As a boater and a diver on Lake Simcoe, here's a bit of perspective.
Lake Simcoe is a big lake. On a Saturday or Sunday, it is extremely choppy simply from boat wakes. I operate a 32ft cruiser and no one would respect a dive flag more than I. That however does not change the fact that most flags cannot be seen until you need to make a hard evasive manouver to avoid them. On a calm day, not a problem - they can be seen for a long way. But this weekend was both windy and choppy. There were a ton of boats out there stirring it up - I know - I was one of them. Put a dive flag between 1 foot swells and it becomes almost non visible. As mentioned, approach one either dirctly downwind or up wind and you won't see it.
I will be willing to bet the people operating the boat don't even know what happened. If you have been in a boat at any appreciable speed, you know how loud the wind noise and engine noise is. You could hit something and very easily never know it.
If the boater saw the flag and kept going, or, if they know they hit something and kept going - then yes - lock them up for life. I suspect however they were completely oblivious to the event.
When we dive Simcoe, or anywhere else for that matter, we fly a minimum of 3 flags from our boat. One on the bow, one on the antenna, and a 4ft x 2ft one displayed from the radar arch. Then, we only ascend and descend directly under our boat.
Shore diving Lake Simcoe on a weekend is not a good idea and should not be done by anyone. Even any other times of the week, Big Bay Point and The Morrison are VERY dangerous dives. You are diving a lake that has become a meca for recreational boating...and that is dangerous.
You can make all the comments you want about how you should be able to safely dive Simcoe at any time, but, that doesn't change the reality that it is a life risking endevour. Very sadly, this weekend proved that.