Defects Liability Period (DLP): Insurance Responsibilities Explained

Completing a construction project does not always mean a contractor’s responsibilities have ended. In Malaysia, most construction contracts include a Defects Liability Period (DLP), during which contractors remain responsible for rectifying defects discovered after practical completion.

Understanding your insurance obligations during this period is essential. Many contractors assume that once the project is handed over, their insurance coverage automatically ends. In reality, failing to maintain appropriate insurance during the DLP can expose contractors to costly repairs, legal disputes, and contractual breaches.

This guide explains the Defects Liability Period, the insurance policies that may apply, and how contractors can manage risks effectively.

What Is the Defects Liability Period (DLP)?

The Defects Liability Period is a contractual period after practical completion during which the contractor is required to repair defects arising from workmanship, materials, or construction quality.

The duration varies depending on the contract but is commonly:

• 12 months
• 18 months
• 24 months

The exact period should always be confirmed in the building contract.

During the DLP, the project owner has the right to notify the contractor of defects that require rectification within the agreed timeframe.

Why Is DLP Important?

The DLP protects both the project owner and the contractor.

For project owners, it provides assurance that defects discovered after occupation will be repaired without additional construction costs.

For contractors, it offers an opportunity to rectify genuine defects before final project completion and release of retention sums or performance security.

Does Contractor’s All Risks (CAR) Insurance Continue During the DLP?

One of the most common misunderstandings is that the Contractor’s All Risks (CAR) Insurance automatically provides protection throughout the Defects Liability Period.

This is not always the case.

Most CAR policies cover construction works only until practical completion unless they include a Maintenance Period Extension or similar endorsement.

Contractors should review their policy carefully and confirm:

• Whether maintenance period cover has been included
• The duration of the maintenance cover
• What events are covered
• Any exclusions that apply during the DLP

Insurance Policies to Review During the DLP

1. Contractor’s All Risks (CAR) Insurance

Review:

• Policy expiry date
• Maintenance extension
• Remaining insured value
• Scope of cover after practical completion

2. Public Liability Insurance

Even after handover, contractors returning to site to repair defects may still create risks to members of the public or neighbouring properties.

Public Liability Insurance should be reviewed to ensure adequate protection during defect rectification works.

3. Contractors’ Plant & Machinery Insurance

If heavy equipment returns to site during the DLP, confirm that machinery insurance remains valid.

4. Workmen’s Compensation / Employer’s Liability Insurance

Any workers carrying out rectification works remain exposed to workplace risks.

Employers should ensure statutory insurance requirements continue to be met.

5. Professional Indemnity Insurance

For design-and-build projects or projects involving professional advice, Professional Indemnity Insurance may also remain relevant if design-related defects arise.

Common Defects During the DLP

Typical defects include:

• Water leakage
• Roof leaks
• Cracked walls
• Concrete shrinkage cracks
• Tile debonding
• Settlement issues
• Waterproofing failures
• Door and window alignment issues
• Mechanical and electrical defects
• Surface finishing defects

Prompt rectification helps reduce disputes and protects the contractor’s reputation.

Contractor Responsibilities During the DLP

Contractors should:

• Respond promptly to defect notifications
• Investigate reported defects
• Arrange rectification works
• Maintain proper records
• Notify insurers if an incident may give rise to a claim
• Ensure subcontractors fulfil their warranty obligations
• Maintain safe working practices during repairs

Ignoring defect notifications can result in legal disputes or the project owner appointing another contractor and recovering the costs.

Common Insurance Mistakes During the DLP

Many contractors unintentionally leave themselves exposed.

Common mistakes include:

Assuming CAR Insurance Continues Automatically

Many policies end at practical completion unless extended.

Allowing Public Liability Insurance to Expire

Repair works may still expose contractors to third-party liability.

Failing to Notify Insurers

Delays in reporting incidents may affect claim outcomes.

Poor Documentation

Missing inspection reports or repair records can complicate future disputes.

Not Reviewing Contract Requirements

Some contracts specify insurance obligations beyond standard market practice.

DLP Insurance Checklist

Before entering the Defects Liability Period, confirm the following:

Insurance Review

☐ CAR Insurance reviewed

☐ Maintenance Period Extension confirmed

☐ Public Liability Insurance active

☐ Contractors’ Plant Insurance reviewed

☐ Professional Indemnity reviewed (if applicable)

Contract Review

☐ DLP duration confirmed

☐ Insurance obligations reviewed

☐ Performance Bond status confirmed

☐ Retention release requirements understood

Documentation

☐ Insurance certificates available

☐ Claims history updated

☐ Defect reporting process established

☐ Site inspection reports maintained

Risk Management

☐ Repair team assigned

☐ Subcontractor responsibilities confirmed

☐ Incident reporting procedure established

☐ Safety measures maintained during repairs

Best Practices for Managing DLP Risks

To minimise disputes and unexpected costs:

• Review insurance before practical completion.
• Ensure maintenance cover is in place if required.
• Keep accurate defect records.
• Conduct scheduled inspections during the DLP.
• Respond to defect notifications promptly.
• Maintain communication with the project owner.
• Review subcontractor warranties and insurance obligations.

A proactive approach protects both the contractor’s financial interests and long-term client relationships.

How NVS Sdn. Bhd. Can Help

At NVS Sdn. Bhd., we help contractors, developers, consultants, and engineering firms manage construction risks throughout the project lifecycle—including the Defects Liability Period.

Our specialists can advise on:

• Contractor’s All Risks (CAR) Insurance
• Maintenance Period Extensions
• Public Liability Insurance
• Contractors’ Plant & Machinery Insurance
• Professional Indemnity Insurance
• Workmen’s Compensation Insurance
• Performance Bonds and Bank Guarantees
• Tailored insurance programmes for construction projects

Whether your project is approaching practical completion or entering the Defects Liability Period, we can help review your insurance arrangements to reduce risk and support contractual compliance.

Speak to Our Construction Insurance Specialists

Before your project enters the Defects Liability Period, let NVS Sdn. Bhd. review your construction insurance programme.

Our team can identify potential coverage gaps, explain your contractual obligations, and recommend insurance solutions that help protect your business, your workforce, and your clients.