Dylan was a successful lawyer who had been in practice since the mid 1980’s. In 2008 Dylan joined a mutual association of other lawyers who had banded together to get specialised legal professional indemnity cover with strong policy wordings and premiums ranging between $7000 and $9000 per year.
Dylan’s professional indemnity insurance ran from July and he renewed it every year.
Between 2008 and 2016, Dylan had a number of issues with his practice. Several disgruntled clients pursued Dylan for what they perceived were legal errors and Dylan had to defend or settle proceedings with these former clients.
In total, Dylan made 16 notifications to his insurer in a 9-year period and some of those notifications turned into claims.
At renewal time in June 2016 Dylan’s insurer told him it had decided not to insure him.
Dylan’s insurance broker immediately went to market to find replacement professional indemnity insurance for Dylan on similar mutual association wording. Unfortunately, Dylan’s insurer had an exclusive contract with the mutual association, and its decision not to cover Dylan meant that Dylan could no longer benefit from the policy wordings and lower cost premiums.
Dylan’s insurance broker found a new insurer willing to offer similar terms to Dylan, however the new yearly premium was $26,500.
Dylan was angry that his premiums had jumped so much and demanded that his insurance broker make his insurer take him back as a client.
The insurance broker’s view
The insurance broker felt it had performed its job by securing comparable cover for Dylan.
Although it was unfortunate that Dylan had lost the mutual association benefits, the insurance broker considered this was linked to the insurer’s decision.
The insurance broker had raised Dylan’s case directly with the insurer who had made its decision based on Dylan’s claims and notifications since 2008, and the costs the insurer had paid in defending Dylan’s claims.
Dylan felt that his insurance broker should have done more to convince the insurer to offer him terms of insurance and retain his mutual association benefits.
Dylan said that he was left with no choice but to accept the new insurer’s terms and at a greatly increased premium. Dylan felt that his insurance broker had failed to get him the best available insurance in the market and had cost him his mutual association benefits.
Dylan requested his insurance broker pay the difference in the premium between his old and new insurance policies. When his insurance broker refused and decided not to represent Dylan any more, Dylan complained to FSCL.
Our investigation concerned the insurance broker’s actions. However, we advised Dylan that his old insurer was not obliged to provide cover to anyone and was entitled to make a commercial decision not to offer insurance on any information it saw fit. Further, there was no general duty on an insurance broker to challenge an insurer’s decision to provide or withdraw cover.
We reviewed the insurance broker’s actions and were satisfied that it acted reasonably to secure professional indemnity cover for Dylan with market leading insurers and recommended the best offer of terms.
We were satisfied the insurance broker provided Dylan with a reasonable service and acted with the care, diligence, and skill reasonably expected of a competent professional insurance broker.
The insurance broker was not obligated to hold out or find the best deal, but rather to provide the insured with cover which met his instructions. If the client does not believe the cover is appropriate, it can reject the offer of terms and is able to look elsewhere for suitable cover.
We found Dylan’s claimed loss of benefits under his mutual association membership was a consequential loss, specifically excluded under the insurance broker’s terms of engagement.
Finally, we considered that the increase in Dylan’s premium was inevitable and was not as a result of the insurance broker’s actions. Dylan’s premiums would have increased to reflect his claims history even if the mutual association’s insurer had renewed Dylan’s policy.
We recommended that Dylan discontinue his complaint against the insurance broker.
Key insights for consumers
A contract for services with a professional financial services provider can be cancelled or not renewed just like any contract. Either party can terminate a contract for services or can choose not to renew a contract when its term expires.
When you receive notice that an insurance contract is not being renewed, you should take steps to ensure that you have appropriate replacement insurance in place.