One of the 14-year-old boys lost about 7cm to 10cm of his humerus (the long bone in the upper arm) and had his elbow fused, while the other suffered a serious head injury when Mr Strachan (92) lost control of the powerboat and collided with the OBHS rowing eight in October last year.
A statement from Maritime New Zealand said charges - which were laid last month - against the school could not be pursued under the Maritime Transport Act and charges against Mr Strachan were dropped after a settlement was reached.
The accident happened after Mr Strachan, who was standing up, knocked the vessel's throttle lever, causing the boat to accelerate sharply, the statement said.
‘‘Mr Strachan fell backwards and the out-of-control boat hit the rowing eight.
‘‘The school and Mr Strachan have acknowledged that failure to use a 'kill switch' system and the fact that Mr Strachan was alone as skipper and coach aboard the support boat were factors leading to the collision.''
The school and Mr Strachan accepted ‘‘full responsibility'' for the accident, Maritime New Zealand said.
‘‘The school has improved safety processes and will pay compensation to the two injured students,'' the statement said.
‘‘Fred Strachan has retired as a rowing coach and is no longer involved with coaching at the school.''
The settlement - which was not disclosed - was in line with what the courts would likely have ordered.
Otago Boys' board of trustees chairman Geoff Bates said he hoped the school could help the boys and their families ‘‘find a bit of closure'' now the matter was resolved.
‘‘We regret the accident ever happening, but hindsight is a wonderful thing and we have worked closely with the families,'' Mr Bates said.
‘‘We knew what we have had to do and we've now done it.''
The settlement was confidential and he would not comment further.
The school's legal counsel, Allie Cunningham, said it would be inappropriate to comment on the specifics of the settlement.
‘‘The settlements that have been paid were arrived at after we, and the lawyers for Maritime New Zealand, had considered the reparation payments that would be made in similar health and safety cases.''
Maritime New Zealand maritime compliance general manager Harry Hawthorn said the settlement had saved the victims the stress of court action and he commended the school's board of trustees for their approach.
‘‘We welcome the fact that both the school and Mr Strachan have accepted full responsibility for the accident,'' he said.
‘‘We wanted to ensure that the serious effects of this accident on the victims were acknowledged, safety processes were put in place to protect future rowing participants and that lessons learnt in this case were highlighted. That has been achieved.''
Another pupil was taken to Dunedin Hospital with minor injuries following the accident.
Shortly after the incident, the school's rowing club fitted propeller guards to its two main coach boats and changed its policy so two people were in the boats at all times and drivers were to use kill switches.
