A gardener who thought his adviser had arranged income protection cover that would provide benefits if he could not work, only to realise it did not when his claim was declined, has partially won his dispute with the adviser’s firm.

The Australian Financial Complaints Authority (AFCA) says the adviser, who was an authorised representative of Remunerator Financial Services when he engaged with the gardener, understood that his client wanted income protection insurance.

Yet he recommended in his statement of advice to his client that he should opt for a product called Living Expense Cover, which only provides benefits if the insured was “significantly disabled”. The gardener’s claim was declined since he did not meet the “significantly disabled” definition.

AFCA says when the advice statement was prepared in April 2011 the adviser knew that his client wanted income protection cover.

“The statement of advice acknowledged that [he] wanted income protection insurance. It recommended Living Expense Cover,” AFA says in its ruling of the dispute. “It contained no information that showed that this was not the same as income protection cover. It contained no information showing that it could not be accessed unless [he] was significantly disabled.”

The financial advice firm says the statement of advice recommended the cover should be reviewed regularly and that the client should have followed-up if he had any confusion.

But AFCA disagrees. It says it was “legitimate” for the client to understand, on reading the statement of advice, that living expense cover was a type of income protection cover that could be accessed if he could not work due to illness or injury.

“The information contained in the statement of advice, in causing these misunderstandings, was materially misleading and [the adviser] ought to have known this given that a cursory reading of the product disclosure statement shows that there are obvious differences between income protection cover and living expense cover.”

“The financial firm, because of the conduct of its representative, caused [the client] to misunderstand his personal insurance cover,” AFCA said.

AFCA ruled the financial firm must pay the client $3822.94 for premiums unnecessarily paid and $5400 for interfering with his “expectation of enjoyment and peace of mind”.

The client wanted compensation of $55,175 plus indexation – based on $2207 per month with a 30-day waiting period.

AFCA says it did not award the compensation sought by the client as “a finding that there has been loss because [he] may have obtained income protection insurance is, at most, speculative”.

“There is no guarantee that this would occur, there is nothing showing what level of cover would have been taken, and what would have been paid had a claim been made,” AFCA says.

Click here for the ruling.