Roy had been in the sawmill business for many years, and has always arranged his insurance cover through the same broker, Trevor. Roy owned one sawmill and was leasing another. The insurance covered the mill he owned and machinery at the sawmill he was leasing. Roy also had business interruption cover for both sites.
Roy decided to buy the mill he was leasing and, before the purchase, he and Trevor discussed the appropriate level of cover, agreeing Roy would need about $300,000 additional cover for the new mill. Roy understood the existing insurance cover would remain in place.
Trevor was unable to place the additional insurance with Roy’s existing insurer because there was not enough time before settlement to have the site surveyed. Another insurer was prepared to insure the new mill. Trevor instructed the new insurer to place the cover and cancelled the existing cover on the new mill, including business interruption cover, without written confirmation from Roy.
Two days after settlement the new mill Roy had bought burnt to the ground. The new insurer accepted the claim, and paid out $300,000. Roy then discovered Trevor had cancelled the existing policy for the business interruption insurance. Trevor said he thought he was following Roy’s instructions.
Roy said Trevor cancelled the existing policies without his authority. The fire had caused a loss in excess of the $100,000 business interruption cover and Roy had also lost equipment to the value of $87,000 that he could have claimed under the original policy.
Trevor denied liability and said, when placing the new cover for the leased mill, he had told Trevor’s wife that the business interruption insurance cover would be cancelled.
Roy complained to FSCL.
We were concerned Trevor had cancelled the existing policy without Trevor’s authority. On the information before us, this complaint appeared suitable for conciliation.
Roy and Trevor agreed to a conciliation with our case manager. The conciliation terms are confidential, but both parties were happy with the outcome. Roy received compensation, but the compensation paid was less than the $187,000 Roy had been claiming.
This complaint is an example of a complaint arising out of a broker’s failure to confirm intentions with a client and keep adequate notes of a client’s instructions. It was pleasing to see that a satisfactory settlement was able to be negotiated promptly once the complaint reached our office.