In the recent decision of Kotku Bread v Vero Insurance [2012] QSC 109, Appelgarth J has provided some useful reminders to insurance brokers of the need to ensure the accuracy of information supplied to insurers or otherwise risk being liable to their client for losses an insurer declines to meet on grounds of non-disclosure or misrepresentation.  The case also provides a useful illustration of the difficulties there can sometimes be with leading evidence of responses to questions given online.


Kotku had for a number of years engaged a broker (CIB) to place its insurance. In February 2010, CIB placed insurance on Kotku’s behalf with Vero. In placing the insurance, CIB completed an online form and answered a question concerning the quantity of expanded polystyrene (EPS) used in walls of Kotku’s bakery, CIB answered 0%. The policy was immediately placed on completion of the online form.

Subsequently Kotku’s bakery was destroyed in a fire on 19 August 2010 and a claim was made for $2,716,300. Vero declined Kotku’s claim in December 2010 on the basis that more than 33% of the walls were constructed from EPS. Vero said this amounted to both a misrepresentation and a non-disclosure.

Vero succeeded in establishing that the answer to the EPS question was both a misrepresentation and a non-disclosure although doing so was not an easy matter given a dispute over the content of the online questionnaire and whether the answer to the relevant question had been pre-populated. The judge spent a significant amount of time dealing with this issue in his judgment and this serves as a useful reminder for those businesses that collect information through online questionnaires to ensure sufficient and adequate records are kept of the actual questionnaire, any changes made to the questionnaire and the dates of those changes, what fields are pre-populated and the actual responses submitted.

Vero was able to use the misrepresentation and non-disclosure to avoid liability under the policy, the judge having accepted that had the EPS question been correctly answered then Vero would not have issued a policy. It is of interest to note that evidence of Vero underwriters was accepted in this regard and no recourse was apparently had to underwriting manuals or rules by the judge.

As for the broker, CIB had answered the online questionnaire without recourse to Kotku and in doing so answered the EPS question wrongly. CIB not only failed to made necessary enquiries of Kotku, it also failed to subsequently check the accuracy of the answers submitted with Kotku. CIB was found in breach of both its retainer and duty of care to Kotku and was ordered to pay the full value of Kotku’s claim ($2,716,300) less a small sum of $10,000. The failure to check the accuracy of the information proved to be an expensive mistake for CIB.

The decision against the broker provides a useful reminder of the importance of brokers checking the accuracy of information they submit on behalf of their clients. If inadequate information is available to properly answer a question, then the information should be obtained. Even if sufficient information is available and answers to questions are submitted to a third party, it would be prudent of to subsequently provide the submission to their clients so that the client could check and, if necessary, correct any inaccuracies.