Water damage to common and lot property and what’s covered by the OC/BC’s compulsory building insurance is a bit complicated.
AFAIK and in my experience from being involved in quite a few insurance claims it tends to work as follows:
1. Liability for any water damage usually requires establishing negligence.
2. For a burst pipe or water from storm damage, establishing negligence is often impossible, so usually no one, including the OC/BC, is deemed to be legally liable in those situations. Letting a bathtub overflow or failing to maintain a gutter might be deemed to be negligent so there could be liability on a lot occupier or the OC/BC in those situations.
3. The OC/BC’s compulsory building insurance usually covers much more that just common property. It also tends to cover building elements that can belong to the lots including lot fixtures and fittings. It does not cover lot contents.
4. If a burst pipe occurs for which there is no liability, the affected parties have to repair their own property. So the OC/BC must repair common property and common contents while the lot owners must repair lot property and lot contents.
5. The OC/BC’s building insurance generally won’t cover the cost of repairing the burst pipe itself. But it will usually cover the consequential damage caused to insured building elements and common property contents. Both the OC/BC and the lot owners can choose to claim on the OC/BC’s compulsory building insurance for items that are covered by the policy. That can include lot fixtures and fittings but not lot contents.
6. If a water leak occurs for which there is liability due to negligence, the affected parties can either claim on their own insurance or claim against the negligent party. If the OC/BC was deemed negligent, the legal liability cover in its compulsory building insurance should hopefully cover any successful negligence claim made against it.
7. If an insurance claim is made in the above situation, the insured party forgoes any further right to claim from the negligent party. The insurance company gets that right. OC/BC insurers will not further purse negligent lot owners as they are members of the OC/BC but they have been known to further pursue negligent tenants.
8. Who pays the excess in the event of an OC/BC compulsory building insurance can vary according to legislation that differs around Australia and sometimes is decided by the OC/BC (eg at each AGM).
It’s complicated, so no wonder it’s hard to understand!