On 27 November 2010, Nathan Whittington was a passenger on a jet-ski which was owned by Todd Smeaton and being operated by his brother Scott Smeaton on the Ross River in Queensland. Nathan was thrown from the jet-ski into the water, causing his foot to become tangled in the towrope. As a result, Nathan’s left leg was later amputated below the knee. Todd held a third party liability policy with Allianz. However, the policy excluded liability arising from an incident involving a jet-ski being controlled by an unlicensed person. On the basis that Scott was unlicensed to operate a jet-ski, Allianz declined to indemnify Todd and Scott.

Nathan issued proceedings against Todd and Scott, who joined Allianz to the proceeding. The trial judge found in favour of Nathan and awarded damages in the amount of $800,000. His Honour also determined that Allianz was obliged to indemnify Todd and Scott.

Allianz appealed the decision on the basis that Todd had failed to prove that no part of the loss was caused by or contributed to by the fact that Scott was unlicensed (as required by section 54(3) of the Insurance Contracts Act 1984). The Court of Appeal found that the trial judge’s approach, in considering whether the incident would still have occurred and the same damage been suffered had Scott obtained the relevant watercraft license, was correct. Allianz argued that if Scott had obtained the watercraft license prior to the incident then it would have influenced how he drove the jet-ski and reduced the likelihood of the incident occurring. Allianz also assumed that it would be Queensland (not New South Wales) licensing requirements which would apply because the incident occurred in Queensland.

Scott and Todd had extensive experience in operating boats and jet-skis in New South Wales and both had New South Wales boating licences. The Court of Appeal therefore held that obtaining a Queensland watercraft license would have made no difference to Scott’s actions on the day. Accordingly, the appeal was dismissed and Allianz was not entitled to deny the claim.

Allianz Australia Insurance Ltd v Smeaton [2016] ACTCA 59

The obligation imposed on an insured by s 54(3) of the Insurance Contracts Act to demonstrate that no part of a loss was caused or contributed to by the relevant act or omission is often not an onerous one. Section 54 looms large in Australian insurance law.