Section 54 — Your Right to Choose Your Own Contractor

Section 54 of the Insurance Contracts Act 1984 (Cth) is one of the most important consumer protections in Australian insurance law. It prevents insurers from refusing or reducing a claim based on acts or omissions by the insured that occurred after the contract was entered into — provided those acts or omissions did not cause or contribute to the loss.

In plain language: if your policy contains a term that says you must use the insurer's “preferred”, “approved”, or “panel” contractor, and you choose to use a different qualified contractor instead, the insurer cannot refuse your claim on that basis alone.

The relevant provision states (in part):

“Subject to this section, where the effect of a contract of insurance would, but for this section, be that the insurer may refuse to pay a claim, either in whole or in part, by reason of some act of the insured or of some other person… the insurer may not refuse to pay the claim by reason only of that act.”

Section 54 was specifically designed to prevent insurers from using technical policy breaches — like failing to use a nominated contractor — as grounds to deny otherwise valid claims. The principle is straightforward: if your property was genuinely damaged by an insured event, the insurer should pay the claim. Your choice of who repairs the damage does not change the fact that the damage occurred and is covered under your policy.

Section 54 provides several layers of protection for Australian property owners making insurance claims:

• Freedom to choose your contractor — You are not locked into using the insurer's panel contractor, preferred builder, or nominated repairer. You can engage any suitably qualified and licensed professional to perform the restoration work.
• Protection against technical policy breaches — If you breach a policy condition (such as a “preferred contractor” clause) but that breach did not cause or contribute to the loss, the insurer cannot use it to deny the claim. The damage was caused by the insured event (flood, fire, storm), not by your choice of contractor.
• Emergency response protection — In an emergency, you may need to act immediately — engaging the first available qualified contractor to stop damage from worsening. Section 54 protects you from being penalised for taking reasonable emergency action without waiting for insurer direction.
• Protection against unreasonable insurer conditions — Some policies include clauses requiring the insured to notify the insurer before commencing any work, use only approved contractors, or obtain pre-approval for expenditure. While these clauses exist in the policy, Section 54 limits the insurer's ability to rely on them to deny a claim — particularly where compliance was impractical or the non-compliance was harmless.
• Proportionality — Even where Section 54 allows the insurer to reduce a claim (rather than deny it outright), the reduction must be proportionate to the actual prejudice the insurer suffered. If your choice of contractor caused no prejudice to the insurer (e.g., the work was done properly, at market rates, with full documentation), there is no basis for any reduction.

Despite Section 54, many insurers actively discourage policyholders from choosing independent contractors. Recognising these tactics helps you respond appropriately:

• “Your policy requires you to use our preferred contractor” — This is the most common claim, and it is misleading. While the policy may contain such a clause, Section 54 prevents the insurer from relying on it to deny your claim, provided the non-compliance did not cause or contribute to the loss.
• “We can't guarantee the work if you use your own contractor” — This is true but irrelevant. The insurer guarantees work done by their panel contractor because they have a commercial agreement with that contractor. Your independent contractor provides their own workmanship guarantee — and you can also require it contractually. The insurer's guarantee obligation under the policy relates to the claim payment, not the contractor's workmanship.
• “Our contractor is already available and can start sooner” — This may or may not be true. In catastrophic events (storms, floods), insurer panels are often overwhelmed, resulting in weeks or months of delay. Independent contractors may actually be available sooner.
• “Your contractor's quote is too high — we'll only pay our panel rate” — The insurer is entitled to pay a “reasonable” cost for the work, but “reasonable” is based on market rates for qualified tradespeople — not the discounted rates they have negotiated with their panel. If your contractor's quote reflects genuine market rates for IICRC-certified work, the insurer should not substitute their below-market panel rate.
• “We need to approve the scope before any work can begin” — For non-emergency work, the insurer may require scope approval. However, for emergency make-safe work (stopping water, preventing further damage, decontaminating hazards), waiting for approval can cause significant additional damage. Section 54 protects your right to take reasonable emergency action.
• Offering a low cash settlement — Some insurers offer a cash payout based on their panel contractor's below-market quote. This is an attempt to settle the claim cheaply. You are not obligated to accept. See our guide on when to accept — and reject — a cash settlement.

Knowing your rights is one thing. Exercising them effectively is another. Follow these practical steps:

1. Notify your insurer promptly — Lodge your claim as soon as possible after the event. Notify the insurer that damage has occurred and that you are taking steps to mitigate further loss. This demonstrates good faith and protects your position.
2. Engage your own qualified contractor — Choose an IICRC-certified restoration professional. Ensure they are properly licensed and insured. The contractor's qualifications are your strongest defence against any insurer argument that you used an “unqualified” provider.
3. Document everything from the start — Take your own photos before the contractor arrives. Record the date, time, and nature of the damage. Keep all communications with the insurer in writing (email, not phone calls). Written records are evidence; verbal conversations are not.
4. Inform the insurer of your contractor choice in writing — Send an email (not a phone call) advising the insurer that you have engaged [contractor name], who is IICRC-certified, fully licensed, and fully insured. State that you are exercising your right under Section 54 of the Insurance Contracts Act 1984 to choose your own qualified contractor. This creates a written record.
5. Obtain comprehensive documentation from your contractor — Your contractor should provide photographic evidence, moisture mapping data, thermal imaging (where relevant), a detailed scope of works with line-item costings, daily progress reports, and a completion report. This documentation is your claim evidence.
6. Submit the documentation to your insurer — Provide the full documentation package to your insurer in support of your claim. The more thorough the documentation, the harder it is for the insurer to dispute the scope or cost.
7. If the insurer pushes back — escalate formally — If the insurer refuses to process your claim, disputes the scope, or insists on using their panel contractor, lodge a formal complaint through their Internal Dispute Resolution (IDR) process. If IDR fails, escalate to AFCA (Australian Financial Complaints Authority). Reference Section 54 explicitly in all written communications.

The most common reason insurers challenge independent contractor claims is insufficient documentation. If your contractor provides a single invoice with no supporting evidence, the insurer can legitimately question the scope and cost. Disaster Recovery contractors eliminate this problem.

The documentation package includes:

• Pre-work photographic evidence — Time-stamped photos of all visible damage before any work commences. This establishes the baseline condition and proves the damage existed.
• Moisture mapping and thermal imaging — Quantitative data proving the extent of concealed damage. This is the evidence that justifies scope beyond visible damage — and it is the evidence most panel contractors do not provide.
• Detailed scope of works — Every task, material, and cost itemised. This allows the insurer to review line by line and confirms that the work is reasonable, necessary, and properly priced.
• Daily drying and progress logs — Equipment placement records, daily moisture readings, and photographic progress. This demonstrates that drying and remediation followed IICRC S500/S520 protocols and that each step was necessary.
• Completion report and clearance data — Final moisture readings confirming the structure has returned to normal levels. Air quality results where applicable. Photographic evidence of completed restoration.

Work begins immediately without waiting for insurer approval — stopping the damage from worsening is always the priority. After make-safe, your contractor provides a formal contract with full terms and conditions.

We bill you directly. You control the process. You submit the documentation to your insurer and claim reimbursement. Full claims documentation is provided with every job. Payment plans are available through Blue Fire Finance if you need to manage cash flow while your claim is processed.