Theoretically the system is set up to do this but in practice its complex and takes time.

Insurers and lawyers can have a field day over liability. Was it the builders fault? The structural engineer? The architect? Or caused after construction? All of these will have their own insurance and all will avoid paying unless its clear to a court that its their liability.

Of course major issues like this dont happen so often so theres little to reference. But for example there was a recent case where the owners corporration insurance refused to pay for a roof flying off after a storm because in their view poor construction was to blame. Its a lot of time for residents to be without a home while these things are sorted

https://www.smh.com.au/national/nsw/insurer-rejects-stormdam...