One of the largest industrial fires in Victorian history has led to the state’s Supreme Court awarding $9.8 million against broker Griffiths Goodall.

Warehouse owner Danbol sued the broker – now known as ACN 007 198 343 Pty Ltd – for negligence after fire destroyed its building.

Danbol found it was not covered because Griffiths Goodall had not advised it of a two-week extension available when its policy expired, or of the annual renewal a day before the fire.

Justice Michael Osborne finds that had the broker acted with “due care, skill and diligence”, the landlord would have been insured.

The broker argued the policy would not have paid out due to the illegal storage of gas bottles at the site.

The court heard Danbol’s industrial special risks policy expired on August 24 2018, and as the date approached Danbol advised the broker there was a new tenant, which stored decommissioned gas bottles at the Melbourne site.

The broker passed the information to Pen Underwriting, which had authority to write on behalf of Swiss Re.

On the morning of August 24, Pen told the broker that due to the change of use, Swiss Re was not willing to renew. Given the short notice, Pen offered a 14-day extension so Danbol would be covered while it sought new insurance.

Griffiths Goodall did not advise Danbol of this, and Danbol said it would have accepted the offer.

Justice Osborne says although the new tenant told Danbol it stored decommissioned gas bottles only, it did in fact hold large volumes of highly flammable chemicals “in an unsafe and illegal manner”.

When Danbol told the broker the bottles were decommissioned before arriving at the site, Pen offered to renew, with policy exclusions relating to bottles not being decommissioned and around storage.

On August 30 2018, a fire destroyed the warehouse. The blaze took 60% of the fire brigade’s fleet to control and nearly two weeks to extinguish.

Danbol believed it had cover and sued the insurer for indemnity, which turned on whether a contract of insurance existed because of the 14-day offer. The Supreme Court found there was no cover in place at the time of the fire.

The insured then sued the broker for negligence equivalent to the indemnity that would have been recoverable.

Justice Osborne says the broker accepted its conduct was negligent but argued that if a policy had been in place, the insurer would not have paid out, so its conduct did not cause Danbol to suffer loss.

The annual renewal was emailed to Griffiths Goodall the day before the fire, August 29, when the property was uninsured, even though the broker believed the 14-day offer had taken effect.

Justice Osborne says if Danbol had known the property was uninsured, it would have accepted cover and the annual policy, starting on August 24, would have been in place when the fire started.

The broker did not advise Danbol to accept the amended terms for the annual renewal on August 29.

Griffiths Goodall had advised the insurer the tenant was storing decommissioned gas bottles and argued Danbol should have known about the illegal storage on the site, while Danbol said it was reasonable for it to rely on the tenant telling it they were decommissioned bottles.

Justice Osborne finds Danbol held an honest belief that only decommissioned bottles were stored.

He says large volumes of flammable gas were moved onto the property about August 27.

Danbol had not known about the flammable gas, so had not made misrepresentations to the insurer, and Justice Osborne finds the insurer could not have denied the claim on the basis of misrepresentation.

Read the judgment here.