The Court held that where an insured sues its broker in negligence for damages equivalent to the indemnity that would have been recoverable under a hypothetical insurance policy, the plaintiff bears the onus under s 52 of the Wrongs Act 1958 (Vic) of proving on the balance of probabilities that the hypothetical insurer would have paid out, including by establishing that defences such as alteration of use and misrepresentation would not have succeeded — following Flanagan v Bernasconi and rejecting the approach in TBI v AON that the broker must disprove all exclusions. The Court also held that the knowledge proviso in the alteration of use condition of an ISR policy does not operate as a precondition to the condition's engagement but rather provides a mechanism for the insured to reinstate coverage through disclosure and payment of additional premium. On the facts, the Court found the alteration of use (bulk storage of flammable chemicals) occurred after the commencement date of the hypothetical policy, based in part on Jones v Dunkel inferences drawn from the plaintiff's failure to call a witness within its camp.
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