In 2007 Bill bought a catamaran (the boat), which he used in his charter fishing business. In December 2014, damage to a cable resulted in the bilge pump not operating automatically. When water got onto the boat, the port side starter motor flooded, because the bilge pump was not working. Bill contacted his auto electrician to bring out a spare starter motor, but Bill did not replace the starter motor.
In February 2015, Bill took customers out on a charter fishing trip. When the boat was to return to shore, the port side motor would not start because the starter motor failed. The boat was then motored back to shore solely on the starboard motor at a speed of only 5 knots, and there was a significant following sea. When Bill next went to use the boat, it did not start, because water had got into the port motor.
Bill said the water got into the port motor through the exhaust because the port motor was not running on the return voyage, combined with the significant following sea. Because the sea was travelling faster than the boat, the water got into the port motor.
It was going to cost around $19,761.78 (including GST) to repair the boat and Bill made a claim to his insurance company. The insurer declined the claim on the basis of an exclusion clause in its policy excluding cover where there is defective design or workmanship.
Bill complained to FSCL. As part of his complaint, Bill said that because he had been unable to repair the boat, he had to relinquish his berth, sell his boat at a ‘broken boat’ price, and stop trading his charter fishing business, causing further loss.
The insurer’s view
The insurer said:
- the damage to the boat’s port engine was caused by defective design to the motor/exhaust system which meant that water could get into the exhaust and then overflow into the motor.
- the exhaust design and installation of the engines on the boat were not signed off by the local expert technicians.
- Bill’s claims history (in terms of water ingress into the port engine), indicated there was a design flaw with the boat.
- if a starter motor is immersed in salt water, at a minimum, it should be removed and dried out and reinstalled, or replaced. It was not enough that Bill sprayed the flooded starter motor with CRC in situ, and left it to dry.
- his claim was the result of accidental damage to his starter motor which led to only one engine being available to motor the boat to shore at a very slow speed.
- he had never encountered this issue previously, and he had motored home on a single engine about 12 times over the preceding 8 years without incident, and with heavier payloads.
- the claims assessor took incorrect measurements of his boat, and the engines and exhausts were all installed according to required specifications.
- the design and installation of the motors were signed off by the local technician before he bought the boat, and he was entitled to rely on this ‘sign off’. If there was a design flaw, this was something outside his control and his insurer should cover him.
Bill provided evidence from an expert on the specific type of motor/exhaust system on Bill’s boat. The expert said that if the motor/exhaust placement measurements met the specifications in the manual for that type of motor/exhaust system, he would consider the installation acceptable
An independent assessor doubted water could re-enter the exhaust system while the boat was motoring at 5 knots, regardless of the speed and/or direction of the swell; it was more likely to have occurred when the boat was at anchor, due to a wallowing effect.
The independent assessor’s said that an independent expert should take measurements of the boat and come to a final decision about whether the placement of the exhaust and the motors met the minimum requirements. However, the measurements could not be taken because Bill had sold the boat.
Unable to determine the correct measurements
This was a difficult case to determine because of the complex technical evidence involved. The key issue was whether, on a balance of probabilities, the damage caused to the boat’s port motor was the result of an accident, or a design flaw.
There was no solid evidence about whether the motor/exhaust system had been signed off by a technician at the time of installation. There were also differences in opinion about the measurements in relation to the placement of the exhaust/motor system.
We placed weight on Bill’s expert’s opinion, and said that if it could be determined that the measurements did meet the specifications in the manual, it would be difficult for the insurer to argue there was a design flaw. However, we could not make a definitive finding about whether the motor/exhaust system met the manual specifications without having the system independently measured, and the boat could not be remeasured because Bill sold it.
Was there a design flaw?
We noted that there was no specific evidence of water getting into the port motor on previous occasions because of a design flaw. We would have expected that if there was a design flaw, then the issue would have happened previously.
However, there was no specific ‘out of the ordinary’ weather event on the day in February 2015, such as a major storm. This supported the view that there was a design flaw, and it was only because of the particular combination of the damaged starter motor, and the significant following sea, that the issue presented itself.
After balancing the evidence, we found there probably was not a design flaw because the issue had not occurred before. However, Bill had prejudiced the ability to find out for sure, by selling his boat.
Was the damage accidental?
A factor contributing to the damage was the starter motor not working in February 2015. We said that it could not be ‘unexpected’ by Bill that the starter motor may fail, because following the flood in December 2014, Bill knew the motor needed to be replaced, but did not replace it.
General wear and tear (not covered under the policy), may have contributed to the failure of the starter and port motors.
On all the evidence available, we said that the fairest way for the complaint to be resolved was for the insurer to pay Bill half of the original quote to repair the boat, which was $9,880.89.
The insurer and Bill agreed that our suggestion to resolve the complaint was a reasonable way to resolve the complaint. The insurer paid Bill $9,880.89 in full and final settlement.
Our decisions often come down to balancing the available evidence, and sometimes asking for a third/expert opinion to aid us in making a decision. We will make a decision based on the civil standard of proof – the balance of probabilities. In this case, it was impossible to obtain the required evidence to determine whether the installation of the exhaust/motor system on the boat met the required specifications. We therefore looked at what a fair and reasonable way to resolve the complaint was, based on all the evidence available, and all the circumstances.