In a letter to the solicitor representing a former client of an AFS Group authorised representative dated yesterday, obtained by InvestorDaily, the Credit Ombudsman Service Limited (COSL) announced that it's “unable to deal with the complaint further” and has “closed the file” on the matter.
The reason given for the closure of the file is a lack of information about the relevant insurance policies held by AFS, which is necessary to proceed with a determination.
“We have asked AFS to confirm whether the complaint is covered by a PI insurance policy and if so, whether the PI insurer has accepted the complaint as a claim under the policy,” the letter states.
“AFS has indicated that it has informed the relevant PI insurer of your complaint. However, the insurer has declined to provide any further information and instructed AFS not to provide any further information to COSL.”
The letter reveals that appointed liquidator BDO made clear in October that “AFS is unlikely to have any resources to pay the claims of unsecured creditors”, meaning that COSL was then reliant on the cooperation from the insurance provider in order to pursue the complaint.
The solicitor, speaking to InvestorDaily on condition of anonymity, explained that the decision to withhold information from COSL did not come from the former directors of AFS.
“AFS has not caused this situation – this is about the insurer giving directions to the liquidator,” he said. The solicitor said the complaint had been filed prior to AFS entering administration and losing its PI cover and that therefore it should be pursued in accordance with the law.
However, the ability for the insurer to decline to cooperate with COSL will have wide-reaching implications for the financial services industry, the solicitor said.
“The insurer has had a great victory,” he said. “There is a deficiency in the system and that’s 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.”
The solicitor said there are a number of cases currently before the Supreme Court of Western Australia involving AFS Group, in which the same insurer – whose identity has been suppressed in all documents available to the solicitor and seen by InvestorDaily – has also refused to provide necessary documentation and formally opposed a sanctioned subpoena.
InvestorDaily reported that AFS Group was facing financial difficulties in March 2013, before the company entered administration in April.
