Locked Out by Time: NSW Supreme Court Clarifies Long Stop Limits in Home Warranty Claims

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In a decision that will resonate across the construction, insurance and strata management sectors, the Supreme Court of New South Wales has delivered a clear message: when it comes to statutory home warranty insurance, timing is everything.

The recent case of The Owners – Strata Plan No. 81376 v Dyldam Developments Pty Ltd [2025] NSWSC 438 (Dyldam Developments), decided by Justice Stevenson on 8 May 2025, underscores the unforgiving nature of statutory limitation periods under the Home Building Act 1989 (NSW)(HBA). This ruling has reinforced the strict limits of what can be claimed, when and how – particularly in relation to latent defects and historical correspondence.

Understanding the Framework

Home warranty insurance plays a vital role in protecting homeowners and strata schemes from defective residential building work in New South Wales. Under the HBA, builders and developers are required to obtain statutory warranty insurance for residential projects valued over a certain threshold ($20,000). This insurance provides cover to property owners in cases where the builder is insolvent, dead or has disappeared, and there are defective and/or incomplete works.

Within this statutory framework, two key provisions of the HBA govern the timing and scope of insurance claims:

  • Section 92(5) provides that a contract of insurance is in force for residential building work (the “original work”) extends to any further work carried out by the same builder by way of rectification of the original work. Accordingly, a separate insurance contract is not required in relation to the rectification work.
  • Section 103BC, often referred to as the “long stop” provision, imposes a strict limit of 10 years from the date of completion of the building work. After this period, no claim can be brought under the policy – regardless of when a defect is discovered or how serious it may be.

These provisions aim to balance consumer protection with commercial certainty for insurers and builders. However, in practice, they can have  consequences for owners who discover structural issues or latent defects years after completion.

Background – The Facts

The dispute in Dyldam Developments arose from a multi-unit residential development completed in 2012. Following the collapse of the builder and developer – both of whom entered administration in 2022 – the only active defendant remaining was Lumley Insurance (part of Insurance Australia Limited), which had issued the residential building insurance policy in 2006.

After discovering building defects, the Plaintiff, (the Owners Corporation), claimed that correspondence with Lumley Insurance in both 2012 and again in 2022 constituted formal insurance claims. They argued that the insurer remained liable for the defective works, despite the significant passage of time.

Lumley Insurance denied liability, asserting that the correspondence in question did not constitute valid claims under the policy and that any entitlement had been extinguished by the operation of the 10-year statutory limitation period – specifically, section 103BC of the HBA.

This case gave the NSW Supreme Court an opportunity to clarify the scope and operation of statutory limitation provisions in relation to home building insurance – particularly whether informal communications satisfy the requirements of a formal insurance claim, and how long stop limitation is to be applied.

The Dispute: What Constitutes a “Claim”?

At the heart of the case was whether the correspondence – letters sent in 2012 and again in 2022 – constituted valid claims under the home warranty insurance policy issued by Lumley Insurance. The Owners Corporation argued that the insurer’s obligations were triggered by these letters, as they related to building defects from work carried out by Dyldam Developments.

The insurer maintained that the communications did not meet the policy’s requirements for a formal claim – and, in any case, that the time limit for bringing a claim had long since expired.

Legal Terrain: A Matter of Interpretation

The case required careful consideration of statutory interpretation and the construction of the insurance policy. Key provisions of the Home Building Act examined by the Court included:

  • Section 92(5), which addresses how insurance policies apply to rectification work performed by the same builder;
  • Section 103BC, the so-called “long stop” provision, which caps liability at 10 years from the completion of work, regardless of when defects become known.

Justice Stevenson also considered foundational High Court authorities such as McCann v Switzerland Insurance Australia Ltd (2000)[1] and Project Blue Sky Inc v Australian Broadcasting Authority (1998),[2] along with recent guidance from the NSW Court of Appeal in Drummond v Gordian Runoff Limited CAN 052 179 647 [2024].[3]

The Decision: A Firm “No”

The Court was asked to determine several key questions, including:

  • Did the 2012 letter constitute a valid claim under the insurance policy?
  • Were the 2022 letters submitted within time to qualify as valid claims?
  • Could any statutory interpretation operate to circumvent the 10-year long stop?

The Court’s answer to all three questions was a resounding “no.”

Justice Stevenson held that the correspondence did not meet the policy’s definition of a claim. Even if it had, the 10-year long stop limitation period under section 103BC had expired. Section 92(5) did not operate to extend or reset the limitation period – the insurer’s liability was extinguished.

Why It Matters

This decision is a clear reminder to owners’ corporations, strata managers and construction professionals: the statutory protections afforded by home warranty insurance are strictly time-bound.  The clock starts ticking at the date of completion, not when a defect is discovered or discussed.

Insurers will welcome the certainty provided by the Court’s interpretation. Builders and developers should also consider the implications for rectification work and insurance coverage. Most importantly, property owners and strata committees must take early and formal steps when pursuing defect claims – delays can be fatal.

A Turning Point for Policyholders?

This judgment may prompt calls for legislative reform, particularly from strata and consumer advocacy groups. Given that many building defects are latent and may not be discovered until well after completion, the strict application of the 10-year long stop can leave property owners without recourse.

Whether Parliament will revisit the timeframes under the HBA remains to be seen. For now, however, the position is clear: home warranty claims must be made strictly within the timeframes prescribed by statute and the policy. Anything less will likely be dismissed – regardless of merit.

If you’re involved in construction disputes, strata law or insurance litigation, this case is essential reading. Feel free to reach out or connect for further discussion on its implications.

 

Bradbury Legal is a specialist building and construction law firm. If you or anyone you know requires advice or assistance, reach out to us on (02) 9030 7400, or email us at info@bradburylegal.com.au to see how we can assist you.

[1] 203 CLR 579; [2000] HCA 65.

[2] 194 CLR 355; [1988] HCA 28.

[3] NSWCA 239.