FAIS Ombud: Broker who leaves everything to clerk ordered to pay

Fais Ombud critical of broker abandoning duties in favour of clerk

In a hard hitting determination that is bound to give errant brokers a wake-up call in 2009, the office of Charles Pillai, the financial advice ombud has ordered a financial services firm and its broker to make good the loss suffered by a client as a result of its failure to ensure that the client’s vehicle was insured when the vehicle was involved in an accident.

Ms Noluntu Bam (pictured), the Deputy FAIS Ombud found Pepina Servas and her firm Bitline Brokers jointly and severally liable for the damages suffered by Marlon van Dorsen when his motor vehicle was written off in a collision during July 2007.

From June 2005 up until June 2007, Van Dorsen’s 2003 Volkswagen Golf 4, 2.0 Highline was insured with the assistance of the respondent with Auto & General Insurance Company. When Auto and General more than doubled his premiums, complainant felt the need to obtain cheaper alternative insurance through other insurance companies. He discussed the matter with one Yvonne Barnard, a receptionist clerk at the broker firm. He was presented with a quotation from Santam Insurance Company. He accepted the quotation, furnished his banking details and authorised deduction of the monthly premium and, as far as he was concerned he was covered. When the accident occurred in July 2007 he found out to his dismay that his claim for compensation for his motor vehicle was declined as he was not insured with Santam. He complained to the FAIS Ombud.

Complainant at all times dealt with Barnard. The quotation she presented him from Santam clearly stated that the inception date of the policy was 4 June 2007 and it further stated that it was valid for thirty days. On 20 June 2007 Barnard again sent the Santam quotation to complainant with the request that he peruse it carefully to see that all information is loaded correctly and that-

“should you wish to except please sing and fax back to our office along with your updated banking details, copy of Id and drivers license.” (Extracted from the e-mail as is.)

On 27 June 2007, Barnard then authorised the move from Auto and General to Santam. She further informed the administrator, one C & F Outsource Management (Pty) Ltd (C & F), which is an administrator for Santam to arrange for the complainant to be on cover from 1 July 2007. The e-mail informing the administrators of this was copied to the complainant. However, at that stage the complainant had not sent the requested copies of the signed quotation, his identity document and driver’s licence. However, based on the e-mail copied to him, he was placed under the impression that he would be comprehensively insured as from 1 July 2007.

After his vehicle was written off in the collision on 13 July 2007, he informed the said M/s Barnard on 19 July and was told to send the outstanding requirements. This he sent the same day. However on 31 July he was informed by Santam that he was not insured by them. It was only then that Barnard informed him that it was because he had not sent the outstanding documentation.

The questions which the Deputy Ombud had to decide was whether he was properly informed that he had to send the outstanding documentation and that no cover would exist until then and whether it was reasonable for the complainant to assume that he was insured based on the e-mail sent to him by Barnard.

It was clear from the investigation by the Ombud’s office that the broker had been previously informed quite clearly that no cover would exist until all outstanding documentation had been forwarded. Although Barnard maintained that she had told the complainant about this, none of the written communication from her reflected this. The Deputy Ombud also questioned why the broker had not ensured that the client was first covered by Santam before cancelling his insurance with Auto and General.

The Deputy Ombud found on the evidence that Barnard had actually believed that the client was covered by Santam from 1 July 2007. She also found that another important piece of information that Santam would hold cover for 14 days whilst outstanding information was to be provided was not communicated to the complainant. M/s Bam found that the respondent had failed to comply with important sections of the Code of Conduct for Financial Services Providers by failing to provide information that was factually correct and not misleading and details of special terms and conditions and circumstances under which liability was excluded.

M/s Bam also expressed concern at the fact that although certain correspondence (including the letter in terms of s27(4)) was addressed to Ms P A Zervas as the managing member and key individual of the respondent, all responses were received from Barnard who was only a receptionist clerk of the respondent. M/s Zervas, the key individual and representative of the financial services provider did not respond to the complaint and left it to Barnard to do so. In fact, all interaction with the complainant even at the stage of rendering the intermediary service was left to the receptionist/clerk. This, the Deputy Ombud found was not in accordance with the provisions of the FAIS Act and the Code of Conduct. The Deputy Ombud remarked that the Financial Services Board will be informed of this in order that steps considered appropriate may be taken against the financial services provider concerned.

Both the broker M/s Zervas and her firm Bitline Brokers were held jointly and severally liable for Complainant’s loss and ordered to pay the amount of R113700.

Click here to read the full determination (PDF file 60kb)