The way I said that may have been too much of a distraction from the real problem, which I'll restate as: considerations of fairness, which may arise from bargaining or just due to fairness being a terminal value for some people, can imply that the most preferred outcome lies on a flat part of the Pareto frontier of feasible expected utilities, in which case such preferences are not VNM rational and the result described in the OP can't be directly applied.