By David Slatyer, Partner and Charles Cooper, Paralegal

The Supreme Court of Victoria’s decision in Danbol Pty Ltd v ACN 007 198 343 Pty Ltd [2026] VSC 305 examines a broker’s liability where renewal and extension offers were not communicated before a loss. Although negligence was admitted, the Court had to determine whether the insurer would have been liable under a policy that should have been in place. The Court found that the broker was liable because the insured would have obtained cover under a renewal policy that would have responded to the loss.

This decision highlights the importance of timely communication by brokers and provides useful guidance on how Courts assess hypothetical insurance cover in negligence claims.

Background

Danbol Pty Ltd (‘Danbol’) owned a large warehouse in West Melbourne and insured it under an industrial special risks policy arranged through its broker, Griffiths Goodall Insurance Brokers Pty Ltd (now ACN 007 198 343 Pty Ltd). The policy was due to expire at 4pm on 24 August 2018.

Until mid‑2018, the premises were occupied by a tenant operating a timber recycling business. In June 2018, that tenant vacated and a new tenant took possession. Danbol understood that the new tenant would be storing decommissioned gas bottles and this information was provided to the broker and passed on to Pen Underwriting, acting on behalf of Swiss Re.

On the morning of 24 August 2018, shortly before the policy was due to expire, the insurer declined to offer a full renewal due to uncertainty about the tenant’s activities. It did, however, offer a 14‑day extension to allow time for further enquiries. The broker did not communicate this offer to Danbol. On 27 August 2018, the broker clarified that the gas bottles were decommissioned before arriving at the premises. Following that clarification, the insurer offered a 12‑month renewal on 29 August 2018. This offer was also not communicated to Danbol. On 30 August 2018, the warehouse was destroyed by a significant fire. It later emerged that the tenant had been storing large quantities of flammable liquids, contrary to what had been represented and what was permitted under the lease.

Danbol initially brought a claim against the insurer, which failed because no policy was in place at the time of the fire. It then commenced proceedings against the broker, alleging that its loss resulted from the failure to communicate the available policy options.

Issues

The key question was not whether the broker had been negligent but whether the negligence caused the loss. In practical terms, that required the Court to consider:

1. whether Danbol would have taken out cover if properly advised;
2. whether the insurer would have been entitled to refuse a claim under any such policy; and
3. whether any misstatements about the tenant’s activities affected the position.

Findings

The Court approached the case on the basis of two possible hypothetical policies: one arising from the 14‑day extension and the other from the 12‑month renewal. It was accepted that Danbol would have taken out at least one of those options if they had been communicated. The critical issue was whether either policy would have responded.

The broker argued that even if cover had been arranged, the insurer would not have been liable. It argued that the tenant’s actual use of the property amounted to an “alteration in use” after the policy commenced, allowing the insurer to refuse the claim. It also submitted that any policy would have been entered into on the basis of incorrect information about the tenant’s activities. A key issue was therefore the operation of section 54(2) of the Insurance Contracts Act 1984 (Cth), which allows an insurer to refuse a claim where an act occurring after the policy begins could reasonably be regarded as capable of causing or contributing to the loss.

The timing of events was central. The Court found that the storage of flammable chemicals began around 27 August 2018. This was after 4pm on 24 August, being the commencement of a policy based on the 14‑day extension, but before the commencement of a policy based on the 12‑month renewal, which would have started between 1pm and 5pm on 29 August 2018. Accordingly,

• under the 14‑day extension, the alteration in use would have occurred after the policy began, meaning the insurer could have refused the claim; and
• under the 12‑month renewal, the alteration in use occurred prior to the policy’s commencement, such that the insurer could not rely on section 54 to deny cover.

Therefore, the Court concluded that only the 12-month renewal would have provided effective cover, with the result that the broker’s failure to communicate that offer caused Danbol’s loss.

Takeaways

This case is a clear reminder that brokers must ensure renewal and extension options are promptly communicated, particularly where cover is about to lapse. It also shows that in broker negligence claims, establishing negligence is only the starting point. The outcome will often depend on whether hypothetical cover would actually have responded. Here, the timing of events proved critical, with only a narrow window determining whether the insurer could refuse the claim or not.