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Determination
Case number | 998421 |
Financial firm | Insurance Australia Limited |
Case number: 998421 24 May 2024
The complainant held boat insurance with the financial firm (insurer), covering his 1915 wooden ferry (vessel) for $88,460 as an agreed value. On 19 April 2023, he lodged a claim after the vessel suddenly sank at its marina berth.
The insurer denied the claim. It says the vessel’s sinking was not due to an insured event listed in the policy. Rather, the vessel sank because of excluded causes, including lack of maintenance, structural problems, wear and tear, and gradual deterioration.
The complainant maintains that the insurer should accept the claim. He also says that the insurer mishandled the salvage operation, causing additional damage to the vessel. He wants the insurer to pay him the vessel’s agreed value.
Yes. Based on the exchanged information, it is more likely than not the vessel sank due to causes excluded from cover under the policy terms.
No. While the vessel sustained additional damage during the salvage operation, I am satisfied it was already unrepairable.
The insurer has on balance established the vessel sank because of excluded causes and was unrepairable before the salvage operation commenced. In the circumstances, it would not be fair to require the insurer to pay the claim.
This determination is in favour of the insurer.
The insurer is entitled to deny the claim. It is not required to take any further action.
Yes. Based on the exchanged information, it is more likely than not the vessel sank due to causes excluded from cover under the policy terms.
The complainant is required to show on the balance of probabilities (that it is more likely than not), that he suffered a claimable loss under the policy. This means he must show the loss was caused by a risk for which he is insured.
Subject to the terms and conditions set out in the product disclosure statement (PDS), the complainant’s policy covers damage to the vessel caused by a listed insured event. Those events include ‘accidental damage’.
The PDS defines ‘accidental damage’ as ‘damage that is caused unintentionally’.
On 19 April 2023, the complainant notified the insurer that earlier that day the vessel had suddenly and unexpectedly sunk while secured to its berth in a national park.
The insurer says the complainant has not shown the vessel sank because of an insured event. However, there is no reasonable basis on which to conclude the vessel was sunk intentionally. Accordingly, I am satisfied that the complainant has shown a claimable loss, as the vessel was accidentally damaged.
I note that ‘collision or crash’ is also an insured event. The complainant raised as a possibility that the vessel sank due to being hit by another boat. However, as I have found the vessel was accidentally damaged, it is not necessary for me to also consider the claim under the ‘collision or crash’ insured event.
Once the complainant proves the existence of a claimable loss, the insurer is liable for the loss unless it shows an exclusion or limiting condition applies. The insurer has the onus of proving on the balance of probabilities the application of the exclusion or condition.
The insurer says the claim is not covered because the policy excludes:
The insurer relies on reports from its marine surveyor, NM. In its report dated 4 May 2023, NM said:
In its second report dated 13 May 2023, NM informed the insurer that the salvage operation had been completed. NM concluded that the vessel had not been in a seaworthy condition and was structurally unsound before it sank. It said:
During our inspection we found many areas of the hull planking with aggressive timber decay from borers and many areas where the hull had previous copper tingles (copper patches to cover up holes) that had areas of timber decay that would have allowed sea water to freely access the bilges. We also found the aft section of the vessel had two very large longitudinal bearers added to support the vessel. It appears these longitudinal sections were very deformed and on the port side broken, this would indicate the backbone of the vessel was broken and would explain how the vessel became submerged so suddenly. The entire deck shelf that connects the deck and superstructure to the hull had separated from the hull during the submersion. This indicates this area was completely rotten and structurally unsound.
The complainant says NM did not inspect the vessel until after the salvage operation was completed. That operation was undertaken by salvage company BR, who was paid by the insurer. The complainant submits that:
NM provided a third report dated 31 October 2023, responding to the complainant’s submissions. NM said:
Based on the exchanged information, I am satisfied the insurer has established it is more likely than not that the vessel sank due to excluded causes, including maintenance issues, structural problems, and gradual deterioration.
I find NM’s reports persuasive. They are detailed, contain careful analysis and numerous supporting images. No contrary independent expert opinions have been provided, and NM has comprehensively responded to the complainant’s submissions.
The insurer has shown policy exclusions apply. It is entitled to deny the claim.
No. While the vessel sustained additional damage during the salvage operation, I am satisfied it was already unrepairable.
The complainant says that BR was inexperienced, and not properly prepared or equipped for the salvage operation. He says the dive team told him that the salvage manager was a ‘cowboy’ and was adopting unsafe methods.
He also says the vessel had to be cut up not because of the damage but to suit the limited equipment BR had on site. Further, that in dragging the pieces up the boat ramp into the carpark, BR wrecked what was left of the vessel.
NM rejects the complainant’s criticisms of BR and has confirmed the vessel was unrepairable before the salvage operation commenced. It also says the vessel had to be cut up and moved in pieces due to environmental and navigation hazard concerns.
I find NM’s comments persuasive. While the vessel undoubtedly sustained additional damage during the salvage operation, I am satisfied it was already unrepairable. The insurer is not liable for the additional damage.
The insurer has on balance established the vessel sank because of excluded causes and was unrepairable before the salvage operation commenced. In the circumstances, it would not be fair to require the insurer to pay the claim.
AFCA has determined this complaint based on what is fair in all the circumstances, having regard to:
The respective parties have completed a full exchange of the relevant information, and each party has had the opportunity to address any issues raised. I have reviewed and considered all the information the parties have provided.
While the parties have raised several issues in their submissions, I have restricted this determination to the issues that are relevant to the outcome.
AFCA is not a court of law. We do not have the power to take or test evidence on oath, or to require third parties to give evidence.
When we assess complaints, we consider:
We give more weight to documents created at the time the events occurred. If there are no relevant documents, we will decide what most likely occurred based on the available information.
If there are conflicting recollections and these are evenly weighted, we may find that a claim cannot be established.
