Barbara’s company had public liability insurance, which had been arranged by a broker firm. The policy was to run from 31 March 2018 until 31 March 2019.
Barbara’s industry was regulated by an Act of Parliament, and practitioners were required to belong to a professional body. The professional body had a disciplinary board which had the power to consider members’ breaches of their professional obligations.
In July 2018, the broker contacted the insurer to advise that Barbara’s company may be fined by the professional body. He asked the insurer to review the matter. The insurer said the policy would cover defence costs, but not fines. The insurer explained the policy only covered fines payable on the conviction of an offence, and the professional body did not have the power to convict.
Following a disciplinary hearing, the professional body issued a decision finding Barbara guilty of causing a job to be carried out in a negligent or incompetent manner.
Barbara lodged an appeal against the professional body’s decision in the District Court.
The insurer confirmed to Barbara and the broker by email in March 2020 that they would cover the legal costs of the appeal. However, they also noted the policy would not cover any fine which may be payable or any costs orders against Barbara.
In March 2021, the company’s policy was due for renewal. During the renewal process, Barbara sent the broker a series of questions, one of which concerned an endorsement on the policy concerning another profession. Barbara noted that the endorsement did not cover her profession. The broker responded by email to say that if there were no members of that profession at Barbara’s company, the endorsement could be removed. He went on to say that cover would be provided in relation to her profession so long as the employees were licensed and adhered to the conditions of the Act regulating her profession.
In September 2021, the District Court dismissed Barbara’s appeal.
Following the appeal, the professional body ordered Barbara to pay a $4,000 fine and $16,000 towards its costs.
Barbara asked the broker to explain why the fine and costs were not covered under the policy. The broker responded that the policy wording did not provide cover for fines or costs. Further, the insurer had paid out close to $130,000 for the costs of defending and investigating the claim.
Barbara complained to the broker that they had misled her about the extent of the cover, and referred to the broker’s March 2021 email. Barbara said the broker’s email had assured her that her company was covered for fines and costs awards from the professional body.
The broker did not consider they had misled Barbara about the extent of the cover. They also said they would need to inform any other insurers they approached for cover for Barbara’s business that cover had previously been refused.
Barbara asked FSCL to investigate.
Barbara complained that the broker had confirmed to her in the March 2021 email, when the policy was being renewed, that the professional body’s fines and costs would be covered. She said that it was reasonable to rely on what the broker had said. She also said her previous broker had told her in 2012 that the company would be fully covered for fines, apart from traffic and WorkSafe fines.
Further, Barbara said that, under the policy wording, the company was covered because the policy said that cover was provided for penalties arising from prosecutions by regulatory authorities for statutory breaches which may result in criminal conviction, together with the accompanying fines and costs awards.
The broker said they did not say in the March 2021 email that Barbara would be covered for the professional body’s fines. Further, Barbara was advised of the correct position by the insurer in their March 2020 email. The broker provided evidence that insurance for fines and costs by a professional disciplinary body was not generally offered in the market.
The broker also noted that their email was sent almost two years after the events giving rise to the claim, meaning it was already too late to put cover in place for the fine and costs imposed on Barbara.
We were satisfied the broker had not misled Barbara about the extent of the cover. The context for the March 2021 email was a discussion about the specific endorsement for another profession. The broker’s comment that the policy provided cover for Barbara’s profession was broadly correct. This was shown by the fact the insurer had covered Barbara’s defence costs. Further, in the absence of a specific question about fines and costs, we did not consider the email could be reasonably interpreted as saying that the professional body’s fines and costs would be covered.
In any event, Barbara’s query about the endorsement was made nearly two years after the claim was notified to the insurer. Under the policy, cover arose when the claim was notified, and not when the fine was imposed. Barbara was also aware of the insurer’s email from March 2020, explicitly saying that, in relation to her claim, the policy would not cover any fine or costs imposed by the professional body.
We could not fairly make a finding about any assurance her previous broker may have given Barbara about the extent of her policy coverage, given the lapse of time since the conversation and the lack of any supporting evidence.
We were also not satisfied there was any alternative cover available for the professional body’s fines and costs.
We suggested that Barbara discontinue her complaint. However, we did comment that the broker should not have said that they would have to tell prospective insurers that Barbara’s company had been refused cover, given that they did not consider that type of cover existed. We suggested the broker rescind that comment.
The broker accepted our findings, but Barbara strongly disputed them.
We issued our final decision confirming our findings that we were not able to uphold Barbara’s complaint, and closed our file.
Insights for consumers
It is crucial that consumers read their insurance policies, and seek clarification from their broker or insurers if this is required. If further clarification is required, the consumer should ask a further question. There will always be limitations to the cover provided and exclusions, and it does not pay to make assumptions.