Professional negligenceInsurance brokers
Insurance Broker Negligence Claims
A broker who arranges your insurance must take reasonable care to understand the cover you need and to arrange cover that responds to it. If a claim was refused or fell short because of the broker’s error, you may be able to recover from the broker what the insurer would have paid.
- No-obligation first consultation
- We set out our costs in writing at the start.
When several parties are involved
Why everyone should be identified early.
Where the sharing rule applies, the law expects you to claim against everyone you have reasonable grounds to believe may be responsible. (Civil Liability Act 2003 (Qld) s 32)
-
Several parties: each pays its share
Where several parties caused a financial loss, each may only have to pay the share a court thinks fair. If one of them can’t pay, you may carry that share yourself. (Civil Liability Act 2003 (Qld) s 31)
-
Unless you’re a consumer
That sharing rule doesn’t apply to an individual’s claim about services for personal, domestic or household use, or about a professional’s advice for their own use rather than a business. (Civil Liability Act 2003 (Qld) ss 28, 29) Some claims under Commonwealth laws, such as some misleading conduct claims, may not have this exception.
What has to be shown
Losing money isn’t enough on its own.
A negligence claim needs all four of these. Other claims, like misleading conduct, have their own tests.
A duty to you
Usually owed by the professional you engaged, in contract and in negligence.
Care below the standard
Less care than a reasonable professional in their position would have taken. (Civil Liability Act 2003 (Qld) s 9) In some cases, following a practice widely accepted by respected peers can be a defence, and the professional must prove it. (s 22) That defence doesn’t apply to claims about giving, or failing to give, a warning, advice or information about a risk of harm, and harm includes financial loss. (s 22(5))
It caused your loss
You must show what proper advice or work would have led to, and that you’re worse off because of the breach. (Civil Liability Act 2003 (Qld) ss 11, 12)
A loss you can measure
The difference between where you are and where you’d otherwise be.
Where a claim can go
Which routes each profession has.
Some routes are free. Most can pay only limited amounts, or only for certain losses.
A professional who also holds an Australian financial services licence, like some accountants, may be an AFCA member for the financial advice they give.
Time limits
The clock can start before you know.
Finding out late doesn’t usually give you more time for financial loss.
-
6 years
Court action
Generally within 6 years of when the cause of action arose. (Limitation of Actions Act 1974 (Qld) s 10)
-
From the loss
When the clock starts
For negligence, when you first actually suffer a loss. For contract, when the contract was breached, which can be earlier.
-
No extension
Not knowing isn’t enough
Queensland’s extension for facts learned late applies to injury claims, not to financial loss. (Limitation of Actions Act 1974 (Qld) s 31)
-
6 years / 2 years
AFCA complaints
Within 6 years of when you knew, or should have known, of the loss. If the firm gave you a final response, also within 2 years of it.
Fraud, or a claim hidden by fraud, can delay the start of the clock until you discover it, or could reasonably have discovered it. (Limitation of Actions Act 1974 (Qld) s 38)
How it goes wrong
How broking goes wrong.
A refused claim isn’t enough on its own. The question is whether the broker took reasonable care, and whether proper advice would have left you covered.
Cover that didn’t fit
A policy that didn’t cover the risks you told the broker about.
Underinsured
A sum insured set too low, so the insurer paid less than you needed.
Exclusions not explained
An exclusion or condition that defeated your claim, and wasn’t explained to you.
Disclosure handled badly
Information not passed on to the insurer, or your duties to the insurer not explained to you.
Cover that lapsed
A renewal missed, or cover cancelled, without you being told.
Who may be responsible
Who answers for a broker’s mistake.
More than one party may be responsible. Each should be identified early.
Your broker
The advice and arranging: what cover they recommended, what they told you about exclusions, and what they told the insurer.
Ask for: Emails about cover, the proposal and the policy schedule
Their brokerage
The business holding the Australian financial services licence, or the licensee it acts for. It’s generally responsible for its brokers.
Ask for: The brokerage’s details, from its Financial Services Guide
Your insurer
If the refusal itself was wrong, the claim may be against the insurer under the policy, instead of or as well as the broker.
Ask for: The refusal letter and the full policy wording
Who pays
More than one party may be responsible.
Every party who contributed
Where several parties caused a financial loss or damage to property, each may only have to pay its own share. (Civil Liability Act 2003 (Qld) s 31)
Unless you’re a consumer
That sharing rule doesn’t apply to an individual’s claim about services for personal, domestic or household use, or about a professional’s advice for their own use rather than a business. (Civil Liability Act 2003 (Qld) ss 28, 29) Some claims under Commonwealth laws, such as some misleading conduct claims, may not have this exception.
Their insurer
Professionals usually carry indemnity insurance, which may pay a successful claim.
Any liability cap
Look for “Liability limited by a scheme approved under Professional Standards Legislation” on their letters. A cap only matters if your loss is above it.
Straight away
Four things to do now.
- Now 1
Keep every document
The policy schedule and wording, the refusal letter, and emails with the broker.
- Now 2
Write down the timeline
What you asked for, what you were told, and when the claim was refused.
- Now 3
Complain to the firm in writing
AFCA usually needs you to have complained to the firm first. Keep a copy.
- Now 4
Don’t sign a release yet
Don’t accept an offer or sign a release until you’ve had advice about it.
What you can claim
What you can claim.
- The money you lostThe difference between your position and where proper advice or work would have left you.
- Costs to put it rightReasonable costs of fixing the problem, like rectification work or new advice.
- Tax, interest and penaltiesWhere they flow from the error, such as interest or penalties caused by a tax agent’s mistake.
- Wasted legal costsLegal costs wasted because of the professional’s error.
- Lost opportunitiesThe value of a real chance you lost, such as a better deal or a claim, if it can be proved.
Damages aim to put you where you’d have been without the error. They’re not a penalty, and distress is generally not compensated.
How a claim runs
From the first call to court, if it’s needed.
No-obligation first consultation
We look at what happened, who may be responsible, and when your time limit runs out.
Documents and review
We gather the file and, where needed, brief an independent expert from the same profession.
Letter of claim
A detailed claim to the professional and their insurer, setting out the breach and the loss.
Negotiation or AFCA
Claims can be negotiated or mediated. Financial advice and broking complaints can go to AFCA instead.
Court, if needed
If it doesn’t settle, proceedings are started before the time limit ends. Talks can continue.
Costs
What it costs you.
We don’t take these claims on a no-win, no-fee* basis. Before we start, a costs agreement sets out our fees, an estimate of your total legal costs, and the outlays you’re likely to pay, such as report and court fees. We tell you if that estimate changes significantly. If a court case is lost or withdrawn, or you don’t do better than an offer the other side made, you may have to pay the other side’s legal costs.
No-obligation first consultation
You decide whether to go ahead once you know your options and the likely costs.
Everything in writing
Fees and outlays are set out in a costs agreement before we start.
An estimate first
An estimate, or a range, of your total legal costs before we start.
Questions
Questions people ask.
A broker generally acts for you, to find and arrange cover. An agent acts for the insurer. Who acted for whom affects who you can claim against.
Possibly. If the broker’s error caused the refusal, or left you without cover that would have paid, the broker may be responsible. If the insurer was wrong to refuse, the claim may be against the insurer instead.
No, not by itself, but the two don’t usually run at the same time. AFCA is free, but its awards for broking are capped. If you accept its decision, it binds the firm, and you give up a court claim for the same loss. If you don’t, you can still go to court, but the court time limit may keep running while AFCA deals with your complaint.
Generally, not in court. A claim against a broker is about the money you lost. Damages for distress generally aren’t available for a breach of contract like this. (Baltic Shipping Co v Dillon (1993) 176 CLR 344) AFCA can award a limited amount for non-financial loss in some cases.
Generally 6 years to start a court claim, and the clock can start earlier than you’d expect. (Limitation of Actions Act 1974 (Qld) s 10) An AFCA complaint is due within 6 years of when you knew, or should have known, of the loss, and within 2 years of any final response from the firm. Don’t wait.
Another kind of professional?
Claim refused because of your broker?
Your first consultation covers which routes are open and the time limits that apply. There’s no obligation to go ahead.
Our fees and outlays are set out in a costs agreement before we start. If a court case is lost or withdrawn, or you don’t do better than an offer the other side made, you may have to pay the other side’s legal costs. This page is general information, not legal advice about your situation.