Section 23A(3)(b): When Insurance Doesn’t Pay… But Someone Must

Section 23A(3)(b): When Insurance Doesn’t Pay… But Someone Must

The other week, we explored section 23A(3)(a) of the Owners Corporations Act 2006 (Vic) (the Act), a mechanism for recouping insurance costs, like excess or premium increases, when a lot owner’s culpable or negligent conduct causes damage.

This week, we turn to a different (but equally important) tool: section 23A(3)(b).

When common property is damaged, the first question is often: “Is it covered by insurance?” But what if the answer is no?

Section 23A(3)(b) empowers an Owners Corporation (OC) to levy a lot owner for damage to common property caused by the lot owner or their tenant when:

• the damage is not covered by insurance; or
• the cost to repair is less than the insurance excess.

It’s a clause that reads simply but applying it is another matter entirely.

What does this mean in practice?

If a lot owner’s actions cause a pipe to burst, a door to shatter, or a balcony to leak, and the cost of fixing it is:

• under the insurance excess, or
• not covered at all (e.g. wear-and-tear exclusions, or scope gaps),

…the OC can levy that lot owner directly to recoup the repair costs.

Unlike section 23A(3)(a), no finding of fault or gross negligence is required under 23A(3)(b). The key is causation, not intention, fault, or foreseeability.

That makes it a powerful statutory tool for recovering low-value, high-frequency damage costs, especially those that fall into the growing “insurance gap.”

More Than Meets the Clause

At face value, 23A(3)(b) looks like a pragmatic fix: “If someone causes minor damage, and insurance won’t cover it—just bill them.”

But in practice, it opens a can of procedural and evidentiary worms:

• what counts as “not covered”?
• who determines fault or causation?
• how should an OC proceed when the facts are contested?

Without clear answers or a documented process, even low-value disputes can escalate quickly.

Practical Considerations

To rely on section 23A(3)(b) effectively and fairly, OCs and managers should:

• engage a loss adjuster or building expert to document the causal link between the conduct and the damage;
• confirm the insurance position, including why it does not respond to the incident; and
• where liability is unclear or contested, seek legal advice early to minimise risk and cost.

Final thoughts

Section 23A(3)(b) is quietly becoming a key tool in OC governance and risk management. It fills a critical, and often overlooked, gap: dealing with damage that’s too minor to claim, but too costly to absorb.

When applied carefully and transparently, it strikes a fair balance between individual responsibility and collective financial stewardship.

—Julia Moroz, Special Counsel VIC

© Bugden Allen Group Legal Pty Ltd. This is general information only and not legal advice. You should not rely on this information without seeking legal advice tailored to your specific circumstances.