Problem: Fred and Wilma have a specific insurance policy on some valuable artwork. This policy gives them additional coverage, above what their homeowner's policy would cover. Wilma feels the cost of this extra insurance is quite high and they could use the money she spends on premium for something else. Fred believes the extra coverage provides valuable protection for them. Late on Friday, Wilma calls the insurance broker and requests that the specific policy be cancelled. She confides that Fred is not aware that she has called the broker and that he does not agree with cancelling the policy. The broker advises Wilma that cancelling the policy is not a good idea, but she insists. Finally, the broker accepts the cancellation an as he is on his way out of the office for the weekend, puts the cancellation in his desk drawer to be sent to the insurer on Monday morning.
Over the weekend, the artwork is severely damaged when a pipe bursts. Fred, who is not aware that Wilma cancelled the policy, calls the broker on Monday to report a claim. The broker has not yet processed the cancellation and is now presented with a difficult decision. The broker has the cancellation in his desk and knows that it should be processed. However, Fred and Wilma have been long time good clients and have several policies with his office. He is sympathetic and understands that the damage would cause them hardship without insurance coverage. The broker is torn on what action to take: process the cancellation and advise Fred that Wilma had cancelled the policy the broker or ignore the cancellation and process the claim? What should the broker do? Fully justify your recommendation.