Dugan was expected to line up at centre in what would have been a mouth-watering head-to-head contest with Queensland's attacking weapon Greg Inglis.
Instead, the 2015 Brad Fittler Medallist will miss Game One on Wednesday night after aggravating an elbow injury he suffered in the Dragons' Round 11 loss to the Rabbitohs at ANZ Stadium.
Daley said the news was surprising given how well the 26-year-old had been training at the side's Coffs Harbour base, but appreciated Dugan's decision to not put the team's balance at risk.
"'Duges' woke up yesterday morning and shocked us all. He just didn't feel as if he'd be right to play," Daley said outside the team's hotel in Sydney.
"No one knew after Saturday's training session. Everyone thought everything was OK. He'd been doing contact on Wednesday, Thursday and Saturday. He said he just woke up on Sunday with a bit of swelling and didn't feel confident he could get the job done.
"He didn't want to let the boys down and he thought it'd be in the best interests to not play. Everyone was taken aback by it, but we support his decision to put the team first."
Dugan's loss is Josh Morris's gain, with the Bulldogs centre receiving an 11th-hour call-up to make his 14th appearance for the Blues.
It won't be the first time Morris has had to replace an injured teammate, having come in for Craig Wing in Game Two of the 2009 series to make his Blues debut off the bench.
"Josh came in and he's an experienced guy which we need; especially given the preparation. It's not ideal but it's one we've had to put up with," Daley said.
"It's not the ideal preparation and I sort of said that to him. It's not the best way to do it. No one saw what happened coming and that's what happens.
"He actually told me when he played his first Origin, that's how it sort of unfolded. He was in a similar situation – he was called up the day of the game. It's funny how things work."
Morris has only missed one of the past 12 Origin encounters and has defended Inglis well in the past. Given his familiarity with the team's structures and the fact he was in camp until late last week, Daley is confident his new centre will handle the occasion.
"He trained Wednesday and Thursday and then he missed the weekend sessions," Daley said.
"He'll have a run tomorrow and that'll be enough. He's been with us for four or five years now so nothing changes. He knows his role pretty well.
"He brings plenty of experience to our team and he's a great talker, good leader and we'll need that on Wednesday."
Meanwhile, Daley remains confident Maroons halfback Cooper Cronk will play despite picking up an ankle injury at training on Friday afternoon.
"He'll be there. And even if he's not there they'll bring in a guy [to the starting side] like Michael Morgan. He's a pretty fair player."