@just get on with it said:
KP – I believe that Investor13 is probably referring to a claim against the Home Owners Warranty Insurer since we are talking about failure of waterproofing membrane – not a claim against the OC’s building insurance.
I believe you could be right as I didn’t understand why the Strata insurance had accepted responsibility for what was a building defect. So OP needs to examine what the Product Disclosure Statements (PDS) says for the Warranty Insurance.
BUT if the insurance firm has already agreed to provide temp accommodation in writing just take them up on it and again let the builder and insurance firm fight it out.
Seems to me the insurance firm dropped a clanger agreeing to relocation costs if it is not covered by the PDS. But if OP has this in writing the insurance firm will have trouble wriggling out of paying for it.