A beauty salon owner has won her bid to be fully covered for a broken laser machine after her insurer applied an underinsurance clause and only partially covered the loss. 

The woman said the tool stopped working in February and a technician quoted $18,069 to repair it. 

The salon owner had insured the laser machine for $50,000 in December last year, after buying it second-hand and refurbished in 2012 for $66,000. 

QBE accepted the damage was covered but said it was entitled to reduce its liability to $7286 due to the item being underinsured. 

It said the tool should have been insured for $155,000 because the model was discontinued and that amount would be needed to buy the current model.

QBE said its underinsurance clause applied if the sum insured was “less than 80% of the total new replacement value of the insured property”. 

But the woman said the insurer’s assessment was unfair and a refurbished laser machine of the same model would cost between $30,000 and $45,000. 

In a dispute ruling, the Australian Financial Complaints Authority says that under the policy terms, the tool – if beyond repair – would be replaced with one in a similar condition.

It says another obsolete model, second-hand and with 17 years of wear and tear, would not cost more than the $50,000 sum insured. 

AFCA also notes the wording on the policy’s uninsurance clause was “inconsistent and unclear” because it interchangeably used “full value”, “maximum potential risk” and “total new replacement value”, despite the terms having different meanings.  

It said: “When the policy is read as a whole, it indicates the laser should be insured for its full value, or what it would cost to replace with a similar laser in a similar condition.

“The insurer says the complainant should have insured the laser for $155,000. However, it would never have paid more than $50,000 for damage to the laser.”

AFCA requires the claim to be settled for the repair cost minus the policy’s $500 excess. 

Click here for the ruling.