IAG had the right to cancel a public liability and property insurance policy arranged by a broker when it did not receive the premium for the coverage period, the Australian Financial Complaints Authority (AFCA) has ruled.

The dispute arose after the broker’s client discovered in 2014 it did not have the insurance in place for its office premises, leaving it in breach of its lease agreements and exposed to liability claims and other losses.

The client says he had paid $27,766.65 in premiums to the broker for the policy period January 2008 to March 2014 but was not provided with cover.

In the complaint lodged last year with AFCA, the client also says it was not notified by IAG that the policy was cancelled in 2009 for non-payment of premiums, or that the broker’s account was cancelled in 2011.

The complainant says the broker was an agent of the insurer and at no point was it notified the broker no longer held an account with the insurer or the insurer had cancelled the policy.

It also argues the insurer should not be relieved of its common law and statutory obligations to separately notify the complainant of the cancellation of its policy.

AFCA disagrees with the complainant’s arguments, ruling IAG was “entitled to cancel the policy” since it never received the premium payment and that it had met its obligations under the Insurance Contracts Act.

AFCA says screenshots provided from the insurer’s system indicate that premium was not received for the one-year period of insurance to November 30 2009.

“I am satisfied the insurer had the right to cancel the policy,” AFCA said.

AFCA points out that there was no information from the complainant to back its claim that the broker had been given the funds to pay the premium or that the insurer had received the money.

It says the insurer had notified the broker of the policy cancellation through a notice sent in April 2009.

“The complainant’s position is that he was unaware of the cancellation of his policy,” AFCA said. “However, I do not consider this situation arose through any error of the insurer.

“The complainant appears to have been a victim of fraud.”

AFCA also ruled IAG was not obliged to inform the complainant that it had terminated the broker’s account. The complainant had argued he had no other means of knowing the broker’s account had been terminated.

AFCA says the termination was a commercial arrangement between the broker and the insurer governing their terms of trade and credit arrangements.

“Its termination was not something the insurer was obliged to advise the insured,” AFCA said.

“The broker was an authorised representative of the complainant and did not act as an agent for the insurer.”

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