The insured company operated a bakery. Its usual broker was
Osman Insurance Brokers, and fire cover was placed with Suncorp. In
April 2006 another broker (Comsure Insurance Brokers) obtained a
quote from Suncorp. The broker's submision referred to internal
insulated panelling; Suncorp responded that it would only
underwrite up to 33% of the risk where a building had such
panelling but did not also have sprinklers. Nothing further came of
Subsequently, Suncorp acquired Vero, with Vero taking over
responsibility for Suncorp's small to medium business
The insured's fire cover was renewed annually by its usual
broker. In the change-over from Suncorp to Vero, an on-line
proposal had to be completed. The broker did that on behalf of the
insured. In doing so, the broker answered 'zero' in
response to a question about the percentage of expanded polystyrene
sandwich panelling in the insured premises. In fact, the broker did
not know, and did not bother to find out, that the premises did
contain such panelling.
The premises were subsequently destroyed by fire. Vero denied
indemnity because of the non-disclosure. The insured sued both Vero
and the broker.
The Queensland Supreme Court accepted that Vero would not have
issued the policy if the true percentage of EPS panelling had been
disclosed, and consequently it was entitled to reduce its liability
for the claim to nil. The information provided to Suncorp by the
other broker was not information which Vero knew, or ought to have
known in the circumstances.
Not surprisingly, the broker was found liable for not enquiring
about – and if necessary inspecting – the
internal construction of the premises prior to answering the
Kotku Bread Pty Ltd v Vero Insurance
The knowledge of an insurer when considering whether to accept a
risk does not necessarily include everything contained in the
corporate records of the insurer (or its parent company).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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