A complaint filed by a motor trader against PSC Reliance Franchise Partners, accusing the broker of failing to arrange an “appropriate” insurance policy, has been dismissed by the financial dispute resolution body.

The Australian Financial Complaints Authority (AFCA) says the broker had not been provided with the relevant information to set up the policy and is therefore not responsible for the losses the complainant incurred when separate insurance claims lodged with the insurer for two damaged vehicles were rejected.

The vehicles - a Lexus and Hyundai - had been leased to a customer who then rented it out to his clients. The sub-letting of the cars by the customer, according to the insurer, did not meet the definition of “Loan Vehicles” as set out in the product disclosure statement (PDS).

An extract of the PDS reproduced in the AFCA ruling says cover for “Loan Vehicles” will be provided only if it has been advised that “it is your practice to provide loan vehicles (with or without consideration) to selected customers where that customer owns a vehicle which has been left with you for service or repair, or when awaiting delivery of a newly ordered vehicle.”

In its complaint, the motor trader insisted the broker should pay for the losses since it was kept “fully informed” about the car leasing business, including its practice of leasing a fleet of vehicles to the customer, who would in turn rent them out as accident replacement cars.

However, AFCA says the motor trader’s recollections of its communications with the broker as set out in its solicitor’s letter in June 2019, did not show that the “specific arrangements” had been relayed to the broker, who was engaged in December 2015 to arrange the insurance policy.

The complainant referred to an email sent to the insurer on June 16 2016 saying its business provided loan vehicles to repairers to be used as courtesy cars for customers as proof that the broker was aware of the leasing activity.

But AFCA points out that the email was sent after both claims were lodged following the damage to the Lexus in March 2016 and the Hyundai shortly afterwards in May.

“This does not show the complainant informed [the broker’s representative] or the broker, of the arrangements described in the email before the claims were lodged,” AFCA said. “It is just as possible this was disclosed after the claims were lodged and problems were identified by the insurer.”

AFCA also notes that the email does not describe the specific arrangements that the motor trader says it had told the broker, such as the leasing of vehicles to the customer.

It says while the email referred to the fact the vehicles were being used as courtesy cars by repairers’ customers, this is inconsistent with the fact there was a commercial arrangement where the customer paid a leasing fee to the complainant and charged a daily rate to their customers.

“Therefore, this email contradicts the complainant’s recollection that it specifically notified the broker of its arrangements,” AFCA said.

AFCA also mentioned in its ruling that the insurer had raised “serious concerns” about the complainant’s credibility. The claim for the damaged Lexus was initially declined as the insurer believed it was fraudulent. The insurer later informed the motor trader the claim was being refused because the complainant failed to co-operate.

Click here for the ruling.