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Adviser fights insurance company for commissions after sex claims

A financial adviser has been fighting through the courts to reinstate his contracts with an insurer, which cancelled them because of his inappropriate behaviour.

Thursday, November 29th 2018, 6:00AM 8 Comments

The case has been heard in the High Court at Christchurch, but many of the details are suppressed, including the name of the insurer and the adviser.

The adviser, referred to as Mr X, was one of the insurer's top three advisers in the country.

He and his companies relied heavily on the insurer for their business - the two companies put 97% and 100% of their business with the insurer, respectively.

He argued that the cancellation of the contracts would be disastrous for his business.

Complaints were first raised about the adviser in October last year, by female staff of the insurer, who said he was behaving in an unsolicited, sexualised way.

A review was carried out and in May it was determined that the allegations of misconduct had been established.

The insurer told the adviser that his behaviour had breached its agreement. It cut off his commission streams and told him it would market its policies directly to his clients.

Mr X took the insurer to court, seeking to have the contracts reinstated. His trail commissions were worth up to $37,000 a month.

The insurer argued that the trust of clients and the wider marketplace was important in insurance, and there was a risk that the adviser would damage its brand and reputation.

It said he also jeopardised its ability to offer its staff a safe workplace.

The judge said he could not restore the contracts before a full hearing but noted it was unlikely the business relationship would continue.

It should be a matter for damages to address if the insurer had been wrong to cut off the contractual relationship, he said.

The Financial Markets Authority said it had not had anything to do with the case.

 

Tags: Insurance Advisers

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Comments from our readers

On 29 November 2018 at 8:54 am MediCare said:
I would really like to know who the insurer is. Fair enough if they don't want to deal with the agent, but he shouldn't be wiped out in this way and should have the opportunity to sell his book.
On 29 November 2018 at 12:10 pm Steven Popodopolus said:
Its not Colonial Mutual
On 30 November 2018 at 8:35 am MediCare said:
Its not Prudential either. Let's not forget the bad old days when tied agents who dared to resign, or became "persona non-grata", faced financial ruin when their their house mortgages were called up by the insurer together with any potential future commission write-backs. I think that it is important that advisers are fully informed about their personal risks related to dealing with an insurer. Let's put this under the spotlight. Who is the insurer?
On 30 November 2018 at 10:54 am Ron Flood said:
Why do we need to know who the insurer is? A good excuse to run around and replace our clients cover, now that there are no new entrants to the marketplace?
Let this play out in court and worry about what we do, providing good advice.
On 30 November 2018 at 9:23 pm JPHale said:
Exactly Ron. No one's business but theirs and they will have to live with the consequences of their choices.

If advisers bothered to read the contracts they have signed with insurers they will find they have extensive conduct requirements and no not just about commission rates and clawback periods.
On 2 December 2018 at 9:49 pm Murray Weatherston said:
This story reads to me like the adviser applied to the Court for a summary judgment against the insurer. Summary judgment is fast track without a full hearing.
Judge refused that application and said the case had to go to a full hearing.
So who is the winner and who is the loser is yet to be determined. That is likely to be an open question for at least a year or more.
I am very surprised that some commenters have rushed to judgment that the adviser has been in the wrong, and that it was right and just that he should outright lose his apparent $450,000 p.a. trail without compensation. "Holier than though" runs through my mind.
The case will no doubt be argued at least as a breach of contract by the insurer.
I have absolutely no idea whether the agent or the insurer will win.
In the event the agent wins, there will be a hefty award of damages against the insurer, especially as the judge seems to have concluded that any business relationship can be reinstated.
RTFM - the outcome of the case will (as in all contractual disputes) depend on the construction of the contract. Those of us who have not seen the contract should remain silent about it rather than rushing to judgment.
On 2 December 2018 at 9:53 pm Murray Weatherston said:
This story reads to me like the adviser applied to the Court for a summary judgment against the insurer. Summary judgment is fast track without a full hearing.
Judge refused that application and said the case had to go to a full hearing.
So who is the winner and who is the loser is yet to be determined. That is likely to be an open question for at least a year or more.
I am very surprised that some commenters have rushed to judgment that the adviser has been in the wrong, and that it was right and just that he should outright lose his apparent $450,000 p.a. trail without compensation. "Holier than though" runs through my mind.
The case will no doubt be argued at least as a breach of contract by the insurer.
I have absolutely no idea whether the agent or the insurer will win.
In the event the agent wins, there will be a hefty award of damages against the insurer, especially as the judge seems to have concluded that any business relationship can be reinstated.
RTFM - the outcome of the case will (as in all contractual disputes) depend on the construction of the contract. Those of us who have not seen the contract should remain silent about it rather than rushing to judgment.
On 2 December 2018 at 9:54 pm Murray Weatherston said:
Oops 3rd last line "can" should be "can not" (be reinstated).

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