Failing
to arrange insurance cover for clients and then dishonestly stating that he had
done so meant an insurance broker was liable for his clients’ uninsured losses on
a $1.5 million property after the Christchurch earthquake.
Mr John Jackson as owner of Town
and Country Brokers was left liable for repair costs to a substantial Tai Tapu lifestyle
property owned by Nicola and Jacques Marchand, damaged in the September 2010
Canterbury earthquake.
In June 2009, the Marchands
approached Mr Jackson to arrange insurance cover for both their personal assets
and Dr Marchand’s medical practice. Dr
Marchand had been insured previously with the Medical Assurance Society. This cover was cancelled by the Society after
Dr Marchand’s conviction for fraud. The
doctor had been sentenced to eight months home detention after conviction on 57
counts of making fraudulent medical services claims totalling $30,500 over a
three and half year period.
Insurance companies routinely
cancel insurance cover for any person convicted of fraud.
As broker for the Marchands, Mr
Jackson did arrange alternative cover for Dr Marchand’s medical business, and
did send an insurance proposal to NZI for house and contents insurance in
respect of the Tai Tapu residence. But,
the court was told, he failed to follow up NZI’s response, leaving the Tai Tapu
property and contents uninsured. He was
later to say that his poor health contributed to the oversight. Rather than admitting to his error, Mr
Jackson maintained a pretence that cover was in place. He reassured Mrs Marchand they were insured
when she queried why no invoice had been received for the premium due, he paid
out of his own pocket a claim by Mrs Marchand for damage to her spectacles, he
sent to her a claim form for minor damage to wall paper even though there was
no insurance in place against which to claim and then after the September 2010
earthquake he sent to NZI a back-dated insurance application. NZI refused to provide cover.
Justice Kos said that Mr Jackson
failed in his duties as an insurance broker by not completing the job
diligently or with reasonable care and skill.
He was liable to pay for damage to the Tai Tapu property as if it had
been insured.
The High Court was not asked to
rule on what would have been the extent of insurance cover that a competent
broker would have arranged for the Marchands.
Insurers willing to offer cover to people convicted of fraud often
demand a higher premium and impose a greater excess. Those convicted of arson or serious criminal
damage usually find insurance is not available at any cost.
In parallel litigation, Mr
Jackson failed to recover from his professional indemnity insurer, IAG New
Zealand. Mr Jackson sued IAG claiming
insurance cover for his negligence. IAG
said Mr Jackson’s professional indemnity insurance excluded cover for any
dishonest acts or omissions. Both the
Court of Appeal and Supreme Court agreed the exclusion applied: Mr Jackson’s
liability to the Marchands arose from his admitted dishonesty in telling them
that cover was in place, when it wasn’t.
Marchand
v. Jackson – High Court (2.11.12) and IAG Ltd v. Jackson – Court of Appeal
(15.7.13) & Supreme Court (25.02.14)
14.009