Broker lands in hot water after BI coverage miscue
February 5, 2019 by David Gambrill
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A Manitoba broker landed in hot water after filling in for a vacationing colleague whose commercial client wound up without business interruption coverage.
Broker John C. McDonald was fined $250 for his role in the coverage mix-up.
When McDonald’s work colleague first explained to the client how business interruption works, the client declined the coverage on the basis of a misunderstanding. The client thought the coverage was only for lost wages; since they did not take wages, they declined the coverage.
But in September 2016, the work colleague further explained BI coverage and the client agreed to add it to the policy at the time of renewal on Dec. 3, 2016. However, while the colleague had agreed to add the coverage to the policy, it had evidently slipped his mind, council found in its decision. The colleague did not document the September conversation with the client.
About a month before the renewal process, the colleague went away on vacation, handing over his client’s file to McDonald. In an email to the client on Nov. 2, 2016, McDonald requested information for the policy renewal. Twenty days later, he followed up in another email to the client; in that message, he wrote: “There is a question regarding BI coverage.”
McDonald had several conversations with the client about live bands during the week of Nov. 22 and Dec. 3, 2016. But he said he did not recall receiving instructions from the client about BI coverage.
The client’s recollection is that she confirmed BI coverage was in place in December, the week after the policy renewed. She assumed it had been in place because the bill for the policy was higher than expected. But when the business suffered a water damage loss in early January 2017, the adjuster advised the client that BI coverage for the business was not in place.
McDonald told council that his colleague had given him certain tasks to complete with the client during the vacation period. He said he completed those tasks, and placing business interruption coverage for the client was not among them.
“He reiterated that his task was limited to obtaining the [client’s] sales figures and that he considered everything else with respect to their renewal as having already been taken care of by his colleague,” council found in its decision. “When directed to his November 22, 2016 email where he states that ‘there is a question regarding BI coverage,’ [McDonald] confirmed that he knew business interruption coverage was a live issue at the time but that the [client] had never given him instructions to add business interruption coverage.”
The regulator found that McDonald owed a duty of care to his colleague’s client to make sure he had clear instructions from the client on BI coverage.
“While council appreciates that the licensee [McDonald] inherited the file from his colleague while the latter was on vacation, and that the lack of documented evidence of his colleague’s conversations with the [client] in September 2016 likely contributed to the confusion in November 2016, this does not relieve the licensee of the duties he owed to the [client].
“Whether the file was his own or whether he had temporarily taken over the file in his colleague’s absence, the licensee’s duty to the [client] remained the same; namely to be clear, conscientious and diligent in his dealings with them and to provide them with competent guidance based on sufficient knowledge of the specific risks entailed.
“If the [client’s] understanding of business interruption coverage seemed muddled, it was the licensee’s duty to explain that coverage and its importance so that clear instructions could be obtained.”
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Teamwork. You learn from this report that it didn’t work in the office of the stand-in or there would have been checks and rechecks since the stand-in apparently knew nothing of the producer’s client and how best to deal with the situation when the client was obviously a stranger to him. I tend to blame the producer (preoccupied with visions of pina coladas, sun-drenched beaches and waves of cooling air wafting off the combers as they crawl up the shore) for not sitting down with the stand-in to go over specific details of the item, the type of client he would be dealing with and at least some minimum form of communication even while away on a tropic isle. That this was someone else’s client, an even more pronounced duty of care should have been the stand-in’s aim. It’s as if the attitude could have been, “Well, it’s not my client. I’ll do what I can but there are no promises. I’ve got my own stuff to look after”. (Ahem!).
A recent report of a case had a Judge proclaim that the practice of insurers is to keep a policy in effect if there is any doubt at all as to whether it is to be cancelled and found in favor of the insurer. Applying the principle of that practice to this case, the stand-in should have added the coverage until it was positively decided the client didn’t want it. But looked what happened.
Maybe The Three Musketeers were right – “One for all and all for one”. Why not try it sometime?