Avondale Exhibitions Ltd v Arthur J. Gallagher Insurance Brokers Ltd

An insurance broker must exercise reasonable skill and care in helping a client comply with the duty of disclosure. The broker must advise on that duty, explain the consequences of non-disclosure, identify matters that are or may be material, and take reasonable care to elicit relevant information. The precise content of the duty is fact-sensitive. There is no general requirement to give oral advice or ask an oral question about convictions in every case. The court assesses whether the broker’s communications and enquiries were adequate in the circumstances. On the facts, clear and repeated written warnings and references to convictions meant that the broker was not in breach of duty.

Avondale sought damages from its insurance broker after QBE avoided commercial insurance policies for non-disclosure of convictions belonging to Mr Watkins. Avondale alleged that it had told the broker about the convictions and, alternatively, that the broker had failed to give adequate advice and make sufficient enquiries. The broker denied actual knowledge and contended that its written communications discharged its duty.

The court tried preliminary issues concerning breach of duty, whether proper advice would have led to disclosure, and contributory negligence. The central questions were whether the broker knew of the convictions and whether reasonable skill and care required further oral advice or enquiries.

1. The court rejected the evidence that the broker had been told of the convictions and found no actual knowledge.
2. The broker’s duties included explaining the duty of disclosure and its consequences, indicating matters that might be material, and taking reasonable care to elicit relevant information. A broker who actually knows a material fact must communicate it to the insurer.
3. Whether oral advice or specific oral enquiries are required is fact-sensitive. There is no general obligation to ask every client orally about convictions or to give oral advice about disclosure.
4. The legal standard is ultimately determined by the court. Expert evidence is normally expected in professional-negligence claims but is not an absolute prerequisite.
5. The broker’s documents were clear, repeated the duty of disclosure, and referred to convictions. The client was sufficiently experienced and had engaged with the documentation. The broker was not in breach of duty. Causation and contributory negligence did not require determination. The claim was dismissed.