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ARTICLE · 01 JULY 2026

Insurer’s Denial Upheld: Non-Disclosure Of Material Risk Changes Reduces Liability To Nil

Gilchrist Connell
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The Supreme Court of New South Wales has ruled that insurers can deny indemnity and reduce liability to nil when an insured fails to disclose material changes in risk. This case examines how a pharmaceutical manufacturer's undisclosed pivot to hand sanitiser production during COVID-19, involving a fifteenfold increase in ethanol storage, led to a complete denial of coverage following a devastating fire.

AustraliaInsurance
Alex Haslam
Alex Haslam
Tiarn Pauletto
Tiarn Pauletto
Orijana Zdanaviciute
Orijana Zdanaviciute
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The Supreme Court of New South Wales, in Sphere Healthcare Pty Ltd v Allianz Australia Insurance Ltd [2025] NSWSC 606, has confirmed that an insurer was entitled to deny indemnity and reduce its liability to nil where the insured failed to disclose a fundamental change to its operations. The decision reinforces the breadth of an insurer’s entitlements under section 28 of the Insurance Contracts Act 1984 (Cth) (ICA) and provides clear judicial guidance on the limits of the waiver defence.

Background

Sphere Healthcare Pty Ltd (Sphere) operated a pharmaceutical manufacturing facility at Moorebank, New South Wales.

Its insurer, Allianz Australia Insurance Ltd (Allianz), had provided insurance to it since 2012 on the basis that the site was a pharmaceutical manufacturing risk with limited ethanol storage (approximately 4,000 litres) in a compliant external facility.

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