Broker Held Accountable as Insurer Rejects Truck Damage Claim

The dispute arose when a transport company sought to enhance its fleet insurance coverage, aiming for nationwide protection. The broker facilitated a new policy that included specific driver acceptability exclusions, notably requiring all drivers to have held licenses for the nominated vehicles for more than two years. This marked a significant change from the previous policy, which did not impose such exclusions.

In July 2023, the broker sent a renewal email to the client, advising them to review the policy and list all regular drivers, emphasizing the importance of noting any under-25-year-old drivers due to potential impacts on premiums and excesses. The client did not request any changes, leading to the policy's renewal.

However, in October 2023, an incident occurred involving a 24-year-old driver who had held the relevant license for only a short period. The insurer denied the claim, citing the driver's inexperience as a breach of the policy's terms.

The client contended that the broker failed to adequately inform them of the new exclusion and that they had previously communicated their practice of hiring and training drivers of all ages. They argued that the policy documents led them to believe coverage was provided regardless of age and experience, albeit with potential adjustments to premiums and excesses.

AFCA's ruling emphasized that transitioning to a policy with such exclusions constituted a significant change that should have been explicitly highlighted by the broker. Merely sending complex renewal documents and expecting the client to identify critical changes was deemed insufficient. The broker was found to have failed in their duty of care by not ensuring the client was fully aware of the policy's specific exclusions.

As a result, AFCA determined that the broker must compensate the client for the amount that would likely have been paid under a policy without the exclusion, minus the applicable excess and any additional premium that would have been payable for such coverage. This compensation is subject to AFCA's cap of $316,000 for broker complaints.

This case serves as a stark reminder for brokers of the necessity to clearly communicate any changes in policy terms, especially those that introduce new exclusions or conditions. For transport operators, it highlights the importance of thoroughly reviewing policy documents and seeking clarification on any terms that may affect coverage, particularly concerning driver qualifications and experience.

Ensuring that all parties have a clear understanding of policy terms can prevent disputes and ensure that coverage meets the specific needs of the insured, thereby safeguarding against unexpected claim denials.