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Advice Under the Spotlight: Insurance Brokers Professional Indemnity

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Advice Under the Spotlight: Insurance Brokers Professional Indemnity. Duncan McGill, Partner, Duncan Cotterill Craig Kirk, COE Manager – Liability, Lumley General. Advice Under the Spotlight: Insurance Broker’s Professional Indemnity. Who’s been swimming naked?.

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Advice Under the Spotlight: Insurance Brokers Professional Indemnity

Duncan McGill, Partner, Duncan Cotterill

Craig Kirk, COE Manager – Liability, Lumley General

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Advice Under the Spotlight: Insurance Broker’s Professional Indemnity

Agenda

  • Brokers’ Duties & Obligations
  • Recent Mistakes & Leading Legal Cases
  • Risk Management: Best Practices
  • Conclusion
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Advice Under the Spotlight: Insurance Broker’s Professional Indemnity

General Legal Principles

  • Insurance Intermediaries Act 1994 governs
  • Common Law Fiduciary duties to your client:
    • Use due skill, care & diligence
    • Confidentiality
    • Act in client’s interest
    • Account for all payments
    • Act in accordance with authority granted
  • Additional Contractual obligations may exist.
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Advice Under the Spotlight: Insurance Broker’s Professional Indemnity

Duty to the Insurer

  • “Contracts of good faith”
  • Insurance Law Reform Act 1977
  • Brokers have a duty not to withhold information
  • If done dishonestly or recklessly this can amount to fraudulent misrepresentation.
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Advice Under the Spotlight: Insurance Broker’s Professional Indemnity

Duties to 3rd Parties?

  • Crowson v HSBC Insurance Brokers (UK)
  • The Broker did hold a duty of care to the third party
  • In New Zealand?
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Advice Under the Spotlight: Insurance Broker’s Professional Indemnity

Leading Cases

  • Graham Strategic Ltd v Stratus Financial Services Ltd
  • Aon New Zealand Ltd v The Attorney-General in respect of the Ministry of Agriculture and Fisheries
  • Cee Bee Marine Ltd v Lombard Insurance Co Ltd
  • McCombieGieck Family Trust No 2 Nominees Ltd v Marsh Ltd and IAG New Zealand Ltd
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Advice Under the Spotlight: Insurance Broker’s Professional Indemnity

Claims Scenarios

  • Scenario 1: No Business Interruption Cover
  • Scenario 2: Earthquake Cover Excluded
  • Scenario 3: Lapsed Policy
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Risk Management:

Best Practices

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Advice Under the Spotlight: Insurance Broker’s Professional Indemnity

What is RM in the context of PI?

  • Reduce probability
  • Reduce the impact.

DEFENSIBILITY

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Advice Under the Spotlight: Insurance Broker’s Professional Indemnity

Breakdown of Claim Types – EQ Claims

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Advice Under the Spotlight: Insurance Broker’s Professional Indemnity

Lessons Learnt

  • Valuations
  • Renew!
  • Quote!
  • Security.
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Advice Under the Spotlight: Insurance Broker’s Professional Indemnity

Three Primary Causes of PI Claims

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Advice Under the Spotlight: Insurance Broker’s Professional Indemnity

Communication

  • “One purpose of communication is to take a thought from one human beings brain and transmit it to the brain of others with the minimum possibility of misunderstanding, confusion or ambiguity.”
  • Major General “Windy” Gale
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Advice Under the Spotlight: Insurance Broker’s Professional Indemnity

Other Best Practices

  • Managing Expectations!
  • Peer Review Process
  • Avoid Conflicts of Interest
  • Graham Strategic Ltd v Stratus Financial Services Ltd
  • PI Insurance.
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Advice Under the Spotlight: Insurance Broker’s Professional Indemnity

Don’t get Caught with your Pants down!

  • Know your legal obligations and duties
  • Know where common mistakes can happen
  • Maximise defensibility - effective risk management
  • Protect yourself with appropriate insurance.
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