Toikan International Insurance Broking Pty Ltd v Plasteel Windows Australia Pty Ltd

In *Toikan International Insurance Broking Pty Ltd v Plasteel Windows Australia Pty Ltd* [1989] NSWCA 212, the New South Wales Court of Appeal considered a dispute between an insurance broker, Toikan International Insurance Broking Pty Ltd, and its client, Plasteel Windows Australia Pty Ltd. The core of the disagreement concerned the adequacy of the insurance cover arranged by Toikan for Plasteel, particularly in light of a fire that caused significant damage to Plasteel's premises and stock.

The Court of Appeal was required to determine whether Toikan had breached its duty of care to Plasteel by failing to advise on or arrange adequate insurance cover for the full replacement value of Plasteel's assets. Specifically, the court had to consider the scope of the broker's professional obligations, including the extent to which they were required to proactively identify and advise on potential underinsurance, and whether the advice provided, or lack thereof, fell below the standard expected of a reasonably competent insurance broker.

The Court of Appeal found that an insurance broker owes a duty of care to its client to act with reasonable skill and diligence. This duty extends to advising the client on the appropriate level of cover required, particularly where the broker is aware of the client's business operations and the potential risks involved. In this instance, the court held that Toikan had failed to adequately discharge its duty by not ensuring Plasteel was aware of the risks of underinsurance and the need for cover reflecting the full replacement value of its assets. The court applied principles of negligence, focusing on the foreseeability of harm and the broker's responsibility to provide informed advice.

The Court of Appeal allowed Plasteel's appeal, finding that Toikan was liable for the loss suffered due to the inadequacy of the insurance cover. The matter was remitted to the trial court for the assessment of damages.