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Boat insurance claim a sunk loss?

Catherine’s boat motor stops working

On 29 June 2014 Catherine and two of her friends were on-board her boat in Tauranga Harbour. Catherine and her friends heard the boat hit something and the motor stopped working. The motor needed to be repaired which would cost $14,000.

Catherine made a claim to her insurance company, Moored Insurance (“Moored”), for the cost of repairing the motor.

Moored declined Catherine’s claim because it considered that the damage to the motor was caused by wear and tear which was not covered under the policy.


Catherine’s view

Catherine believed Moored incorrectly declined her claim. Catherine maintained that the boat’s motor failed after it was damaged from hitting a submerged object.

Catherine also complained that Moored’s claim assessment process took too long. Catherine wanted Moored to pay for the hardstand charges while her boat was out of the water waiting for Moored to complete its assessment. The total cost of the hardstand storage was $3000.


Moored’s view

Moored relied on an exclusion clause in the policy to decline Catherine’s claim.  Moored said that it declined Catherine’s claim because the damage to the motor was inconsistent with impact damage. Rather, Moored said that the motor failure was caused by wear and tear. The exclusion clause stated that any claim related to damage caused by wear and tear was not covered under the policy.


FSCL’s view

We needed to determine whether the damage to motor was caused by wear and tear or whether the damage was caused by impact.

For Moored to rely on an exclusion clause to decline Catherine’s claim, Moored had to prove that the exclusion clause applied in the circumstances of Catherine’s claim. That is, Moored had to prove that the damage to the motor was caused by wear and tear.

We received evidence from Moored’s claims assessor, a marine mechanic, a metallurgist and the manufacture of the motor. However, there were discrepancies in the evidence. As a result, we could not determine definitively from the evidence the cause of the damage to the motor.

Due to the inconsistent evidence, we found it was fair to limit Moored’s liability to 50% of the total repair cost. We recommended that Moored paid $7,000 to Catherine for the motor repairs.

As we recommended that Moored should accept, in part, Catherine’s claim, we considered it appropriate for Moored to cover Catherine’s hardstand charges. Catherine kept the boat on the hardstand so as not to jeopardise her claim while the investigation continued. We accepted that the hardstand charges were reasonable and related to Moored’s investigation. We recommended that Moored reimburse Catherine $3,000 for the costs she incurred for the boat being on the dry stand pending the completion of the investigation.

Moored paid Catherine a total of $10,000 in full and final settlement of her claim and complaint.