The Australian Financial Complaints Authority (AFCA) has ruled a broker was not responsible for the financial loss suffered by a client who was conned out of more than $126,000 by one of his staff.

The client had lodged a complaint against Rivers Insurance Brokers, saying the brokerage should pay for the loss since it failed to arrange for a policy that covered employee theft or fraud as instructed.

The broker was making enquiries with insurers when the employee stole the said amount from the client over a period of eight months.

According to the client, this showed the broker did not act reasonably on his behalf and was therefore responsible.

But AFCA disagreed, saying the evidence presented by the broker backed up its claims that every reasonable effort have been made to try to procure a cover that protected the client’s business from an employee’s fraudulent conduct.

The broker had made enquiries with two insurers, with both rejecting the business for different concerns. The first insurer did not want to offer cover as the business was arranged as a partnership. The second insurer wanted more information about a previous fraud incident before making a decision, and when the details were provided, it decided not to issue cover.

“The broker says that based on this, and the fact the complainant’s business was structured as a partnership, there was no cover available for this situation,” AFCA says in its ruling.

“The complainant says that the insurer’s offer shows cover was available. However, this is not the case. That offer was subject to additional information being provided about the previous incident. Once this information was forthcoming, the insurer refused to offer terms.”

AFCA says even if it agrees with the complainant that the broker did not act with reasonable care and skill, there is no evidence to show the broker caused the loss suffered.

“Given this, the broker is not required to pay the complainant’s claim.”

Click here for the determination.