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On shaky ground

Chris owned a small furniture business. He purchased a range of business insurance policies through a broker. One of the policies Chris purchased gave him cover for natural disasters.

However, when the broker sent Chris the insurance documentation, it forgot to include the policy itself. The policy had a specific endorsement on it about the excess Chris would have to pay in the event of a natural disaster, namely 5% of the total sum insured. Chris’s total sum insured was $175,000, so his natural disaster excess was $8,750, no matter how big or small the claim. The problem was that Chris did not know that, because he had never seen the policy.

Unfortunately, Chris’s business was affected by the Kaikoura earthquake of 2016. The earthquake caused damage to some of the furniture in the shop. Chris made a claim for just over $11,000, but was shocked to discover – for the first time – the size of the excess.



Chris complained to FSCL, saying that he would have had the broker shop around for other insurance had he known how much the excess was.

The broker apologised for forgetting to send Chris the policy, but it also said that 5% of the total sum insured was the industry standard excess in Chris’s location for a natural disaster. The broker’s view was that Chris had not actually suffered any loss as a result of its failure to send the policy, because he could not have got a better deal on natural disaster insurance with any other insurer.



We sought advice from other insurance brokers as to whether Chris could have got a better deal by shopping around. The other brokers agreed that there was no other insurance cover available for Chris that would not include a 5% excess. We considered that the broker’s failure to provide a copy of the policy did not cause Chris a loss.

However, we also formed the view that Chris deserved some compensation for the stress and inconvenience he suffered when he found out about the size of the excess. We agreed that the broker should have sent him the policy at the outset.



We negotiated a settlement between Chris and the broker. The broker made a small payment to Chris to compensate him for his stress and inconvenience.


Insight for consumers

Chris’s insurance did not cover the full amount of his out-of-pocket expenses, so in that sense he had suffered financial loss. But, because he could not have got a better deal elsewhere, he had not suffered ‘loss’ in a legal sense.