Challenging strata insurance claim denials: how to help your body corporate fight back

Strata insurance is a type of insurance that residential and commercial body corporates must take out to provide liability cover over buildings, common property and common areas.

Strata insurance is essential for protecting body corporate communities from financial losses due to unforeseen damage, such as natural disasters, theft, and personal injuries.

However, insurers frequently deny strata insurance claims by relying on broad exclusion clauses, such as wear and tear or lack of maintenance provisions. While these exclusions exist for valid reasons, insurers have the burden of proving their right to rely on them—and too often, they lack the necessary evidence.

Maurice Blackburn’s specialist insurance disputes team has extensive experience in challenging these denials. If your body corporate’s strata insurance claim has been rejected, you may have substantial grounds to dispute the decision through internal complaint processes, the Australian Financial Complaints Authority (AFCA), or legal action.

Strata insurance claim denied over "wear and tear"

At Maurice Blackburn, our lawyers have direct experience helping with strata insurance claims denied for wear and tear.

For example, we recently assisted when a body corporate’s claim for water damage affecting multiple units was denied. The insurer cited “gradual deterioration” and “lack of maintenance” under the policy’s exclusion clauses.

However, we identified several flaws in the insurer’s reasoning, including:

• The insurer ignored the critical chronology of events, which demonstrated that the body corporate could not reasonably have known about any pre-existing wear and tear or maintenance issues before the storm event.
• A prior inspection report had assessed the roof as being in good condition, yet the insurer did not adequately consider this.
• To determine the cause of the damage, the insurer used a general building estimator – not a qualified roofing engineer.

The insurer’s strata policy contained the following exclusion clauses:

• Exclusion for wear and tear: “We will not pay for Damage caused by or arising directly or indirectly from lack of maintenance, rust, oxidation, corrosion, mould, Wear and Tear, fading, concrete or brick cancer, developing flaws, wet or dry rot, gradual corrosion or gradual deterioration.”
• Exclusion for non-rectification of known defects: “We will not pay for Damage caused by non-rectification of an Insured Property defect, error, or omission that You were aware of, or should reasonably have been aware of.”

By challenging the insurer’s reliance on these exclusions and demonstrating that their assessment was flawed, we successfully advocated for the claim to be reconsidered and ultimately accepted.

Strata insurance disputes and body corporate rights

Maurice Blackburn understands the unique legal framework of the governing body of corporate communities and strata law. Unlike individual policyholders, body corporate committees must navigate complex governance structures, comply with legislative requirements, and act in the collective best interests of all lot owners. Our firm has deep expertise in advising body corporate committees on their rights and obligations under strata insurance policies and the law.

We work closely with body corporate managers, committees, and owners to challenge unfair insurance decisions and ensure compliance with strata legislation. Our legal expertise allows us to:

• Interpret strata insurance policies and exclusions to determine if an insurer’s denial is justified.
• Engage independent building experts specialising in strata properties to provide authoritative evidence.
• Advocate for body corporates in disputes with insurers through internal complaints, AFCA, and litigation if necessary.
• Provide strategic guidance to body corporate committees on effectively managing insurance claims and legal risks.

Lessons from AFCA: the insurer’s burden of proof in strata insurance claims

An AFCA determination (Case No. 1006744) further illustrates that insurers must provide clear, expert-backed evidence when denying claims.

In this case, the insurer refused to pay for water damage, claiming the cause was a failed waterproofing membrane due to gradual deterioration. However, AFCA ruled in favour of the complainant because:

• Only once the complainant has established a valid claim does the onus shift to the insurer to establish that the exclusion applied.
• The insurer failed to provide evidence that the damage was due to gradual deterioration rather than a sudden event.
• The insurer’s experts did not adequately explain the underlying cause of the waterproofing failure.

This case sets a valuable precedent - insurers cannot simply rely on assumptions about wear and tear without strong evidence.

How Maurice Blackburn can help your body corporate challenge strata insurance denials

Many body corporate committees accept strata insurance claim denials without realising they can challenge them. Maurice Blackburn can help by:

• Reviewing your insurer’s decision to determine whether the exclusion clause has been applied correctly.
• Engaging independent strata building experts (roofing engineers or forensic building consultants) to counter the insurer’s reports.
• Navigating dispute resolution processes, including internal insurer reviews, AFCA complaints, and court proceedings.
• We work on a No Win, No Fee basis, ensuring access to justice without financial risk.

Don’t let insurers unfairly deny your body corporate’s strata insurance claim.

Don't give up if your body corporate’s strata insurance claim has been declined. Contact Maurice Blackburn’s expert insurance claims team today for a free consultation. We can assess your case, advise on your rights, and fight to get the compensation your body corporate is entitled to.

Get in touch now to learn more about how we can help.