Danbol Pty Ltd v ACN 007 198 343 Pty Ltd [2026] VSC 305
The Victorian Supreme Court has found an insurance broker negligent for failing to communicate an available policy extension and renewal offer to its client before an industrial fire occurred causing significant loss.
Factual Background
The client, Danbol owned a warehouse in Tottenham, Victoria, insured under an Industrial Special Risks (ISR) policy arranged through its broker. Shortly before the policy expired, a new tenant took possession and advised that it would be storing decommissioned gas cylinders. Danbol passed this information on to its broker and then to the insurer, however, the tenant later began storing highly flammable chemicals at the property without disclosing this to Danbol or the insurer.
On 24 August 2018, the insurer declined immediate renewal of the policy due to uncertainty surrounding the change of use of the property but offered a 14-day extension to the broker to allow Danbol to find alternative insurance cover. The insurer later offered a 12-month renewal after receiving clarification that the cylinders were decommissioned off-site. However, the broker failed to communicate the 14-day extension and 12-month renewal offer to Danbol and, as a result, the policy lapsed.
On 30 August 2018, the warehouse was destroyed by a significant fire, causing losses of approximately $9.8 million. Earlier proceedings brought by Danbol against the insurer confirmed that no insurance policy was in place at the time of the fire because neither the extension nor the renewal offer had been accepted.
Relevant Issues
Causation and Disclosure
Although the broker admitted that it had breached its duty of care to Danbol, it denied that the breach caused Danbol’s loss the broker argued that the renewal had been offered on the understanding that the warehouse would store decommissioned gas cylinders, whereas the tenant had in fact begun storing large quantities of flammable chemicals. Accordingly, the broker argued that the change in use and alleged misrepresentation would have entitled the insurer to refuse indemnity even if the policy had not expired.
Osborne J rejected this argument. By 24 August, Danbol had informed the insurer of the tenant’s intended use of the warehouse based on information provided by the tenant, which Danbol reasonably believed to be accurate. The tenant’s change in use occurred after this and without Danbol’s knowledge. His Honour held that the representations were to be assessed at the time they were made, meaning the tenant’s later conduct did not render Danbol’s earlier statements misleading. Danbol was also not reasonably required to doubt the tenant’s assurances or undertake a further inspection.
Section 54
Section 54 of the Insurance Contracts Act 1984 (Cth) outlines circumstances in which an insurer may not refuse to pay a claim. The broker argued that, even if the hypothetical policies had been in place, the insurer could have relied on s 54(2) to refuse Danbol’s claim because the tenant’s change in use of the warehouse was capable of causing or contributing to the loss.
Osborne J found that s 54(2) could have applied to the 14-day extension because the tenant’s change in use occurred after that cover would have commenced and during the period of insurance. However, by the time the 12-month renewal was offered, the tenant had already begun storing highly flammable chemicals without Danbol’s knowledge. As this change in use occurred before the annual renewal would have been entered into, it was found that s 54(2) did not apply and could not provide a basis for the insurer to refuse Danbol’s claim.
Key Considerations
This decision confirms that a broker’s negligence alone will not establish liability for an insured’s loss. The insured must also establish that, had the broker acted properly, effective insurance would have been in place, and the insurer would have paid the claim.
Here, the timing of the tenant’s change in use was critical. It occurred after Danbol had made its representations regarding the intended use of the warehouse, meaning the change did not render those earlier representations misleading. However, it occurred before the hypothetical annual renewal would have been entered into, meaning s 54(2) could not provide a basis for the insurer to refuse the claim.
The decision highlights the importance of insurance brokers promptly communicating extension and renewal offers, particularly where existing cover is approaching expiry.
If you have any questions regarding broker negligence or other issues raised in this decision, please contact:
Danielle Snell, Managing Partner & Co-Founder | [email protected] | 0401 812 885
Robert McGirr, Partner & Co-Founder | [email protected] | 0413 944 023
Article co-authored by William Iacovangelo, Paralegal at Elit Lawyers