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Insurance policy confusion

Kaia had business insurance cover. In June 2020 Kaia notified her insurance adviser that the scope of her renovation business had increased. The adviser recommended adding a defective workmanship policy extension to cover the cost of repairing defective work for a client, which he explained only covered work done by Kaia or her employees. Kaia added this policy extension.

In January 2022, Kaia completed a claim form for items stolen in a burglary at her business premises. The claim form did not list the items being claimed for. The insurer asked for photos of the forced entry and quotes for the replacement of any claimed items. Kaia sent the adviser many quotes over the following weeks, including for items that may not have been stolen.

The insurer appointed a loss adjuster to investigate the claim. The loss adjuster visited Kaia’s premises to ask further questions about the burglary. The insurer then appointed an investigator because the burglars had used the alarm code to deactivate the alarm.

The insurer told Kaia that the CCTV footage showed significant discrepancies between the items physically removed from the property and her claim. The insurer confirmed to the adviser that the claim had been declined in its entirety because they considered the claim had been falsely inflated. Kaia told the adviser that she only wanted to claim for $11,000 worth of items, not the $72,000 claim the adviser had sent to the insurer.

The insurer declined a further two claims from Kaia under the faulty workmanship extension because the work had been done by subcontractors. Kaia said that the adviser had not told her that subcontractors’ work would not be covered.

In May 2022, two weeks before her policies came up for renewal, the adviser told Kaia that they would no longer offer her his services and she would need to make alternative arrangements. The adviser sent cancellation notices for Kaia’s policies to her insurers.

Kaia was unhappy with how the adviser managed her declined burglary claim, the faulty workmanship extension advice, and the ending of the advising relationship with her and complained to FSCL.


Kaia said that the adviser had wrongly told the insurer that she was claiming for items she was not in fact claiming for, causing her claim to be declined. She also said the adviser had not clearly explained the limits of the faulty workmanship policy extension, so she was unaware that subcontractors would need their own liability insurance. Further, Kaia was dissatisfied with the adviser giving her two weeks’ notice when ending the brokerage relationship and for cancelling her insurance. Kaia worried she would be unable to find alternative business insurance due to her claim being declined because of dishonesty.

The adviser was of the view that he had correctly sent the insurer all information Kaia had provided in relation to the burglary claim, so he had not falsely inflated her claim. Further, the adviser said he had adequately explained the limitations of the faulty workmanship policy extension and specifically told Kaia that any subcontractors would need their own insurance.


Kaia sent the adviser quotes for items that totalled significantly more than the $11,000 she said she was claiming for. Kaia had not listed the items she was claiming for on her claim form, so the insurer had calculated the total claim amount by referring to all the invoices Kaia had sent the adviser. Kaia said she believed she needed to send quotes for all business items, as a stocktake, rather than only the items she was claiming for in relation to the burglary.

Even if there was honest confusion on Kaia’s part as to what items she needed to send quotes for, we did not think that adviser had made an error in sending the quotes to the insurer. Although the adviser could have taken more care to ensure clear communication regarding what items were being claimed for, he had asked for quotes for the replacement of stolen items, and it was reasonable to assume that all quotes received should be sent on to the insurer. If Kaia was unhappy with how the insurer had calculated her claim, she could complain about the insurer.

We were satisfied from the email correspondence we saw that the adviser had clearly explained that the faulty workmanship policy extension would only cover Kaia and her employees. The adviser explicitly suggested that Kaia may wish to ensure that subcontractors hold their own liability insurance.

The agreement between Kaia and the adviser stated that 30 days’ written notice was required to terminate the relationship. The adviser did not give Kaia the required notice. Further, we did not see why it was necessary for the adviser to cancel Kaia’s existing policies. The agreement stated the adviser would instruct insurers to deal with the client directly from the effective date of termination.

We said that the adviser should compensate Kaia for the stress and inconvenience caused by failing to give notice of terminating their relationship and cancelling her policies. However, we took into consideration that the adviser continued to assist with ongoing claims after ending the relationship.


We found that the adviser should pay Kaia $250 for the stress and inconvenience caused by the inadequate termination notice. We did not uphold the other parts of her complaint.

Kaia disagreed with our preliminary decision, but she did not provide any further evidence to change our view, so we closed our file.

Insights for consumers and participants

Clients making an insurance claim should carefully itemise their claim to make sure their claim is correct, and the sum claimed is not over-inflated. If you make a false claim, the insurer is entitled to decline a claim and avoid a policy. It may be difficult to then obtain cover from another insurer.

Advisers must give clients adequate notice if they wish to end the relationship. Advisers should also take care to ensure that the client understands what information they need to provide when making an insurance claim.