PI dispute pushes AFSL into administration
A dispute with an insurer over professional indemnity premiums has reportedly led to a Perth-based AFSL holder and financial planning firm entering into voluntary administration.
Chambers Investment Planners Pty Ltd, which holds AFSL No. 243359, entered into administration on 2 July, with Grant Thornton appointed administrator, according to an ASIC insolvency notice.
ifa understands the company’s decision to enter voluntary administration is largely in relation to a dispute with its PI insurer over coverage of expenses emanating from a claim brought by a client before the Financial Ombudsman’s Service (FOS).
“In this case, the insurers decided to calculate the costs relating to the FOS claim in a particular way that [Chambers Investment Planners Pty Ltd] disputes,” a source close to the matter told ifa, speaking on condition of anonymity.
“If a client brings a claim against an AFSL before the courts and is awarded $500,000 in damages their PI insurer will cover the full amount plus costs minus excess,” the source said.
“But in the case of a FOS claim, if the same amount was awarded, the insurer will only cover up to around $100,000 and the licence holder will find themselves out of pocket for the rest.
“This is very serious and the marketplace is not sufficiently aware; it has huge ramifications and could turn the whole market upside down.”
This gap in PI coverage for FOS claims is partly due to FOS’s decision to split claims into various categories with a claim ceiling price for each, the source said.
In a separate matter, a claim for discovery – i.e. access to documents required to pursue litigation before the courts – was brought against the company in 2011, but dismissed by the Federal Court.
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