Earthquake damage has thrown into question the adequacy of many home and business owners' insurance cover. Some property owners have placed cover through an insurance broker. If the cover has proved to be inadequate, these owners may well be looking for an answer from their broker.
The High Court has recently decided in Marchand & Ors v Jackson1 that a broker who failed to place insurance cover for his client home owners was in breach of his duty to act with reasonable care and skill. He was liable for the losses suffered by his clients as a result of the lack of insurance cover.
The facts were rather unusual in that the broker did not place any cover at all, despite telling his clients that cover was in place. In fact, before the September 2010 earthquake, the broker paid a contents claim out of his own pocket. The broker had done the groundwork to place the cover, but for reasons unknown, never took steps to ensure cover was bound. The broker's health and business pressures may have been a factor. This meant that there was no cover for the earthquake damage to his clients' house.
The Court considered whether cover would have been available, had the broker sought to place it, because one homeowner had dishonesty convictions for making false claims under a previous insurance policy. The Judge decided that, on the evidence, this would not render the property uninsurable. It was likely that the clients could have obtained full replacement insurance from an insurer – and the particular insurer from whom the broker had sought cover.
The clients' house was worth approximately $1.5m. However, the final assessment of the clients' loss, for which the broker is liable, has been adjourned to a later hearing.
The facts here are not common. The situations more likely to lead to a claim against a broker will be the level or type of cover, incorrectly stated floor areas of the house, whether the broker should have attempted to remove certain policy exclusions; the exclusion from cover of particular house or property improvements; or misrepresentations by the broker about the actual cover in place.
With pressure now beginning to tell for some property owners still battling with their insurers, there may well be further cases being brought before the courts for insurance losses where a broker is alleged to be at fault.
1 Marchand and others v Jackson, 2 November 2012, Christchurch High Court, Kos J, CIV-2011-409-810