Claim refusals often get blamed on the broker, but that’s not right, says Pat Boreham, head of broker development and relations at MGB Insurance Brokers
How well is your business protected when a coverage claim is declined?
Brokers often get blamed for claim refusals. And this blame often leads to a claim or a precautionary notification to the broker’s professional indemnity insurance policy, even if it is spurious. Of course, brokers are sometimes at fault. So an unhappy customer whose claim has been rejected or who is facing resistance from the insurer to pay a claim can cause chaos in a broker’s life, sometimes fairly but often not.
Well, many would argue that the 2015 Insurance Act helps to protect brokers, and their PI policies, by increasing the frequency of customers getting their claims paid. And although it’s too early to tell, we think it will. However, there are many coverage issues across all lines of business which will be unaffected by the Insurance Act: disputes about policy trigger, allegations of late notification, other breaches of condition, and the scope of applicable exclusions to name a few. Genuine coverage disputes will still happen long after the Insurance Act especially where Insurers are under huge commercial pressure because of historically low premiums across the industry.
For example, a broker arranges the insurance for a plastics factory with the same insurer for a number of years. A major theft occurs, resulting in a substantial claim against the policy. If the plastics factory had fire/alarm protection, but not as specified following a survey, cover may not have applied pre-Insurance Act.
Since the Insurance Act, the unconnected breach is unlikely to be a valid reason to reject the claim as a whole, but there is the possibility of a contributing factor.
Whilst the claim might not have been declined in its entirety by the insurer, the customer may not be wholly satisfied with the outcome, particularly in the event of the claim being only partially paid, and this could lead to a claim or allegation against the broker.
What can you do to support your client in these circumstances?
You can now inform your client that, whilst there may be a problem, you already have a solution that allows them to challenge an unmerited declinature by an insurer without expending huge sums of money on specialist coverage lawyers or taking on the risk of adverse costs. This could be the difference between having to deal with a professional negligence claim against you and not, and between retaining your customer or not.
At MGB Insurance Brokers, through MGB’s unique facility with Fenchurch Law, every broker who places their PI through us has access to the award-winning services of Fenchurch Law, without there being a cost to you or your customer. As part of that service you or your client can contact Fenchurch Law for independent advice about how best to obtain cover or challenge a decision made by an insurer.