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 that enquiry.

Subsequently, Suncorp acquired Vero, with Vero taking over responsibility for Suncorp's small to medium business customers.

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 question.

Kotku Bread Pty Ltd v Vero Insurance Limited

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).

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