Two policies fail to cover catastrophic injuries: judge

by John Reynolds, KT Journalism

A houseboat passenger who was catastrophically injured when he dived into shallow water has failed to have the vessel owner’s insurers joined to his negligence lawsuit.

NSW Supreme Court Justice Ian Harrison ruled neither an NRMA nor a Liberty Mutual policy covered the houseboat or the circumstances in which Jacob Tasker was injured.

He refused Tasker’s application under the 2017 Civil Liberties (Third Party Claims Against Insurers) Act to join the insurers to his claim, despite boat owner Francis Arnold Munro’s inability to satisfy any financial judgement made against him.

In his 24 November 2020 judgement, Justice Harrison said Munro’s uncontested impecuniosity was insufficient to overcome the difficulty that one policy covered his business but not his personal boat, and the other had a clause exempting watercraft of the houseboat’s size.

Justice Harrison heard Tasker was seriously injured on 14 February 2017 when he dived or jumped from the houseboat Shiftin’ Sands and hit his head on a sand bank on the Nambucca River estuary, near South Beach at Nambucca Heads.

Tasker said he had jumped into the water to assist another passenger who had fallen overboard.

Tasker argued the incident was caused by Munro’s negligence in mooring the vessel in or near shallow water and failing to warn or instruct passengers not to dive overboard when it was in that location.

Sand extraction

On learning of Munro’s financial difficulties, Tasker applied to join Insurance Australia Ltd t/as NRMA Insurance, which was Munro’s home and contents insurer, and Liberty Mutual Insurance Co t/as Liberty International Underwriters, which insured Munro’s sand extraction business.

Tasker argued Munro had failed in his duty to warn passengers of the risk of injury, which was negligent and covered by the NRMA policy. He said because Shiftin’ Sands was kept at Munro’s home when not in use, clauses that made NRMA liable for injuries to people on Munro’s property were relevant.

He said all passengers on board the houseboat when he was injured had been at Munro’s home before the river trip. He argued Munro was still at his insured premises when he failed to warn guests about the dangers of diving or jumping into shallow waters, which triggered NRMA’s liability.

Tasker also argued the watercraft exclusion clauses could not be relied on because Shiftin’ Sands ceased to be a watercraft when it stopped on or near the sandbank. In effect it became a pontoon or a “floating platform attached to land”. 

NRMA argued:

• Munro had no duty to warn passengers because the risks of diving into shallow water were obvious
• there was no arguable case the policy responded to incidents beyond Munro’s home, and
• the policy contained an exclusion clause for ownership or use of watercraft.

Tasker’s case against Liberty was that the incident was the “result of an occurrence in connection with the insured’s [sand extraction] business” and the name of the houseboat, Shiftin’ Sands, showed a direct connection. He also relied on Munro’s alleged failure to warn passengers of the risks as a catalyst to join Liberty in the case.

Liberty argued the trip was for recreational purposes and had no connection to Munro’s business, nor was the houseboat owned by the business. It also rejected Tasker’s argument Shiftin’ Sands had ceased to be watercraft when it was stopped or moored.

In addition, the policy expressly did not cover liability “directly or indirectly caused by, arising out of or in any way connected with” watercraft exceeding 10m in length.  Shiftin’ Sands was longer than 10m.  

Injury risk

Justice Harrison rejected Tasker’s claim against NRMA because it was based on an allegation of a failure to warn of an obvious risk.

He said it was “clear beyond argument” that a reasonable person in Tasker’s position would have been aware the houseboat was or could be in shallow water and that diving into the water carried a risk of injury.

The risk was obvious, and the argument Munro should have warned passengers of the dangers was untenable and unarguable, Justice Harrison said.

Even if Munro had breached his duty warn passengers, Justice Harrison agreed NRMA’s policy indemnified Munro only for incidents at his home, not on “a river some distance away”. The territorial or physical limitation in the policy was not overcome by an alleged act of negligence at some earlier time at his home.

Justice Harrison also rejected Tasker’s argument Shiftin’ Sands had ceased to be a watercraft for the purpose of the policy when it stopped on or near the sandbank.

“The fact the houseboat was stationary with part of its hull on a sandbank does not convert it from a watercraft to something else. A houseboat that is being transported by road to a new mooring remains a watercraft notwithstanding that it is nowhere near water but is being pulled on a trailer behind a vehicle, along a road.”

That fact did not change because Tasker jumped or dived from the vessel to rescue a fellow passenger. 

“It can hardly be thought that if the houseboat had been diverted from its course while cruising along the river to rescue someone in distress it would then have ceased to be a watercraft,” he said.

Justice Harrison said arguments about the Liberty policy were less clear.

He acknowledged Tasker’s argument the boat’s name, Shiftin’ Sands, could be seen as a connection to the sand extraction business but said there was also merit in Liberty’s argument the houseboat was being used for recreational purposes.

“The factual question of whether the houseboat was being used for a purpose arguably connected with Munro’s business cannot be finally determined. It is potentially at least arguable that it was.”

But that question could be put aside because Tasker had a more “fundamental difficulty” with the exclusion clause.

“I am not [able] to determine whether the policy responds [to the incident or Tasker’s injury] but the exclusion relating to a watercraft exceeding 10m in length clearly applies,” Justice Harrison said.

Tasker v Munro [2020] NSWSC 1674,24/11/20