The owner of a beauty salon that was covered in toxic soot when a next-door tobacco shop was firebombed has won a claim dispute in which she was seeking more than $200,000 for damage plus $44,000 for business interruption.

The industry ombudsman has ordered the BI sum be paid, but it has not specified an amount for material and property damage, saying only that the $63,146 offered by AIG was too low and the insurer “did not adequately investigate the damage and loss” and “must increase its assessment”.

The parties must “co-operate in a genuine attempt to reach agreement about and resolve the issue of quantum of materials, contents, electrical equipment and stock damaged”.

The Australian Financial Complaints Authority also says AIG must pay for work by claims management specialists up to the policy limit of $35,000, expert analysis and plumbing work to clean a sewage line blocked by fire debris.

And AFCA has awarded relocation costs to the beautician, who moved interstate after the February 2024 fire in regional Victoria.

“I decided, for my own wellbeing, to move to be with my family to support me through this horrible experience that is dragging on and on and on. Each day/week is a never-ending rollercoaster of negativity and feelings of despair,” the salon owner said.

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“The clinic reeked of smoke and soot and chemicals, and clients and staff would comment as soon as they walked into the premises.”

The high-end clinic was contaminated with smoke and pyrolysed e-liquids for vapes.

Various experts – including disaster recovery and environmental specialists and forensic engineers – inspected the site after it was cleaned by restoration specialists.

They argued over the cause of damage.

Frustrated, the beautician arranged a claims service specialist about three months after the fire. It commissioned analysis by an engineer and fire and explosions expert.

AFCA says this evidence was “nuanced, cogent and plausible” and the report “comprehensive and logical” in its conclusion the building was unsafe to occupy.

The fire expert’s findings are “persuasive in the sense it is likely ... smoke, soot and the like directly damaged the majority of the claimed materials, equipment and stock”, AFCA’s adjudicator says.

“I have no doubt the insurer has underassessed the complainant’s claim ... The extent of insured-event related damage and loss in this instance requires the insurer to increase its settlement offers.”

AIG’s expert reports included inappropriate testing methods, and they misclassified soot particles as background debris, the claimant’s fire expert said.

The insurer made an interim payment of $1417 for BI, for five days’ closure. But AFCA says this did not factor in a $40,000 drop in turnover and the ongoing cost of rent.

“The business, and the complainant’s capacity to operate the business, were indeed adversely affected in various ways following reopening of the salon.

“I do not accept the insurer’s submissions that ‘tests indicated no air and surface contaminants’ and that ‘all equipment operated normally’ after the business reopened.

“Recontamination of the salon and much of the electrical equipment and machines persisted.”

See the ruling here.