The recent decision of Whittington v Smeaton
 ACTSC 76 held that an insurer has no power to refuse to pay
a claim on the basis of an act by the insured, if the act is not
reasonably regarded as being capable of causing or contributing to
"the Court found that... whether or not the
Second Defendant had obtained a Queensland licence would not have
made any difference to the loss suffered by the
Nathan Whittington ("the Plaintiff") was an passenger
and observer on a jet ski being operated by Scott Smeaton
("the Second Defendant) while it was being used to tow Todd
Smeaton ("the First Defendant"), the owner of the jet ski
and the brother of the Second Defendant, as he water skied. The
First Defendant fell off the water ski and the Second Defendant
turned the jet ski around at a high speed to collect him. As the
Plaintiff was reaching forward to take the slack of the tow rope,
as earlier instructed by the First Defendant, the jet ski
encountered a boat's wake. The wake led the jet ski to become
unstable and the Plaintiff to fall into the water and his leg
became entangled in the tow rope, traumatically amputating the
The Plaintiff sought $800,000 damages against the Defendants
before the Supreme Court of the Australian Capital Territory. As
the incident occurred in Queensland, the First Defendant and the
Second Defendant argued that they were afforded a complete defence
under sections 18 and 19 of the Civil Liability Act 2002
(Qld) ("CLA") because the accident arose from an
"obvious risk" in the course of a "dangerous
recreational activity". The First Defendant had an insurance
policy with Allianz Insurance Australia Limited
("Allianz"), who were joined to the claim as a third
party. Allianz submitted that it could refuse to pay on the First
Defendant's claim for indemnity because the Second Defendant,
who was driving the jet ski, was doing so without a personal
watercraft licence (PWC) as required under Queensland
Expert evidence before the Court established that performing the
role of an observer on a jet ski did not carry an obvious or
significant risk. Therefore, the Court ruled that the Plaintiff was
not engaged in a dangerous recreational activity and, consequently,
the defence under the CLA was not open to the First and the Second
In determining whether Allianz was required to pay the claim,
the Court considered the First Defendant's Club Marine policy
with Allianz. This contained a clause indemnifying Allianz from
paying on claims where the driver of the jet ski was unlicensed.
The Second Defendant possessed a boat licence, but did not hold a
PWC licence. However, section 54(3) of the Insurance Contracts
Act 1984 (Qld) ("ICA") provides that an insurer may
not refuse to pay a claim if the insured can prove that the injury
was not caused by the act justifying the refusal. The act in this
case was the driver's act of not possessing the correct
In determining whether section 54(3) applied, the Court
considered the process of obtaining a PWC licence in both
Queensland and New South Wales as well as the Second
Defendant's skill and prior experience of operating jet skis.
The Second Defendant had operated jet skis hundreds of times before
the incident in a variety of conditions. Additionally, the
Queensland licensing regime involved the undertaking of a two hour
training course that did not cover pillion or water skiing safety.
His Honour attributed the Plaintiff's loss to the 40 centimetre
wake created by the other boat and rejected that the injury turned
solely around whether or not the Second Defendant was licensed.
Ultimately, the Court found that, on the balance of probability,
whether or not the Second Defendant had obtained a Queensland
licence would not have made any difference to the loss suffered by
The court ordered that judgement be entered for the Defendants
against Allianz in the sum of $800,000.
This decision reminds insurers of the application of section 54
of the ICA. Insurers must be aware that coverage cannot be denied
because of an act of the insured if the loss that gave rise to the
claim was not caused by that act.
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Whereas most insurance policies exclude liability arising under contract, insurers can
positively benefit where an insured has limited or excluded its liability under contract.
This usually arises where the insured's contract has a limitation or exclusion of liability clause in the insured's favour.
The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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