A broker has won a dispute over a policy amendment that resulted in a fire loss payout almost $300,000 lower than under the policy’s original terms.

The dispute centred on whether requested changes emailed by the policyholder to South Coast Insurance Brokers WA were to be actioned in September 2022 or at renewal in January last year.

The commercial motor policy covered a crusher with an initial insured value of $900,000, plus a buffer of up to 25%. In November 2022, the crusher was damaged by fire and deemed a total loss.

The insurer settled for $833,000 based on the buffer and the sum insured, which the broker had lowered to $700,000 before the fire.

The client told the Australian Financial Complaints Authority it was entitled to $1.13 million under the original policy. The broker made unauthorised and premature amendments, it said, and should pay the $292,000 shortfall.

AFCA says South Coast Insurance Brokers WA communicated the steps it took to action the crusher owner’s instructions in confirmation and verification emails, and has ruled the policyholder did not establish that the amendment was to be made at renewal.  

“None of the exchanged contemporaneous information makes any reference to actions to be taken at renewal. Therefore, I consider it was reasonable for the broker to carry out the instructions in the change email when it was received,” the authority’s ombudsman said.

“The confirmation email, refund and verification email put the complainant on notice of the amendment. If the complainant considered there was an error, it ought to have advised the broker of it, but it did not.”

On September 12 2022, the broker emailed asking the crusher owner to visit to review policies before the January renewal, because its broking officer would be on leave until December.

The crusher owner then emailed updated insurance values for various pieces of equipment, including the crusher.

The broker reduced the value of the crusher and sent a “change to your insurance policy” email, which confirmed a refund of $1415.

A verification email sent on November 15 2022 attached a spreadsheet showing the crusher was covered for $700,000. It requested that the complainant “check this document is accurate”.

AFCA says the policyholder had “several opportunities to instruct the broker that the amendment was not to be made until renewal”.

“I consider the original policy has correctly been changed in accordance with the amendment and that the crusher was insured for $700,000 at the time of the total loss event,” the ombudsman said.

“The complainant’s failure to inform the broker of what it says were its true instructions, represents a break in the chain of causation.

“Accordingly, there is no loss that flows from the broker’s actions.”

AFCA says the broker could have better communicated the actions it was taking and confirmed at the client meeting that it had reduced cover for the crusher. “I accept that the broker failed to do this at the meeting or any time before the fire,” it said.

See the ruling here.

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