An insured who sought indemnity for legal liability after a fatal incident while he had been driving his boat will be covered after winning a claims dispute.

The man had been steering his boat along a lake while towing a person, referred to as D, on an inflatable "sea biscuit" in January 2018. After D fell off the sea biscuit, the skipper slowed down to turn around to collect him.

A passenger in the boat, referred to as M, fell from the boat and died.

The complainant lodged a claim, under his pleasure craft insurance policy, to cover legal costs after M’s family brought legal proceedings against him.

Allianz declined the claim, saying that the insured failed to take out the optional coverage that provided legal liability coverage for water skiing accidents, which otherwise is excluded from the policy.

The policyholder argued that the exclusion did not apply because the use of the sea biscuit was not  water-skiing. He also said that neither M nor anybody else had been engaged in water-skiing at the time of the incident.

The insurer acknowledged that its policy did not define water-skiing but noted a reference to “ski biscuits” as part of “water-ski equipment”.  

It said that the complainant's decision to move the boat to retrieve D after he had fallen off the sea biscuit “demonstrates a sufficient nexus between the incident occurring and the use of the boat for water-skiing”.

The insured said that the clause should have been strictly interpreted and “confined to those who are participating in the water-skiing whether actually skiing or directly associated with that activity such as the driver of the boat”.

He said that M was “merely a passenger in the boat,” and was not involved in any activity that could be associated with water-skiing at any point in time.

The Australian Financial Complaints Authority (AFCA) acknowledged that while similarities do exist between the definitions of “water-skiing” and “sea biscuits”, there are “obvious differences” distinguishing the two.

AFCA noted that while there were closer similarities in the policy’s wording of “water ski equipment”, the applied exclusion had not made references to it.

“The PDS has been drafted in such a way that it is overall reasonable to conclude that water-skiing is intended to be viewed as an activity distinct from other towed water gliding activities,” AFCA said.

“That reflects the differences in the dictionary definitions of water-ski/water-skiing and sea biscuit. It does not give rise to an uncommercial, incongruent or nonsensical outcome.”

AFCA said that the insurer could have made clear references to “water gliding activities” in the exclusion if it wanted, but “chose not to do so”.

It said that Allianz is required to cover the claim as per the terms of the policy, as well as the complainant's legal representation for the dispute.

Click here for the ruling.