$2 Million Penalty for Insurance Delays That Left a Family Living in a Rotting Home

What started as storm damage to a family’s roof became a years-long ordeal that eventually left their entire house uninhabitable. Now, an Australian insurance company has been ordered to pay $2 million after admitting to serious failures in handling the homeowners’ claim.

The family watched their home deteriorate as water seeped inside and mold spread. Repairs were slow to materialize, and the insurer later reversed its earlier decision to cover some of the roof damage.

The Federal Court of Australia imposed the penalty on Hollard Insurance Partners on Oct. 9, following legal action brought by the country’s corporate regulator.

The family ultimately received approximately $1.55 million in insurance payments, although resolving the claim took more than three years. The separate $2 million penalty is payable to the Australian government.

Storm Damage Turns into Years of Deterioration

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The trouble began on Oct. 29, 2021, when a powerful storm swept through Scotsburn, Victoria, damaging the roof of the family’s home. Rainwater soon made its way inside, soaking one of the bedrooms.

According to the Federal Court’s judgment, the family’s son had to sleep on an inflatable mattress in the living room after his own room was rendered “uninhabitable.”

The homeowners lodged an insurance claim two days later. Although the insurer initially approved repairs for portions of the damage, the process stalled.

An inspector working for the insurer’s appointed contractor determined in November 2021 that a structural engineer was needed to assess the roof damage. Hollard approved the assessment in January, yet its contractor didn’t actually engage an engineer until July, more than eight months after the need was first identified. Meanwhile, temporary repairs had failed to stop rainwater from entering the house.

By November 2022, Hollard had offered the homeowners $1,000 to settle a complaint about how their claim was being handled. The couple questioned the terms of the offer rather than accepting it outright, and the dispute continued.

Around the end of March 2023, the family finally moved into temporary accommodation after months of delays. Their home was considered unsafe to occupy, with moisture and mold having spread through the property.

The following month, Hollard denied coverage for part of the roof damage, maintaining that structural problems weren’t caused by the storm.

The homeowners challenged the decision through the Australian Financial Complaints Authority, which ruled in their favor in November 2023. Hollard subsequently arranged further assessments, and the family opted for a cash settlement rather than having the insurer’s contractor complete the repairs.

By October 2024, the homeowners were telling Hollard that the house needed to be rebuilt. They later told Hollard they wanted to sell the property and purchase another home.

Insurer Ordered to Pay $2 Million Penalty

The family’s experience prompted action from the Australian Securities and Investments Commission (ASIC), which filed proceedings against Hollard in April 2025.

According to ASIC‘s Oct. 9 announcement, the company admitted that its delays, communication failures, and inadequate response breached its legal duty to act with utmost good faith.

Federal Court Justice Catherine Button described some of Hollard’s failures as “hard to fathom,” particularly the eight-month delay in appointing an engineer as the house continued deteriorating. She said the family’s experience “must have been stressful and traumatic.”

In a statement to ABC News, the insurer apologized and acknowledged that its handling of the claim had fallen substantially short of its obligations.

ASIC Chair Sarah Court said the ruling marked Australia’s first civil penalty against an insurer for breaching its duty of utmost good faith.

The decision also established a financial consequence beyond the family’s eventual insurance settlement, with Hollard ordered to pay the $2 million penalty and ASIC’s legal costs.