On 9 May 2016, Sean contacted his broker about placing cover for drones his business owned.
On 24 June, the broker came back with an offer of terms from an insurer. The broker and Sean discussed by phone that Sean needed to send through an updated schedule of the drones he was seeking cover for, and their values. Sean said he asked his broker to put temporary cover in place for his drones, and he said he would send her the schedule. The phone call was not recorded.
Sean said he sent his broker the schedule on 7 July via email with a dropbox link. Sean then heard no further from the broker. The broker said she did not receive the 7 July email.
Sean thought temporary cover had been placed, and was not concerned about not having paid his premium. Sean thought he had not been sent the premium invoice because the insurer needed to receive his schedule before confirming what the final premium would be.
The drones crash
On 17 August, one of Sean’s drones crashed and was a total loss. Sean immediately contacted his broker, who informed him there was no cover in place because she had not received his schedule.
Sean and the broker discussed getting cover in place as soon as possible in for Sean’s other drones, and he sent the broker the schedule again. Sean became frustrated at this point, because the broker came back to him about the value of the drones several times and that information was on the schedule.
On 16 September, Sean’s second drone crashed, and it was a total loss.
Sean wanted his broker’s firm to pay him $25,500, being the value of the two drones.
The parties discuss the issue
The broking firm came back to Sean saying it was not its fault no cover had been placed, because Sean could not prove that he had sent the dropbox link on 7 July. The broking firm also said that the premium would have been $10,000, so that figure would need to be deducted from the $25,500 to start with.
Sean had since had cover placed for new similar drones, and the premium was closer to $2,550. Sean considered that the $10,000 premium amount would have included a premium loading.
Sean complained to FSCL.
Sean complained about the service he received from the broker. He said the broker should have sent him a follow up email when she did not receive the schedule back from him. If she had done this he would have re-sent her the schedule and cover would have been in place for both drones.
The broking firm’s view
The broking firm said Sean should have followed up when he did not hear back from his broker about the placement of cover. It also said the placement of temporary cover does not happen as a matter of course, and if Sean had requested temporary cover the broker would have remembered it.
The broking firm also said Sean definitely knew he was uninsured when the second drone crashed.
We suggested the complaint could benefit from a conciliation conference where the parties could discuss the issues, and see whether there was a way the complaint could be resolved. Both parties were keen to conciliate.
Why was the complaint suitable for conciliation?
Conciliation was a good option because both parties contributed to the situation.
On one hand, the broker could have followed up the initial 24 June conversation with an email summarising what was discussed in the telephone call, and/or kept a file note about what was discussed.
The broker could also have followed up with Sean when she had not received the schedule from him for some time. It could be reasonably expected that the broker would be aware there was a high risk Sean’s drones remained uninsured.
On the other hand, although it was understandable why Sean used the second drone – he needed to use drones in his business – it was reasonable to expect him to be aware he was uninsured when the second drone crashed.
In addition, although Sean thought there was temporary cover in place, he could have followed up with the broker after he did not hear back from her after sending the 7 July email.
The outcome of the conciliation
Although the parties were originally quite far apart in their views about what would settle the complaint in terms of monetary compensation, the parties ultimately agreed that the broking firm would pay Sean $12,750 in full and final settlement of the complaint.
This figure took into account the amount Sean would have paid in premium and excess if he had been insured, and the fact that, not having replacement drones, meant he was unable to utilise drones for his business for a period.
Keeping contemporaneous file notes is critical when providing financial advice, as is following up with clients when they have not been in contact after requesting cover, and while they remain uninsured.