When exactly is a contract of insurance formed?

Leading Synthetics Pty Ltd v Adroit Insurance Group Pty Ltd & Anor [2011] VSC 467

In what appears, at first, to be an alarming decision, the Victorian Supreme Court recently found that an insured was entitled to the benefit of an insurance policy despite the fact that no policy had been prepared, no invoice issued and no premium paid.

The insured supplied synthetic resins to customers on 60 day payment terms. By the end of 2007, with the global financial crisis looming, the insured had growing concerns about its exposure to debts owed by its customers. To address these concerns, it instructed its insurance broker to arrange insurance cover for potential losses in the event that its customers failed to pay.