A Victorian brokerage has been ordered to pay a client $250,000 for the losses it suffered after the brokerage failed to advise about a copyright infringement risk.

But it’s not yet clear if Instrat Insurance Brokers will be able to pay, because the Gallagher-owned business was liquidated in January 2018.

A spokesman for Gallagher told insuranceNEWS.com.au last week the company does not comment on court cases involving its businesses. Instrat was established in 1999 and was acquired by the US-based broking giant in December 2014.

PC Case Gear (PCCG), an online business selling and distributing computer hardware and software, took Instrat to court in March 2018, two years after it was forced to pay Microsoft $250,000 as part of a settlement for installing Windows operating systems onto computers it had sold without having the proper licences.

But Melbourne-based Federal Court Justice Stewart Anderson was told the business thought the licences it had acquired from a Microsoft sub-distributor allowed for the installation of Windows on new computers. It was not aware that those licences in fact applied only to second-hand or refurbished computers.

In January 2016 PCCG received a copyright infringement notice from the US software giant. The policy arranged by Instrat covered PCCG for defence costs in respect of the Microsoft claim, but not for the copyright infringement.

In its legal action PCCG accused Instrat of acting negligently and breaching its contractual obligation when it failed to advise the business that it faced copyright infringement risk.

Instrat countered that PCCG had “negligently contributed” to its own loss when it did not flag the risk of copyright infringement with the broker during the insurance renewal process.

But Justice Anderson disagreed, ruling that Instrat had “breached its contractual and tortious duties” by failing to take into account the risk of copyright infringement.

“My conclusion… is that Instrat acted negligently by failing to properly advise PCCG of its exposure to copyright infringement so as to enable PCCG to make an informed decision regarding that exposure,” he said in his ruling this month.

“A reasonably competent insurance broker in the position of Instrat would have discerned a risk of copyright infringement from the nature of PCCG’s business and raised that risk, and options to address that risk, with PCCG.

“However, Instrat failed to do so. If that risk had been raised by Instrat, my view is that PCCG would have taken out relevant insurance cover, which was readily available for businesses in PCCG’s position.”

Justice Anderson says there is insufficient evidence to establish that PCCG’s original use of the Windows licences was negligent.