Wilkinson had an agency from Dallas which entitled it to write property cover with Lloyd’s. A cover note from Dallas dated 7 January 1998 authorised Citilink to write public and products liability cover to a maximum of A$10 million ("the authority"). Sorema provided 100% of the cover written under the authority.

Daravel Pty Limited ("Daravel") was the owner of the Grand Hotel, Wyong ("the hotel"). Citilink arranged via Wilkinson a Lloyd’s property cover for Daravel for the period 19 January 1998 to 19 January 1999 ("the property cover"). At the same time, Citilink was instructed to arrange public liability cover for Daravel in the amount of A$5 million ("the liability cover"), but apparently neglected to do so. In April 1998, Samac Pty Limited and associated companies ("Samac") made arrangements for the purchase of the hotel. Citilink’s omission in not arranging the liability cover came to the attention of Citilink in April 1998 when it became aware that the hotel was to be sold to Samac. Accordingly, that month Citilink issued, pursuant to the authority, a certificate to Daravel for both the property cover and the liability cover, for the period 19 January 1998 to 19 January 1999 ("the BusinessPak certificate"). In accordance with the authority, the liability cover was wholly provided by Sorema. However, the BusinessPak certificate incorrectly stated that Lloyd’s was providing all the cover, whereas it should have stated that the property cover was placed with Lloyd’s and the liability cover placed with Sorema.

The property cover was endorsed over to Samac in place of Daravel as from 21 April 1998. While arranging to purchase the hotel, Samac also sought quotations for increased liability cover from a number of sources including I&S. I&S was not familiar with hotel insurance, and in turn sought to arrange the insurance through Citilink. Citilink arranged to increase the liability cover obtained by Daravel to A$10 million. I&S understood from Citilink that the liability cover was provided by Lloyd’s.

Subsequently, on 22 April 1998, Citilink sent to I&S a certificate in relation to the property cover with Lloyd’s. I&S, through no fault of its own, mistakenly believed that the certificate also included A$10 million of liability cover with Lloyd’s. I&S issued Samac with a certificate of insurance dated 22 April 1998 to that effect. Citilink then issued to I&S a further certificate which included the liability cover of A$10 million and which indicated that all covers were provided by Lloyd’s. On 23 April 1998, Samac completed its purchase and took possession of the hotel. Tanevski became the licensee. On 3 July 1998 a hotel patron was assaulted on the premises by another patron. In 2000 he sued Tanevski and Samac in the District Court for damages. The trial judge found in favour of the injured patron and awarded damages. Samac cross-claimed against, among others, I&S, Citilink and Trenwick International Limited, the last having taken over the affairs of Sorema.

Samac contended that I&S fell short of its duty by failing to sight the policy in relation to the liability cover, failing to identify an insurer who would be liable if a claim was made, failing to obtain any particulars of the insurance and failing to check that Citilink had a binder with Lloyd’s for public liability insurance. At first instance, the District Court Judge, Sorby DCJ, was not satisfied that there was any negligence on the part of I&S. He also held that the liability cover had not been arranged with Sorema and there was, in consequence, no liability cover in place. Tanevski and Samac appealed to the Court of Appeal against these findings.

Judgment
The Court of Appeal (Davies AJA, with Tobias JA and Young CJ in Eq agreeing) agreed with Sorby DCJ that there was no negligence on the part of I&S. The Court was satisfied that Citilink represented to I&S that the liability cover would be a Lloyd’s cover. In the absence of expert evidence, the Court was unable to conclude that I&S was not entitled to rely on that representation. Representatives of I&S gave evidence that it would be unusual to obtain a certificate of insurance from Lloyd’s and that the certificate of the person holding the binder would ordinarily be acceptable. The Court took the view that the matters alleged against I&S required proof by way of expert evidence, of which there had been none.

However, the Court found that I&S was not a mere conduit of information passed on by someone else and its issue of the certificate dated 22 April 1998, stating that the liability cover was provided by Lloyd’s, was misleading and deceptive in breach of s52 of the Trade Practices Act 1974 (Cth). Samac or Tanevski would thus be entitled to recover for loss suffered as a result of their reliance on that certificate, if such loss could be shown.

The Court found that the facts plainly demonstrated that Citilink provided the liability cover for Samac in April 1998 by issuing the Daravel policy, by endorsing it to Samac as from 23 April 1998 and by increasing the limit of the liability to A$10 million. Well before the hotel patron was injured, Citilink had provided the liability cover for Samac and had taken sufficient steps to demonstrate that it provided the liability cover as agent for Sorema under the authority.

The Court stated that the issue was whether Citilink acted under the authority it had to bind Sorema to provide liability cover for Samac. The fact that Sorema was an unauthorised foreign insurer and that Citilink did not comply with its obligations under the Insurance (Agents and Brokers) Act 1984 (Cth) suggested to the Court that Citilink was being deliberately misleading by stating in the BusinessPak certificate that the total cover was with Lloyd’s. However, the Court did not regard that misrepresentation as significant evidence that Citilink ever sought to bind Lloyd’s. Its binder was with Sorema.

Sorema submitted that because Citilink represented that it was providing Lloyd’s cover and Samac understood that it was obtaining Lloyd’s cover, then no contract could have come into existence between Samac and Sorema. In rejecting that submission, the Court observed that an insurance contract has many features different from those of an ordinary contract. In this case, it found that the substance of the matter was that Samac, through I&S, entered into legal relations with Citilink to provide the liability cover. The Court said the fact that Citilink, as agent for Sorema, represented to the insured that the cover was a Lloyd’s cover did not diminish the point that Citilink had been asked to provide cover and it acted under the authority to provide that cover. The issue of the BusinessPak certificate was the formal act by which the agent, Citilink, bound its principal insurer to provide the cover described. Sorema was bound by the acts of its agent. The premium was paid by Citilink to Dallas (as the agent of Sorema).

Comments
While this decision turned in large measure on its facts, it emphasises that courts may require expert evidence of insurance industry practice on the question of whether an intermediary is negligent. The decision shows that the insurer can still be liable even though the agent issues a certificate showing a different insurer.