A business has successfully challenged its insurer’s claim denial following a switchboard fire, persuading the financial services ombudsman its loss should be covered.  

After the blaze – which rescue workers put out before it engulfed the company’s property – the claimant appointed an electrical expert, referred to as D, to assess and repair the damage.

The expert said the fire started when a wire near the fuse base ignited a non-fire-retardant chipboard.

They said the blaze then caused the switchboard’s main fuses to blow, sending flames up to 3.5 metres from the source.  

The insured also engaged an electrical engineer who stated: “There was definitely a fire in the switchboard, with evidence of melting, burnt timber and smoke-damaged cement sheeting.”  

Insurer AIG Australia argued the damage was not from a fire but from electrical arcing caused by a breakdown.  

It relied on findings from a loss adjuster, who reviewed the claimant’s documentation and said that without evidence of ash, there was no indication a fire had occurred.  

The loss adjuster noted photos showing water ingress affecting the wood panelling, and said the switchboard had a defect notice from three years prior.  

D responded that the description of a “simple arcing event” was inaccurate, given the switchboard had caught fire.  

They said if it was arcing, the fuse would have overheated and failed, causing it to cool rather than ignite.  

The claimant’s electrical engineer agreed there was a “very low likelihood the damage was due to arcing”.  

In its dispute decision, the Australian Financial Complaints Authority notes the business’ policy offered “broad coverage” for fire-related damage, with no calls for proof of the specific circumstances or source of a blaze. It says the only requirement was for the insured to show a fire caused the damage. 

It notes the claimant’s experts were first to inspect and repair the damage and greater weight should be placed on their findings.  

“I am satisfied that D and [the electrical engineer], as professional licensed electrical experts ... are very suitably qualified to provide their opinions relevant to this complaint,” an authority ombudsman said.  

“I find their opinions to be supported by detailed and compelling explanations as to why the damage is consistent with a fire event and not an arcing event.”  

The ombudsman says the loss adjuster’s report “lacks adequate detail, explanation or persuasive supporting information”.  

The loss adjuster was not a qualified electrical expert and there is limited evidence their report was peer-reviewed by a forensic fire investigator, despite the insurer’s assertions.  

“Without persuasive information to the contrary, I am satisfied the damage to the switchboard had been shown to more likely than not be the result of a fire,” the ombudsman said.

AFCA requires AIG to pay the claim, plus $5000 to cover the business’ expert fees.  

See the ruling here.