Boat owners who discovered water rats had caused $70,000 in damage by chewing through upholstery, dash trim, batteries, grab rails, speaker grills, a sea-deck kit and rotary encoder buttons have lost a claim dispute over a vermin exclusion.

The seven metre inboard fibreglass runabout was stored on a trailer at their home, about 150 yards from a river.

In mid May last year, they found the inside of the boat had been badly damaged and concluded it was caused by water rats as two months earlier the house had been surrounded by flood waters.

It was likely the flooding caused rats to move into the interior of the boat and gnaw on the upholstery, boat trims, engine and component covers and cables and so on, they told the Australian Financial Complaints Authority (AFCA). A quote showed a $70,000 repair cost for the damage.

The boat owners argued Zurich should pay their claim as without the flood, the damage would not have occurred, and also that the word ‘vermin’ in the policy document was ambiguous – and did not include water rats as they are native animals.

AFCA ruled Zurich was entitled to rely on its vermin exclusion to decline the claim.

“While I sympathise with the complainants for this most unfortunate event, the information shows the damage was due to vermin chewing through the interior of the boat,” the ombudsman said.

The policy exclusion listed damage from “moth or vermin, rot, fungi, mould or infestation”, among other things. It did not define the meaning of the term vermin, so AFCA referred to the Macquarie dictionary definition that states "troublesome, destructive, or disease-carrying animals collectively, especially rodents and insects”.  

“Whether or not a species of water rat was involved, the above dictionary definition provides support for the insurer’s submission that some form of troublesome and destructive animal did the damage,” the ruling said.

Though “not a lot is known” as to how long the rats were inside the boat causing damage, and it was not in dispute there was a catastrophic weather event causing the area to be flooded, AFCA said the available evidence established the damage to the boat was caused by vermin.

It was highly likely the flooding caused the rats and other animals to move to new areas and led to the rats making a temporary home in the boat, AFCA said, as many wild animals would have been forced by the flood to search for alternative shelter and food.

However, it was not possible to say the flooding was the “dominant or operative cause of the actual damage”.

Zurich’s marine mechanic found rats had infested and damaged the boat interior, chewing through and damaging batteries, interior grab rails, speaker grills, a sea-deck kit, throttle assembly & cut-off lanyard, rotary encoder buttons, interior upholstery, surf selects remote and dash trim.

No vermin were seen or identified, though there were photographs of animal skats inside the boat.

“They had an appearance of rat skats but there is no expert or scientific evidence about this,” AFCA said.

It ruled while flood may have been a factor in the damage, it was not the proximate cause.

“The boat was not in or affected by floodwater. The damage was the actual destruction of the boat’s interior. This was the direct result of the activity of rats in the boat,” AFCA said. “The flooding may have made the operative cause more likely, but was not the operative cause.”

See the full ruling here.