The owners of a Queensland chemical factory destroyed by fire almost 10 years ago have lost a Supreme Court bid to have their broker cover the costs of repairing runoff damage to the property and neighbouring land.

Hamcor Pty Ltd’s property policy covered the $3 million loss of the factory, operating as Binary Chemicals and later Binary Industries, but the insurer refused to pay the $9 million bill for remedial work to the land and neighbouring properties.

The damage was caused when water used by the Qld Fire & Rescue Service (QFRS) mixed with chemicals and contaminated the ground. The factory owners claimed their broker, Marsh Pty Ltd, should have been aware the company was inadequately covered and taken steps to rectify the omission and provide an industrial special risks policy.

However Justice Jean Dalton disagreed, accepting Marsh’s argument it had been instructed only to seek public liability cover. It was told another broker was handling the company’s other insurances.

Justice Dalton found Marsh managing client service consultant Stuart Munro had on several occasions sought from Hamcor director Terrence Armstrong (who was killed in a car accident before the case went to court) details of all policies for the factory and the site. The requests were refused or, if agreed to, unfulfilled.

Mr Munro had therefore taken all reasonable steps to acquire the information and had simply acted on Mr Armstrong’s instructions.

"Mr Munro had asked if he could source [details of] the directors & officers’ liability insurance for Binary Industries [from the other broker]. Mr Armstrong refused," Justice Dalton said.

"Mr Munro then asked whether he could provide a quote on buildings, contents, plant and equipment at the factory."

Justice Dalton said Mr Armstrong agreed to the second request but, when asked for details, again failed to provide them or forward any policy and renewal information from the other broker.

"Mr Munro never raised the matter of the property insurance again. He explained [in evidence], 'I’d raised it twice. I thought it might have been a bit …. unprofessional to keep asking',” the judge said.

Binary Industries argued that Marsh Pty Ltd owed Binary Industries and Hamcor a duty to investigate the insurances that had previously been arranged and to realise they were inadequate.

"My view is that no such duty was owed," Justice Dalton said. "Mr Munro was given a specific task on behalf of Binary Industries. He was not asked to ensure all Binary Industries’ insurance needs were met. He was told there were brokers who had the task of attending to Binary Industries’ general insurance needs. There was nothing ambiguous about his task.

"He asked questions designed to ensure he had all the information relevant to the task he had accepted. The oral arrangements were confirmed in writing sent to Mr Armstrong once cover was found. The 2004 renewal was on the same basis."

Justice Dalton also rejected an argument Mr Munro should have extended the policy to cover Armstrong personally, as the land’s part owner. She found Mr Munro was not made aware of that ownership.

She said Mr Munro prepared a formal service agreement which listed Binary Industries as the insured party. However, after sending the document for approval, Mr Munro specifically asked the principals to identify any other entity that or individual who should be included in the policy.

"The service agreement was never signed by Binary Industries," Justice Dalton said.  "But after receiving it, Mr Armstrong gave instructions [to Mr Munro] to effect the cover."

She said there was no further contact between Mr Armstrong and Mr Munro until the insurance was due for renewal in mid-2004. At that time, Mr Munro sent a renewal questionnaire to Mr Armstrong again seeking details of people who or entities that were not covered by the existing policy but should be. Mr Armstrong again did not respond.

Justice Dalton also rejected a second negligence suit against the Qld Government and the QFRS for using water on the fire and allowing runoff to contaminate the land. She found QFRS had acted reasonably and within the Fire and Rescue Service Act 1990.

Hamcor had previously fought and order to conduct remedial work and had lost in the Qld Planning and Environment Court, the Appeal Court and the High Court.

(Hamcor Pty Ltd & Anor v State of Qld & Ors [2014], QSC 224, 01/10/2014)

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