A company’s milling machine claim will be covered under its industrial special risks policy after it argued power fluctuations caused damage.

The business claimed in January 2023 for repair costs of $67,829 after a “metal workpiece” that was being milled came adrift from spindle jaws, hitting the spindle unit and cracking its housing.

A technician’s report for the insured said the main spindle may have slowed slightly due to voltage variations, causing the workpiece to eject, but a conclusive determination was impossible.

The claimant said it was “more likely than not” the voltage issue caused the damage, and if that was not accepted the insurer could not rule out other covered causes such as operator error.

But Lloyd’s Australia said there was insufficient evidence a power issue caused the problem. Its expert noted fluctuations were consistent with business operations and there was no sign other equipment was affected.

It said an exclusion would apply to the claimant’s proposed alternative causes, including operator error or another undefined accident.

It pointed to an exclusion around damage not from an external event, noting the spindle unit damage occurred within the machine.

In a dispute ruling, the Australian Financial Complaints Authority says focusing on the spindle damage within the machine ignores the cause of the damage and “is not determinative”. The insurer has to show, on balance, the cause of the unit damage is listed in the exclusion.

“As the insurer has not provided persuasive information to show this, I do not consider the insurer has met its onus,” an AFCA ombudsman said.

The insurer bears the responsibility of showing the exclusion applies, and “simply saying it would apply in the proposed alternate circumstances” is not enough.

AFCA has ordered the insurer to cover the damage cost, with interest.

The decision is available here.