The owner of a factory containing toxic chemicals that burnt for days in Melbourne’s west was uninsured at the time of the blaze.
The decision in Danbol Pty Ltd v ACN 007 198 343 Pty Ltd (formerly Griffiths Goodall Insurance Brokers Pty Ltd) [2026] VSC 305 is a warning about complex property risks, changing occupancies, late renewal information and the danger of treating extensions as a substitute for disciplined renewal management.
For policyholders, it is critical that renewal information is prepared in a timely manner, particularly where there are changes in tenancies, business activities, storage profile or fire load.
For intermediaries, if disclosures are incomplete, ambiguous or close to the expiry date, act quickly. Clarify key risk information, obtain clear instructions from the client, relay those instructions to underwriters and ensure cover is bound and confirmed.
This case shows what can happen when renewals, particularly for complex risks, are left too late.
Background
Danbol owned a warehouse property. The expiring policy was an industrial special risk (ISR) policy covering property damage. Shortly before expiry, the tenant of the insured property changed. The outgoing tenant had used the property for timber recycling and pallet related activities. The new intended use was described to the intermediaries as the storage of decommissioned gas bottles.
In truth, by the time of the fire, the premises were being used for the unsafe and unlawful bulk storage of flammable chemicals. The difference of the risk type was not marginal.
The policy was due to expire at 4.00 pm on 24 August 2018. That morning, Pen Underwriting, acting as underwriting agents for Swiss Re, declined renewal because of uncertainty around the changed use, particularly whether gas bottle decommissioning was occurring at the site. Given the lateness of the submission and the declinature, Pen offered a 14-day extension so Danbol could maintain cover while an alternative placement or further underwriting information was obtained. Pen also indicated that reconsideration would require a survey or qualified engineer’s report addressing the process, ventilation, procedures and storage arrangements of the new tenancy.
The intermediary did not pass on the 14-day extension offer to its client. Nor did it later pass on the annual renewal offer made on 29 August 2018. The following morning, on 30 August 2018, the warehouse was destroyed by fire. The intermediary accepted that a reasonable agent would have recommended acceptance of both the extension and the annual renewal offer, and that its failure to do so departed from the requisite standard of care.
Case 1: Insurer succeeds, no policy formed
In Danbol Pty Ltd v Swiss Re International SE [2019] VSC 732, Danbol contended that the 14-day extension offer had been accepted, or that Swiss Re was otherwise bound. Swiss Re’s answer was orthodox contract law: an offer of insurance does not itself create cover. It must be accepted. The premium for the extension was not agreed or paid, and the communications that followed were directed to further renewal negotiations, not unequivocal acceptance of the temporary extension.
That conclusion was upheld on appeal in Danbol Pty Ltd v Swiss Re International SE [2020] VSCA 274. The Court of Appeal held that Danbol’s conduct in providing further information and attempting to secure annual cover did not manifest an intention to accept the 14-day extension.
Case 2: Same facts, against the broker
This case asked whether, had the intermediary acted competently, Danbol would have had insurance in place and whether that insurance would have responded?
The intermediary accepted that, had it acted properly, insurance would have been in place. Its defence was causation. It argued that even if cover had been obtained, Swiss Re would not have been liable because of either an alteration of use, or misrepresentation and non-disclosure about the true use of the property.
Alteration of use: What the clause did
An alteration of risk clause provides that the insurer is not liable for loss, destruction or damage caused or contributed to by an alteration, after commencement of the policy, in the trade, manufacturing processes, nature of occupation or other circumstances affecting the premises, where that change increased the risk of loss, destruction or damage.
In practical terms, it protects insurers against a materially different risk emerging during the policy period. A timber and pallet risk is not the same as a bulk flammable chemical storage risk.
The Court found that there had been an alteration of use after 4.00 pm on 24 August 2018. The storage of flammable chemicals increased the risk of loss, destruction or damage and contributed to the damage suffered in the fire.
Section 54
The operation of section 54 of the Insurance Contracts Act 1984 (Cth) limits an insurer’s ability to refuse claims because of post-contract acts or omissions. The Court held that the right given by the alteration condition to refuse payment was constrained by section 54.
For the 14-day extension, the hypothetical contract would have been entered into before 4.00 pm on 24 August 2018. The alteration of use occurred after that. On that basis, the relevant act occurred after contract formation and was capable of causing or contributing to the loss.
The annual renewal was different. Although it would have operated retrospectively from 4.00 pm on 24 August 2018, the contract would not have been entered into until Danbol accepted the offer on 29 August 2018. The alteration of use had already occurred before the annual renewal contract would have been made. Section 54 could not therefore be applied in the same way to the second hypothetical policy.
Duty of disclosure
The intermediary also relied on section 21 of the Insurance Contracts Act in respect of non-disclosure. It argued that Danbol had represented that the property would be used for the storage of decommissioned gas bottles, when in fact the property was used for large scale storage of flammable chemicals.
The Court accepted that the statements were inaccurate but held that Danbol had not made an actionable misrepresentation. Danbol honestly believed the tenant’s explanations, and the Court did not accept that a reasonable person in Danbol’s position should have apprehended that the tenant was lying.
You can’t have it both ways
One of the most important features of the case is that the two causation defences were in tension. The alteration defence was strongest if the dangerous chemical storage commenced after the relevant policy was in place. The non-disclosure case was strongest if the dangerous chemical storage existed, or ought reasonably to have been known and disclosed, before the contract was made.
The Court recognised this tension, observing that the defences of misrepresentation and change of use were “mutually exclusive” and that the facts assisting one defence harmed the other.
The practicalities
The commercial lesson is simpler than the legal reasoning.
This loss occurred in the context of a complex property renewal where material underwriting information was still being clarified at expiry. The underwriter wanted more certainty. The 14-day extension was offered because time had run out.
That is precisely the situation policyholders and intermediaries should avoid. Extensions are not a renewal strategy. They are emergency devices. They can be useful, but they are dangerous when treated casually.
For policyholders, the practical rule is uncompromising: disclose early and disclose accurately. Where a tenant changes, the owner should not wait until the renewal lands on their desk. They should obtain and provide details of the incoming tenant’s business, storage practices, hazardous materials, licences, compliance systems, public liability insurance, fire protection, dangerous goods controls and any change in fire load.
For intermediaries, the duty is active, not passive. An risk advisor receiving vague or incomplete information about a changed industrial occupancy must press for clarity. They must identify the disclosure issue, explain the consequences of non-disclosure, escalate urgency and ensure that every offer of cover, extension or renewal is communicated immediately.
Takeaway
This case should be read as a warning to policyholders and intermediaries managing complex property risks. Start the renewal early. Obtain surveys for complex property risks. Investigate changed uses and disclose properly. Bind cover clearly. Do not rely on last minute extensions unless they are unavoidable, expressly accepted and documented in detail.
