What Happens If the Committee Refuses to Lodge an Insurance Claim?

A Practical Guide for NSW Self-Managed Strata Committees

Insurance claims in strata are not optional. When damage occurs—whether from water ingress, storms, structural failure, impact, electrical faults, or accidental damage—the Owners Corporation has a legal duty to maintain the building and act promptly.

But what happens when the committee refuses to lodge an insurance claim?

A refusal can create serious financial, legal, and governance consequences for the scheme and may expose individual committee members to personal liability.

This guide explains when a committee may legitimately refuse a claim, when it becomes unlawful, what rights owners have, and the steps available to resolve the issue.

1. Who Is Responsible for Lodging Insurance Claims?

Under NSW legislation, the Owners Corporation is responsible for:

• Keeping the building insured
• Maintaining common property
• Lodging insurance claims when damage occurs
• Acting in the best interests of all owners

Committee members act as agents for the Owners Corporation. They cannot refuse to lodge a valid claim based purely on preference, disagreement, or personal opinions.

If the event appears insurable, the committee must notify the insurer and lodge a claim or at least request formal advice from the insurer.

A refusal without valid grounds can be considered negligence.

2. When Is a Committee Allowed to Refuse?

A committee may refuse a claim only where:

• The event is clearly excluded in the policy
• The cost is below the excess
• The damage is solely a lot owner’s responsibility
• There is no insurable event (e.g., wear and tear, old age)
• The insurer has confirmed in writing that the matter is not covered

The committee should provide:

• Policy references
• Written reasoning
• Evidence supporting the decision
• Steps for the owner to take next

Internal linking opportunity:

Common Property vs Lot Property (NSW)

A committee cannot refuse solely to avoid premium increases or administrative work.

3. What Happens If the Committee Wrongfully Refuses?

A wrongful refusal can result in:

Financial Consequences

• The Owners Corporation becomes liable for the full repair costs
• Owners may demand reimbursement for out-of-pocket expenses
• Delays may cause secondary damage, increasing total cost
• Emergency repairs may be required under WHS obligations

Governance Consequences

• Breach of the duty to act with care and diligence
• D&O insurance may refuse to defend committee members
• NCAT may issue orders against the Owners Corporation

Personal Liability (In Serious Cases)

Committee members may become personally exposed if the refusal is:

• Reckless
• Negligent
• Misleading
• Motivated by personal conflict
• Against insurer or expert advice

Internal linking opportunity:

Compliance Health Check

4. Can an Owner Lodge a Claim Themselves?

Yes — owners can lodge a claim directly if the committee refuses or delays.

While insurers prefer Owners Corporation involvement, they will generally register a claim when:

• Damage affects common property
• The committee is unresponsive
• The refusal appears unreasonable
• Urgent repairs are required

If the insurer requests committee cooperation and the committee still refuses, this can form evidence of mismanagement and may be used in NCAT proceedings.

5. Can the Matter Be Taken to NCAT?

Owners can apply to NCAT when a refusal is:

• Unreasonable
• Without basis in the policy
• Causing financial loss
• Allowing damage to worsen
• Contrary to the Owners Corporation’s duties

NCAT can order the Owners Corporation to:

• Lodge the insurance claim
• Undertake repairs
• Reimburse affected owners
• Comply with statutory obligations

Internal linking opportunity:

NSW Strata Compliance & Legal Obligations Hub

6. What If the Scheme Can’t Afford the Excess?

Small schemes often delay claims due to cash-flow problems.

However, financial difficulty does not remove the obligation to lodge a genuine claim.

If the Owners Corporation cannot afford the excess:

• A special levy may be required
• Payment plans may be arranged
• Emergency repairs must still occur
• Failure to act can breach the duty to maintain the building

Internal linking opportunity:

How to Become a Self-Managed Strata Scheme (financial setup section)

Final Thoughts

A committee is required to:

• Act promptly
• Notify insurers of insurable events
• Lodge valid claims
• Protect the financial interests of the scheme

A refusal is only justified when supported by the policy wording or insurer advice.

Unjustified refusals expose the scheme to repair costs, disputes, and governance failures — and may expose individual committee members to personal liability.

Strata On Demand Can Help

Strata On Demand supports self-managed strata committees across NSW with more than 30 pay-as-you-go administrative and compliance services — without the cost of a full-service strata manager.

You only pay for what you need, when you need it.

For insurance-related disputes and governance issues, the five most relevant services are:

1. Insurance Claim Lodging

We prepare and lodge claims correctly, ensuring documentation is accurate and deadlines are met.

2. Drafting Notices & Letters

Clear, compliant communication to owners when claims, quotations or special levies are required.

3. AGM / EGM Agenda Drafting

Perfect for approving insurance motions, special levies, or repair authorisations.

4. Compliance Health Check

Identifies gaps in insurance, approvals, and governance that may expose the scheme.

5. Work Order Management

Coordinates repairs, contractor communication, and post-claim works efficiently.

If your committee is unsure how to handle an insurance claim or there is disagreement about responsibility, Strata On Demand can provide clarity and structured support.