Gibbs Holdings P/L v MMI

Gibbs Holdings P/L brought an action against MMI in the Supreme Court of New South Wales, seeking damages for a fire that destroyed their property. The property was insured under a policy with MMI, but the policy contained a condition that the insured must notify the insurer of any change in the use of the property. Gibbs Holdings failed to notify MMI that they had leased part of their property to a plastics manufacturer. MMI argued that if they had been aware of this tenancy, they would have declined to insure the property, and therefore, they were not liable for the damages.

The court had to determine whether the failure to notify MMI of the tenancy constituted an "act of the insured" under s 54(1) of the Insurance Contracts Act 1984, which would entitle MMI to refuse to pay the claim. Alternatively, the court had to determine if the failure to notify amounted to an "act of the insured" under s 54(2), (3), and (4), which would require the court to apply a different regime. The court also had to determine whether the insurance broker, who was acting on behalf of Gibbs Holdings, breached their duty of care by failing to advise Gibbs Holdings of the potential insurance consequences of leasing to a plastics manufacturer.

The court found that the failure to notify MMI of the tenancy was a composite act that involved both granting the tenancy and failing to notify and obtain MMI's consent. This act was an "act of the insured" under s 54(1) of the Insurance Contracts Act 1984, which entitled MMI to refuse to pay the claim. The court also found that the insurance broker breached their duty of care by failing to advise Gibbs Holdings of the potential insurance consequences of leasing to a plastics manufacturer. The court set aside the judgment for the insurance broker and entered judgment for Gibbs Holdings in the sum of $380,188 with costs to be assessed. The appeal against MMI was dismissed with costs to be assessed.