A business that accused its broker of arranging inadequate cover has lost its case before the Australian Financial Complaints Authority.

In 2022, cables were stolen from the insured’s premises, cutting power to a warehouse and disabling fire safety measures. This forced the business to hire extra security.

The insured lodged a theft claim against its industrial special risks policy for losses of about $395,619.

But its insurer, pointing to a theft sublimit and vacant building deductible, both of $100,000, offered to cash settle the claim for only $100,000.

The business made a complaint against its broker Professional Services Corporation, saying it breached its duty of care by: putting in place a policy that, due to the theft sublimit and vacancy deductible, was inadequate for its needs; and mismanaging the claim, causing the business to incur security costs that were not covered by the insurer.

The insured claimed compensation of $295,620 from the broker.

But, ruling in favour of the broker, AFCA says the client produced no information “to show what an adequate cover is and whether a better cover would have been available to the complainant during the relevant policy period”.

The broker had outlined covid impacts on the insurance market and the difficulty of obtaining a policy for vacant property.

And information about the sublimit was readily available to the insured, an AFCA ombudsman says, adding: “I do not accept the complainant’s claim that the broker negligently advised the complainant about the policy terms.”  

Regarding claim management, the complainant argued that if it had known of the theft sublimit, it would have fixed the cables earlier and cancelled the extra security.

However, the ombudsman says the broker was only told about the security costs months later, and the insured did not act to mitigate or manage costs.

Professional Services Corporation is one of the licences of PSC Insurance Group, acquired by Ardonagh last year.

See the ruling here.