The Claim
The complaint relates to a claim for fire damage to Mr. Y’s vehicle. While driving, Mr. Y noticed a warning light on the dashboard. He pulled over onto the side of the road and saw smoke and flames coming from the vehicle’s bonnet. Mr. Y reported the incident to the insurer and submitted a claim
The rejection of the claim
The insurer appointed a loss adjustor to validate the claim. During the validation of the claim, the loss adjustor interviewed the insured. The insured confirmed the above version and explained that he did not drive over an object or bump into anything. The loss adjustor recommended that the insurer appoints a technical expert, which the insurer did.
The technical expert noted that the main wiring harnesses from the battery to the fuse box and starter were still in place, with evidence of fire damage to the front section of the harnesses and to the cooling pump. The technical expert checked the coolant and oil level and found that there was no coolant, and the dipstick did not read the presence of any engine oil in the dip sump.
The technical expert established further that the engine conrod snapped due to mechanical failure, perforating two holes to both sides within the lower engine block (crankcase). According to the technical expert, the engine oil immediately escaped, impinged with the hot exhaust pipe “cat” converter, and ignited. The technical expert concluded that the damage to the engine occurred due to mechanical failure when the conrod snapped, consequently resulting in minor fire damage.
Based on the findings of the technical expert, the insurer concluded that the fire damage was a result of mechanical failure, which is excluded from cover. The insurer rejected the claim on the grounds that no insured peril operated to cause the damage.
In the rejection letter, the insurer relied on the following policy provisions:
“6.8 WEAR AND TEAR AND BREAKDOWN
We will not compensate you for loss or damage arising from:
• mechanical, electrical or electronic breakdown or defect
• any cause that was not sudden and unforeseen
• damage to consumable parts or parts with a limited lifespan
• gradual deterioration including rising damp, mildew, fading, rust or wear and tear
• servicing, maintenance, cleaning, repairing, restoring, dyeing, bleaching or alteration.”
The insured challenged the rejection
In the insured’s further submissions to this office, he submitted the following:
“In so far as the insurer may want to insinuate that the lack of coolant and engine oil may have been the cause of the engine damage, I wish to point out that I frequently check the levels and that the absence of the fluids was as a result of and not the cause of the conrod breaking…”
The insured also argued further that:
“I believe the fire damage to be a separate and additional loss, and it is specifically insured for. In any event, I persist in my belief that the exclusion as alleged by the insurer, in any event, does not apply.”
OSTI’s findings
The insurer rejected the claim based on an exclusion in the policy. Therefore, the onus rests with the insurer to prove its case. The clause in the policy relied on by the insurer states that the insurer will not compensate the insured for any loss or damage arising from mechanical, electronic, or electrical breakdown or defect.
The damage to the engine occurred due to a mechanical failure when the conrod snapped, consequently resulting in minor fire damage.
As the oil leak caused the fire, and the oil leaked as a result of a mechanical breakdown, leading to the fire damage, the fire resulted as a direct consequence of the mechanical failure. The policy excluded from cover loss or damage arising from mechanical breakdown.
OSTI found that the insurer was entitled to reject the claim and thus upheld the insurer’s decision on the claim