A lawyer representing a former client of an AFS adviser received a letter from the Credit Ombudsman Service Limited (COSL), an ADR scheme, yesterday explaining a claim filed against AFS had been thrown out due to a lack of co-operation with the relevant PI insurer.
“We are unable to deal with your complaint further and have now closed our file,” said the letter obtained by ifa and signed by COSL case co-ordinator Mairead Murphy.
The letter explained that AFS Group does not have to resources to pay claims of unsecured creditors and that therefore co-operation from AFS’s insurance provider is necessary to proceed with the claim.
However, “the insurer has declined to provide any further information and instructed AFS not to disclose any further information”.
The lawyer, speaking to ifa on condition of anonymity, said the former directors of AFS are not to blame for the obstruction of the claim, pointing the finger squarely at the insurance provider – whose identity has been supressed in all documentation available to the lawyer or seen by ifa.
“The insurers have had a win here; it is pretty murky waters,” the lawyer said. “They are fighting on every stage to try and stop people pursuing their claims.”
The lawyer said he filed the claim prior to AFS entering administration in April, meaning the insurer should be held to account as AFS’s PI cover was still valid.
“There is a deficiency in the system and that’s that claims that are made when an insurance policy is current should be dealt with and now the insurers have found a way to frustrate the process by refusing to hand over information,” he said.
The lawyer said similar tactics have been utilised by the same insurer in two separate disputes involving claims against AFS in the Supreme Court of Western Australia.
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Maybe what will happen as the PI insurers lick their wounds and jump ship, is advisers will have to start paying a levy to a compensation fund…or worse…maintain a level of liquid assets in their own personal names for potential compensation claims.
Now I would see that as being an unacceptable risk being a small player. I would have to sell out to a big player or exit.
It seems to me that PI insurers may cease providing any cover to AFSLs. Then we will four very large and a few large AFSLs about 7 in all providing advice. AFSLs will become ARs if they want to stay.
IT is time someone made PI insurers accountable….they charge like wounded bulls, put their premiums up each year, and then try to withhold the cover you paid for.
PI insurers, like lawyers, are leeches on society. Both overcharge, both don’t want any responsibility for a loss and both constantly with their hand out asking for more.