Homeowners who suffered damage to their solar power system will have most of their repair costs covered after an ombudsman rejected their insurer’s application of an electronic malfunction exclusion.

The claimants said they were unsure what caused the breakdown – which left them without electricity – but suggested it was a storm that rolled in on the night they discovered the problem. 

They engaged a solar expert, who found the system generator’s main fuse had blown and its inverters failed because their components were “burnt out”. 

The expert said the loss was caused by an “external weather event” and quoted $80,436 for repairs. 

But another expert, for insurer IAG, said there was no evidence a storm affected the property. 

The company also ruled out a power surge from the earth or an “electrical distribution influence” through the mains. 

The insurer’s expert found the damage probably stemmed from the generator failing. 

IAG denied the claim, noting its policy excluded damage to electronic equipment from electrical or mechanical malfunction.

The claimants disputed that the system could be considered electronic equipment. 

In its dispute ruling, the Australian Financial Complaints Authority says the loss can be claimed as "accidental damage".

It says the system can probably be considered both electrical and electronic, but notes the policy wording stated it would not cover electronic failure “unless the breakdown or failure results in loss or damage to insured property”.  

AFCA says the insurer was wrong to suggest the system was a singular unit – meaning no further damage occurred – because the generator was used only when the solar panels were not functioning.

It accepts the breakdown probably began with a fuse failure, but says this is not an indication all systems were “intrinsically linked as a singular unit”.  

“Given this, I accept the issue with the generator caused resultant property damage, which meant the entire solar inverter system and panels became unusable,” the authority’s ombudsman said.  

“I accept, based on the above exclusion, the insurer is not liable for the replacement of the generator main control fuse. However, it is responsible for the rest of the claimed damage, as I accept the balance of the damage is resultant damage.”  

AFCA has called on the two parties to work together to resolve the claim, noting the claimant’s quote was not itemised.  

IAG should provide its own assessment and make repairs with a lifetime guarantee. If work has already been completed, the insurer should reimburse the homeowners.  

See the ruling here.