You shouldn't do it that way, here is a course about RecyclerView that goes from displaying to handle clickListener.

Here is how they define it:

While the ViewHolder is a great place to listen for clicks, it's not usually the right place to handle them. You should usually handle clicks in the ViewModel, because the ViewModel has access to the data and logic for determining what needs to happen in response to the click.

So you should be doing this:

Adapter:

class ThumbnailAdapter(model: SharedViewModel, val clickListener: ThumbnailListener) :
    RecyclerView.Adapter<ThumbnailAdapter.CustomViewHolder>() {

    private var thumbnailList = listOf<Pair<String, File>>()
    private val myModel = model

    override fun onBindViewHolder(holder: CustomViewHolder, position: Int) {
        val item = getItem(position)
        holder.itemView.setOnClickListener {
            listener.onClick(item)
        }
        holder.bind(marsProperty)
    }

    inner class CustomViewHolder(view: View) : RecyclerView.ViewHolder(view) {
        private val thumbnail = view.thumbnail
        private val title = view.title

        fun bind(item: Pair<String, File>) {
            val titleToSet = item.first
            val bitmapToSet = Util.uriToBitmap(item.second)
            val resizedBitmapToSet = Bitmap.createScaledBitmap(bitmapToSet, 150, 150, false)
            thumbnail.setImageBitmap(resizedBitmapToSet)
            title.text = titleToSet
        }
    }

    class ThumbnailListener(val clickListener: (libraryId: Long) -> Unit) {
        fun onClick(val library: Library) = clickListener(library.id)
    }

    [...]
}

ViewModel:

private val _navigateToBook = MutableLiveData<Long>()
val navigateToBook: LiveData<Long>()
   get() = _navigateToBook

fun onLibraryClicked(libraryId: Long) {
    // your stuff
    _navigateToBook.value = libraryId
}

Fragment:

thumbnailAdapter = ThumbnailAdapter(model, ThumbnailListener { libraryId ->
    viewModel.onLibraryClicked(libraryId)
})

viewModel.navigateToBook.observe(viewLifecycleOwner, Observer { book ->
    book?.let {
        this.findNavController().navigate(YOUR_DESTINATION)
    }
})

Second possiblity to set listener with databinding this time:

xml item file:

<data>

<variable
    name="listener"
    type="Your.Package.To.ThumbnailListener" />


</data>

<FrameLayout
    android:layout_width="match_parent"
    android:layout_height="170dp"
    android:onClick="@{() -> listener.onClick(property)}">

    ...

</FrameLayout>

Adapter:

fun bind(item: Pair<String, File>, listener: ThumbnailListener) {
            val titleToSet = item.first
            val bitmapToSet = Util.uriToBitmap(item.second)
            val resizedBitmapToSet = Bitmap.createScaledBitmap(bitmapToSet, 150, 150, false)
            thumbnail.setImageBitmap(resizedBitmapToSet)
            title.text = titleToSet
            itemView.clickListener = listener
        }

Simply use your Activity reference inside Adapter class instead of viewLifecycleOwner and it will work

class ThumbnailAdapter(

    private val activity: FragmentActivity

) : RecyclerView.Adapter<ThumbnailAdapter.CustomViewHolder>() {

    // ... Other functions

    override fun onViewCreated(view: View, savedInstanceState: Bundle?) {
        super.onViewCreated(view, savedInstanceState)
        
        model.selectedBookFile.observe(activity, androidx.lifecycle.Observer {
            // Your code goes here
        })
    }

    // ... Other functions

}

I know it's too late to answer. But I hope it will help other developers searching for a resolution on a similar issue.

Take a look at LiveAdapter.

You just need to add the latest dependency in Gradle.

dependencies {
    implementation 'com.github.RaviKoradiya:LiveAdapter:1.3.4'
    // kapt 'com.android.databinding:compiler:GRADLE_PLUGIN_VERSION' // this line only for Kotlin projects
}

and bind adapter with your RecyclerView

// Kotlin sample
LiveAdapter(
        data = liveListOfItems,
        lifecycleOwner = this@MainActivity,
        variable = BR.item )
       .map<Header, ItemHeaderBinding>(R.layout.item_header) {
           onBind{

           }
           onClick{

           }
           areContentsTheSame { old: Header, new: Header ->
               return@areContentsTheSame old.text == new.text
           }
           areItemSame { old: Header, new: Header ->
               return@areContentsTheSame old.text == new.text
           }
       }
       .map<Point, ItemPointBinding>(R.layout.item_point) {
           onBind{

           }
           onClick{

           }
           areContentsTheSame { old: Point, new: Point ->
               return@areContentsTheSame old.id == new.id
           }
           areItemSame { old: Header, new: Header ->
               return@areContentsTheSame old.text == new.text
           }
       }
       .into(recyclerview)

That's it. No need to write extra code for adapter implementation, observe LiveData and notify the adapter.

Also, have DiffUtil implemented so only changed items will be updated on RecyclerView instead of all.