviser sold an insurance policy to the developer. The policy passed to Chan after the purchase.

The insurance policy stated that if, during the first two years, Chan discovered a defect, the builder or developer was required to repair or replace the defect and compensate Chan for reasonable associated costs. The policy went on to say that if the builder or developer did not repair the damage, Chan was covered under the policy for the cost of repairing or replacing the defect.

The insurance policy was branded with the insurance adviser’s name, but the policy was underwritten by an insurer.

About 18 months later Chan discovered damage to the kitchen cabinetry caused by a leaking dishwasher hose. Chan contacted the builder, the developer, and the insurance adviser, and the dishwasher was replaced. However, the water damage had also affected the benchtop and repairing the associated damage was not going to be straightforward. Chan was also concerned that the cabinetry design was too small to accommodate the dishwasher, causing the hose to crimp, meaning that a further leak was possible.

The developer and insurance adviser disagreed. They said that by replacing the dishwasher the defect had been repaired and Chan was being unreasonable in his expectation that the affected cabinetry needed to be replaced.

Chan disagreed and complained to FSCL.


Chan said the information given to him on purchasing the property said that, if there was a problem that he could not resolve with the builder and developer, he would be able to claim under the policy. When Chan tried to claim the insurer said that, before they would consider a claim, Chan was obliged, under the policy, to minimise any loss or damage to the property which included pursuing the developer and builder to the Disputes Tribunal.

Although Chan agreed to lodge a claim in the Disputes Tribunal against the builder and developer, he disagreed that he should have to take this step and so asked FSCL to help.


Under our rules we can only investigate complaints from people who have received a financial service from a FSCL scheme participant.

Although the insurance adviser, who arranged the insurance for the developer, was a FSCL participant, the insurer was not. The insurer did not belong to any dispute resolution service in New Zealand. From the insurer’s perspective, they were not providing a service to retail clients and did not need to belong to a dispute resolution service.

Chan’s main complaint was that the insurer was asking him to take what he perceived to be the unnecessary step of lodging a claim against the builder and developer in the Disputes Tribunal before they would assess his claim. As this was a complaint about the insurer, who is not a FSCL participant, we were unable to take the complaint about the insurer any further.

We also considered whether we were able to help with Chan’s complaint about the insurance adviser who is a FSCL participant. However, we were not satisfied that the insurance adviser had provided Chan with a financial service. We decided that the financial service was the advice the insurance adviser gave to the developer about the appropriate policy for their development. We were unable to take Chan’s complaint about the insurance adviser any further.


It was our view that we could not investigate a complaint about the financial service provided by the insurer because they were not a FSCL participant, and we could not investigate a complaint about the insurance adviser because they had not provided a financial service to Chan. We declined to investigate Chan’s complaint under paragraph 21 of our rules.


There appears to be a gap in the consumer protection offered in this situation. All the information from the insurance adviser gave Chan the impression that he would be able to claim against the policy, but when a dispute arose there was nowhere for Chan to complain about the insurer. We will be raising this issue with the appropriate regulator.