Captlar, the issue is not the "legality" of the Paloma - it is quite legal. The insurance company is simply protecting themselves from having to make a large payment when you OR A GUEST dies from this. But think about this! It is literally a life or death issue. People get killed when they make a mistake. The normal usage of a Paloma is not the problem. It is that things can go wrong too easily and the consequences are severe. There are much less threatening ways to get a hot shower.
A comment about shower sumps. The packaged sumps from the store usually have a pretty wimpy bilge pump in them. It might not be able to lift the water high enough to get it out of the boat. I mention this because it happened to me. I had to replace the pump in a new sump unit (actually the store I bought it at recognized the problem and supplied a larger pump). But I agree totally about not letting the shower drain into the bilge.