Broker in clear as termite exclusion holes claim
The financial services ombudsman has backed a broker in a dispute over a business interruption claim triggered by termite damage.
The Australian Financial Complaints Authority says there was no breach of duty by CorpSure IPL that caused its client’s loss.
The policyholder lodged a claim in November 2023 after closing its restaurant so its landlord could repair the termite-affected floor. It was told it would take six months.
An insurer declined the claim because its business policy excluded termite damage, while noting the issue pre-dated the policy inception.
The claimant said CorpSure was liable for its loss because the broker did not provide a product disclosure statement or advise that the policy would not respond to long-term termite damage.
It claimed a business and personal financial loss, on top of a $400,000 mediated settlement with the landlord, estimated at $250,000.
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CorpSure said it issued the PDS and that the insured did not mention the building was damaged by termites. Termite damage was not flagged until December 2023.
AFCA says the landlord knew of rising damp and termite damage from about 1993 and the insured became aware of issues with the floor in 2018 but did not know the reason. CorpSure arranged cover between 2019 and 2023.
The authority says it is satisfied the broker knew the floor would need repairing but did not know the cause of the damage until December 2023.
But it adds a “competent and experienced broker would be expected to ask for more information about the cause of the damage”.
The broker provided advice based on incomplete information, by not asking enough questions, but AFCA says this breach of the duty of care did not cause the complainant’s loss.
AFCA says CorpSure did not provide copies of relevant PDSs during policy renewals in 2020, 2021 and 2022, and when asked in 2023 to provide one sent a version that was not relevant for the policy term.
But the authority says there is no business policy on the market that covers an interruption caused by termite damage to leased premises.
Read the ruling here.