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Court backs Swiss Re after toxic fire claim rejection

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The Supreme Court of Victoria has ruled in favour of Swiss Re International in a property insurance dispute related to a large industrial fire that sent black smoke over Melbourne.

Swiss Re declined to cover property owner Danbol Pty Ltd for damage caused by the fire in the inner suburb of West Footscray on August 30, 2018, saying the policy had expired six days earlier.

But Danbol maintained an agreement was in place to extend cover for 14 days from August 24 to September 7.

Emails about renewing the policy were exchanged between Danbol’s broker Griffiths Goodall Insurance Brokers and Swiss Re representative Pen Underwriting before the expiration date.

The renewal was not straightforward, as the broker had advised the insurer the tenants had changed the use of the property to include storing used gas bottles. This triggered requests from the insurer for more information.

Previously, the tenant’s activities related to timber pallets, reconstituted logs, woodchips and mulch.

“On further consideration this is not one we are going to be able to assist with at renewal with the change of tenancy,” Swiss Re’s representative wrote on the day of expiry. “However, given the timeframe we will offer 14 days extension to assist with placement.” The email showed a net premium calculation of $3506.06 for the extension.

Further discussion about the gas bottles led to confirmation they were decommissioned before storage at the West Footscray property and were sent elsewhere for disposal.

A renewal quotation was sent on August 29 at 12:33pm, quoting a premium of $106,708 and certain conditions. It also said: “If our terms are not accepted below EP [extra premium] applies for the 14-day extension until 7 September 2018 to assist with placement.”

Fire broke out at the property at about 5am the next day.

The broker sent an email at 8:44am saying the new terms had been accepted. Funds were remitted on October 2, which were returned by cheque dated October 4.

Danbol maintained that the email communications showed an extension to the insurance cover was in place as further discussions continued about a renewal.

But Justice Peter Riordan says in his judgment that he considered none of the emails “on any reading” purported to accept the offer of a 14-day extension for a $3506.06 premium.

“The quid pro quo for the defendants’ 14-day extension of the policy was not the plaintiff’s consideration of the renewal of the policy or even refraining from entering into another insurer’s policy,” Justice Riordan says.

“The defendant’s offer was expressly to provide a 14-day extension in consideration of the promise to pay the extra premium. The plaintiff did not make that promise.”

The Coroner, the Victoria Police Arson and Explosives Unit, the Environment Protection Authority, Worksafe, Maribyrnong City Council and the Metropolitan Fire Brigade are continuing to conduct investigations into the fire, the court judgment says.

The fire was fuelled by a range of materials such as acetone drums, canisters and scrap metal, according to the fire brigade. At its height more than 140 firefighters were engaged in fighting the blaze, which took 17 hours to get under control.

The court decision is available here.