Thanks Whale. I was asking the question generally, not specially for Victoria. It’s a important issue that seems to come up quite a lot.
While there can be differences in insurance polices between the states, they seem essentially to be the same. The one we use (a specialist strata insurance company) has the same PDS for all of Australia. It has an Optional Benefit for NSW to cover Lot/Unit wall coverings.
We have had common property building defects that allowed water leaks to damage lot property. Insurance would not cover the cost to repair the defect but it did cover the damage caused to the lots (including lot repainting). I believe it was covered because the OC was liable to pay for this damage and had a “liability to others” cover in the policy.
Michael Teys (strata lawyer) discusses this on his blog “Lots Damaged By Events on Common Property”: https://wiki.blockstrata.com.au/2014/09/lots-damaged-by-events-on-common-property/
Michael says “If the owners corporation is liable, then it doesn’t matter if the owners corporation insurance policy covers the lot owner’s damage or not”.