Damage following voltage variation (D/00/12)

Case number: D/00/12
Date of Decision: 27 July 2001
Decision accepted by the customer: Yes

The customers stated that they experienced damage to their computer following a voltage variation at their home. Their computer was damaged beyond repair. A new equivalent model cost $1,595.00 to purchase. The customers advised that they purchased the original computer in December 1992, and they submitted a claim for $2,350.00, being the original purchase price.

The company advised that the incident was caused by a bird contacting and shorting out its power lines, and initially offered the customers an ex gratia payment of $200.00. However, it subsequently increased its offer to $400.00, which was based on the market value of the computer ($300) with an additional allowance for customer service ($100.00).

The customers believed that they should be compensated for the cost of a new equivalent model computer, the information which they had stored on the computer, and the inconvenience and cost of sourcing and purchasing another computer.

The main focus of EWOV's investigation was to ascertain the value of the customers' computer and to consider issues of customer service. EWOV obtained advice from an independent loss adjuster regarding the value of the computer, who advised the following:

• Computer technology is such that it is virtually obsolete the minute it is released onto the market.
• The loss adjuster determined the value of the computer using the 'diminishing values' method of depreciation rather than the 'straight line' method. The loss adjuster advised that the 'diminishing values' method was more equitable as it left some residual value in the appliance.
• Using an entry market value figure of $1,595.00 for their computer, the equity loss adjuster calculated that the computer was now worth $187.65, based on depreciation of 30% per annum.
• Accordingly, taking everything into account, it was the loss adjuster's opinion that the recommended replacement value of the computer, at the time that it was damaged, was in the order of $200.

The customers did not accept the independent loss adjuster's assessment of the value of their computer as at the date it was damaged.

EWOV also obtained independent technical advice regarding the most appropriate surge protection devices that could be installed to prevent or minimise any possible damage caused by future voltage variations. This consultant advised of the following:

• The most appropriate protection device was a "medium protection device", which would withstand a maximum voltage of 1,500 volts and a current of 15,000 amps. Such a device is installed at the switchboard of the premises. The approximate cost of such a protection device was $100.00 plus installation cost of approximately $100.
• It was also recommended that the customers install a plug-in protection device located at the power point supplying their computer. The cost of such a device was approximately $20.

The object of the Trade Practices Act 1974 and the common law is clearly to place a person in the position in which they would have been, but for the incident. In the context of this situation, this involved calculating the value of the computer as at the time of the damage occurring. This does necessitate a calculation of the depreciated value of the computer, taking into account its age and current market value.

Therefore, the Ombudsman directed that the company pay the customers the sum of $200, which represented an independent assessment of the market value of their computer, as at the date of the supply incident. The Ombudsman was of the view that it would have been advisable for the customers to back-up data on a disk, in order to minimise the risk of loss in the event of a supply incident.

The Ombudsman also directed that the company pay the customers the sum of $220, to cover the cost of installing appropriate surge protection devices at their premises.
As this was the second occasion that the customers had experienced appliance damage caused by a voltage variation, the Ombudsman also directed that the company pay the customers an additional sum of $350, on the basis of customer service, making a total amount payable of $770.

The Ombudsman also directed the company to provide the following information:

• information regarding the current surge protection devices which were installed on the feeder and circuit supplying the customers' premises
• information regarding any additional surge protection devices/equipment which have been installed on their feeder/circuit since the incident occurred in October 1999
• information regarding any proposed works that the company are planning or could carry out to minimise any future outages or supply incidents which would affect the customers.