A Brisbane brokerage has been ordered to pay more than $2.7 million over a rejected claim.

Kotku Bread sued Vero Insurance and broker 786 International (Aust) Pty Ltd, which trades as Osman Insurance Brokers, after fire destroyed its bakery at suburban Capalaba in August 2010.

Queensland Supreme Court Justice Peter Applegarth found last week that the broker had not told Vero about the amount of expanded polystyrene sandwich panelling in the bakery’s internal walls.

The insurer had set an underwriting limit of 33% for the material, but evidence showed the amount present was as high as 67%.

An employee of the broker used Vero’s Enterprise platform to complete the Kotku insurance proposal, and much of the case revolved around whether an automatic question related to expanded polystyrene content was answered or whether the employee chose “nil”.

”I conclude that if the correct answer to the question had been given, Vero would have declined to insure the risk and Kotku would have obtained alternative cover from another insurer,” Justice Applegarth said.

“Vero was entitled to reduce its liability under the policy to nil.”

He said the bakery relied on the broker to inform it of such matters as the relevance of expanded polystyrene sandwich panelling, which “would have been known to a reasonably competent broker”.

Finding the brokerage failed to discharge its contractual duties to the client and also breached its duty of care under common law, Justice Applegarth awarded Kotku $2,706,300.

He also awarded interest at 10% from the date that a successful claim would have been paid in 2010.

Editor’s note: Osman Insurance Brokers in Brisbane has no relationship with a Sydney brokerage of the same name.

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