Mitor Investments Pty Ltd v General Accident Fire & Life Assurance Corp Ltd [1984] WAR 365
Agency; duties of the agent; duty to exercise care and skill.
Facts: Mitor Investments owned a hotel near the sea, and employed an insurance broker to obtain insurance against the risk of the hotel being damaged by storm, tempest or flood. The broker obtained insurance, but the terms in the insurance contract specifically excluded liability for "damage caused directly or indirectly by the sea". Sometime later, a severe storm caused the sea level to rise and the hotel was flooded. The insurer refused to pay for repairs, relying on the terms in the contract. Mitor sued the broker, both for breaching his instructions, and for Negligence in the performance of his duties.
Issue: Had the broker carried out his task as instructed, and with due care and skill?
Decision: The broker was in breach of these duties.
Reason: The court held that the broker, as Mitor's agent, had failed to carry out his instructions properly. The court also held that the agent had failed to use reasonable care and skill to obtain a policy that covered his principal's foreseeable risks, and for failing to inform his principal of that fact. Accordingly, the broker was held liable to Mitor for the damage suffered.