A policyholder in the real estate sector whose professional indemnity policy did not provide cover for an $18,000 fine related to lodgement of bonds has lost a complaint against broker Aon Risk Services Australia.

The claim was submitted after the policyholder pleaded guilty to Residential Tenancies Act (WA) breaches and was ordered to pay the fine plus $684.15 in costs.

In a dispute lodged with the Australian Financial Complaints Authority (AFCA), the complainant says the broker is liable for the loss as it should have arranged a policy that would cover that type of incident.

The complainant was concerned his policies did not cover staff member incidents and says a management liability policy should have been brought to his attention.

AFCA says the broker had highlighted several superior benefits in the PI policy compared to the management liability policy, it was tailored to the real estate industry and was recommended as being appropriate.

The management liability policy also had exclusions for claims involving professional services under several sections, including for corporate liability and statutory liability.

“Given the fines were incurred as part of the complainant’s obligation to properly lodge bonds for their clients, it is possible this exclusion would have been applicable under the statutory liability cover,” AFCA says. “This section of the policy was the only one that could potentially respond to this type of claim.”

The insurer had accepted a previous claim under the PI policy for almost the exact circumstances, but AFCA says it is not clear to what extent a broker exercising reasonable care and skill should have identified the insurer incorrectly accepted that claim.

AFCA ruled that it was not shown the broker breached any duties owed when recommending the PI policy, and was not liable to pay any compensation.

The decision is available here.