Secondary

business-for-sale

Issues after the sale of a Brokerage

The issue of accountability for an omission was covered in a FAIS Ombud determination issued on 8 December 2015.

It also provides insight into what happens in this regard after the sale of a business to another institution.

Briefly, the complaint involves the alleged failure of a financial services provider to provide short term cover to the Complainant. During a routine revision of the existing policy, the Complainant was advised to add cover to his policy against fire damage for a game fence on the farm. The Complainant agreed with this and instructed his broker to endorse the policy by adding cover for the game fencing.

Soon after this a fire broke out on the farm and the game fencing was damaged. The Complainant filed a claim with the insurer for an amount of R85 500 but it was rejected on the basis that, according to the insurer’s records, there was no cover for game fencing in the policy. It turned out that the brokerage had neglected to have the endorsement processed with the result that there was no cover in respect of the damaged game fence.

What makes this case interesting is that, prior to this event the brokerage was sold to a group of companies. The deal was concluded on the basis of a written agreement of sale.

Please click here to read the actual determination which provides useful information on what to consider when you buy someone else’s book.

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