In November 2025, a North Carolina US court found that where iron ore was fed into a reactor and heated to produce reduced iron without being coated in cement as required and solidified, there was no “breakdown” within the meaning of the policy. Breakdown included direct physical loss or impairment that caused damage resulting in the shutdown of the equipment from mechanical failure or “electronic circuitry impairment” and other causes not relevant to the facts. After repairs to a weigh-belt feeder system, the cement coating system for the iron reset to zero kilograms. Consequently, iron ore pellets entering the reactor were not coated with cement before they were subject to heat. They melted and clustered inside the reactor resulting in losses in excess of $14 million.

The court held that there was no direct physical loss that caused the damage. The policy covered “direct damage resulting from a breakdown”. The term “direct physical loss” was held to be a reference to causation. Although some electronic circuits had been replaced before the coating system reset to zero, those actions were intentional and within the control of the personnel of the insured. While the personal did not anticipate the consequences of their repair of the electronics, that fact did not make those events fortuitous. The events did not cause the equipment to lose its ability to function as it previously had. That was the effect not the cause of the loss.

The wording in many South African machinery breakdown policies cover “accidental, unforeseen and sudden physical loss or damage to the machinery from any cause not otherwise excluded” which, if not expressly excluded, would cover a loss of this nature which was fortuitous in the sense covered by that wording.

[Aspen Speciality Insurance Co v Nucor Corp [2025] NCBC 67]