Most insurance will cover for fuel contamination as this is what caused the mechanical failure. However you are at their mercy as this type of thing is not normally specifically addressed in the policy and it is there judgement if that damage comes under their policy.
I have spoken to a claim assessor (not the call centre) at AAMI and they have paid out on many but have also knocked back on a couple - depends on the circumstances but he said they do lean to paying up.
Garry
REMLR 243
2007 Range Rover Sport TDV6
1977 FC 101
1976 Jaguar XJ12C
1973 Haflinger AP700
1971 Jaguar V12 E-Type Series 3 Roadster
1957 Series 1 88"
1957 Series 1 88" Station Wagon
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