ON August 5 the High Court of Australia held, in Gibbs v Mercantile Mutual Insurance that a liability insurance policy for a runabout ski boat operating on the Swan river was governed by the Marine Insurance Act.
The decision arose from litigation over an insurance claim for a boating accident in 1989. The ski boat had been towing a person parasailing near Heirisson Island when the boat came too close to land and that person was injred when she crashed into trees.
The injured person successfully sued Ian Gibbs, the driver of the boat and Paraglide Pty Ltd, the owner of the parasailing business that had an interest in the boat.
In proceedings brought by Mr Gibbs and Paraglide against Mercantile Mutual Insurance they sought indemnity under the liability insurance policy for the boat.
The insurer refused to indemnify them for the claim because it said they had failed to disclose material matters before the insurance policy was renewed and because of the very late notice given to the insurer – it was notified of the accident until four years after the event.
If the Marine Insurance Act governed the insurance of the boat, the consequence was that the failure to disclose matters and give timely notice to the insurer was fatal and the insurer could refuse to pay the claim. If the Act did not apply, the Insurance Contracts Act applied and limited the insurer’s rights to refuse to pay the claim.
In the District Court the trial judge held that the insurer was obliged to indemnify Mr Gibbs and Paraglide and held that the Insurance Contracts Act – not the Marine Insurnce Act – applied and prevented the insurer from denying liability.
The insurer appealed to the Supreme Court and the Full Court held that the liability insurance policy for the ski boat was governed by the Marine Insurance Act.
The policy, which was primarily against liability arising out of events occurring in the course of the navigation of the boat, covered risks incidental to a “marine adventure” within the meaning of the Marine Insurance Act.
A marine adventure as defined in the act includes liability to a third party incurred by the owner of, or the person interested in or responsible for an insured boat by reason of “maritime perils”.
Maritime perils, under the Marine Insurance Act, means perils consequent on or incidental to the navigation of the sea.
The Full Court found the area of the Swan River where the ski boat operated was sea because its waters, as far upstream as Woodbridge near Guildford were part of a broad expanse of water properly described as an estuary.
Mr Gibbs and Paraglide then took this decision on appeal to the High Court.
By a three to two majority the High Court agreed with the Full Court’s decision.
The insurer was, thereore, entitled to refuse indemnity for the claim made by Gibbs and Paraglide.
The High Court decision means that Mr Gibbs and Paraglide are not covered by insurance for the accident and the injured person’s judgement against them.
Anyone operating a boat should be aware of the terms of their insurance policy and contact his or her broker if they have any queries.
Felicity Davis, partner
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