When a fire and other perils policy came up for renewal on 24 August 2018, the insurer and the insured’s broker exchanged emails regarding renewal terms and hold-covered arrangements. The Victoria Supreme Court in Australia found that cover had not been renewed nor extended because the insured had not unequivocally accepted the renewal terms nor reacted to the hold-covered offer. The insured was therefore not covered for a fire which occurred (as fate so often has it) on 30 August 2018.

The emails to and fro arose from the fact that the property was now occupied by a tenant storing decommissioned gas bottles. The insurer initially refused renewal but offered a 14 day extension to assist with placement of the risk elsewhere at a net premium of $3 506. Further emails resulted in a new renewal quotation or, if not accepted, a 14 day extension to 7 September 2018 at a stated extra premium. The broker purported to accept the renewal terms about four hours after the fire took place and when that was rejected the insured relied on the 14 day extension.

The court ruled that there was no binding bilateral contract to grant the 14 day extension because it was subject to payment of the quoted premium which was never made nor was there any unequivocal acceptance of the offer.

The insured then relied on a unilateral contract that allegedly came into existence as a result of the insured’s conduct in not obtaining alternative insurance which was said to amount to an acceptance of the offer of extension. However, the extension was subject to payment of the premium, so it could not be accepted by the failure by the insured to act in obtaining other insurance.

There was no insurance at the time of the fire.

Contracts require consensus formed by offer and acceptance. The acceptance has to be a clear acceptance of the offer on the terms on which it is made otherwise no contract will come into being.

The case is Danbol Pty Ltd v Swiss Re International [2020] VSC 23.