Who Owns the Rain? Liability in a World of Water Harvesting

Australia’s water system is one of the most regulated in the world and one of the most contested. Under the Murray–Darling Basin Plan, water is not a private asset by default but an entitlement issued and monitored by state authorities. Allocations vary with seasonal availability, and trading markets move water to “highest value use.” 

Yet grey areas persist, especially when it comes to rainfall capture: 

• On-farm dams and floodplain harvesting: Legal within limits, but when scaled up they alter downstream flows and can undermine allocations for other users. The NSW government’s 2021 attempt to licence floodplain harvesting triggered legal challenges and community backlash, showing how contentious the practice has become. 
• Urban water harvesting: Rainwater tanks and stormwater projects are promoted as sustainability measures. But at scale, they may reduce inflows to reservoirs, affecting supply for other users. 
• Industrial use: Mining and energy projects secure large-scale storage for operations. These uses are commercially justified but often politically sensitive, particularly in drought years. 
• Indigenous water rights: Traditional owners continue to argue for greater recognition of cultural and economic entitlements, a factor that may reshape allocation in coming decades. 

Each use makes sense in isolation. But together, they strain hydrology, complicate governance, and set the stage for disputes. 

From an insurance lens, rainfall capture raises exposures that are poorly defined in traditional frameworks. 

• Interference claims: Downstream users may argue that upstream harvesting deprived them of licensed flows. These claims could look like nuisance or negligence actions, yet policy wordings rarely address them explicitly. 
• Regulatory breaches: Exceeding dam capacity or ignoring Basin Plan allocations could result in fines or penalties — often excluded under liability policies. The question becomes whether insurers would respond to associated damages. 
• Contractual disputes: Water trading agreements could unravel if supply is undermined by unregulated harvesting. Boards may even face directors’ and officers’ liability if they fail to disclose material water risks. 
• Cross-sector disputes: Local councils or developers could face claims if urban harvesting schemes reduce flows available to agriculture or ecosystems, creating novel liability exposures. 

Unlike pollution or flood claims, where liability frameworks are established, rainfall capture sits in a grey zone between private initiative and shared resource. That ambiguity is fertile ground for litigation. 

Global precedents show how quickly water conflicts can escalate into liability disputes: 

• Western United States: States such as Colorado long banned private rainwater harvesting on the principle that “every drop belongs to the river.” While restrictions have softened, the legal principle endures — rainfall is not automatically private property. 
• Chile: A fully privatised water market in the 1980s created severe inequities. During drought, lawsuits erupted between communities, farmers, and industries, exposing the risks of treating water purely as a commodity. 
• South Africa: Recent droughts prompted disputes over priority rights between agriculture and municipalities, with insurers drawn into claims over business interruption and contract frustration. 

Australia has yet to see lawsuits over household tanks or small farm dams. But satellite monitoring, stronger regulation, and rising scarcity mean disputes may be harder to avoid in the next decade. 

Water is not just a natural resource. It is becoming a liability frontier. As harvesting practices expand, the question is not only who has enough supply, but who has the right to take it. 

For insurers, this creates a dual challenge: uncertainty about how existing liability wordings apply, and the need to anticipate new forms of claims that test the boundary between private right and public good. 

Insurance evolves after catastrophe, but real resilience comes from anticipating blind spots before they break. Boards and executives cannot afford to treat water rights as a background compliance issue. They are now a governance issue, carrying legal, reputational, and financial implications that go well beyond operations. 

Speculatively, the next decade could bring: 

• Litigation over rainfall capture between landholders, industries, and regulators, especially during prolonged droughts. 
• Policy refinements as insurers clarify whether interference or water rights disputes fall within liability covers. 
• Mandatory disclosure of water harvesting in ESG and climate reporting, alongside emissions. 
• Investor pressure on companies with significant water footprints, treating water security as a material financial risk. 
• Cross-border disputes across state lines or linked to Indigenous rights, testing jurisdiction and fairness. 

Who owns the rain once sounded like a philosophical question. In a hotter, drier Australia, it is becoming a legal, financial, and reputational test — one that insurers, regulators, and boards cannot ignore.

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