Construction defects are among the most common sources of legal disputes in Singapore's residential property sector. Water seepage, glass panel failures, structural cracks, and waterproofing failures have all featured in reported disputes between developers, contractors, and homeowners in recent years. When these disputes reach the courts, the financial consequences for contractors and developers can be significant.
For contractors, developers, and building professionals, the insurance questions that arise from a defect dispute are specific and worth understanding before a claim arrives.
What the defects liability period means and why it is not the end of the story
When a residential development receives its Temporary Occupation Permit and units are handed over to purchasers, a Defects Liability Period (DLP) begins. Under Singapore law, developers of new private residential properties are legally required to provide a 12-month DLP from the date of key collection. During this period, the developer is obligated to rectify defects identified by owners at no cost.
The DLP is not the outer limit of a contractor's or developer's exposure. Under Singapore construction law, claims in contract or tort may be brought within six years from the accrual of the cause of action. For latent defects, which are defects that are not discoverable through reasonable inspection and only become apparent over time, the limitation period runs from the date the defect was or ought reasonably to have been discovered, with a three-year limitation period from that discovery date. This means a contractor who completed work years ago may still face a claim for defects that only became apparent recently.
The practical consequence is that a contractor's liability for construction defects can extend well beyond the completion of the project and well beyond the DLP. The insurance that is supposed to address this exposure needs to reflect that timeline.
In Thio Keng Thay v Sandy Island Pte Ltd, the Singapore court ordered the developer of a Sentosa Cove villa to pay approximately S$1.3 million in damages, including S$876,000 for contractor rectification costs and S$297,500 for lift rectification works, according to Singapore Legal Advice. The case illustrates that where defects are extensive and the DLP has expired without resolution, the financial quantum of a court-ordered remedy can be significant.
What Contractor's All Risk insurance covers and what it does not
Contractor's All Risk (CAR) insurance is the primary insurance product for the construction phase of a project. It covers physical loss or damage to the contract works during the construction period and the third-party liability arising from construction activities while the project is underway.
CAR insurance is a construction-phase product. Once the project reaches practical completion and the works are handed over to the developer or owner, the CAR policy's coverage of the contract works ends. The operational phase property risks transfer to the owner's own property insurance at that point.
For construction defect claims arising after practical completion, CAR insurance does not respond. A defect claim brought by a homeowner against a contractor two years after handover is not a CAR insurance claim. It is a contractual or tortious claim for which the contractor needs either a professional indemnity policy or a latent defects warranty, depending on the nature of the defect and the legal basis of the claim.
This is one of the most common gaps in how contractors understand their own insurance exposure. The CAR policy addresses the risk while the contractor is on site. After handover, different cover is needed.
Professional indemnity for design-related defects
Where a construction defect arises from a design error, the liability may rest with the party responsible for the design rather than, or in addition to, the party responsible for the construction. In Singapore's construction sector, design responsibility may rest with the architect, the structural or mechanical and electrical engineer, the developer's own design team, or in design-and-build contracts, the main contractor.
Professional indemnity (PI) insurance covers claims made against a professional for acts, errors, or omissions in the provision of professional services. For a design professional whose work is later found to have caused or contributed to a construction defect, the PI policy responds to the legal defence costs and any damages arising from that claim.
PI policies are written on a claims-made basis. The policy that responds is the one in force when the claim is made, not the one in force when the design work was produced. A design professional who has allowed their PI cover to lapse after completing a project has no coverage for a claim that arrives after the lapse, even if the design was produced while a prior policy was active.
For defects that include both workmanship issues such as water seepage and what may be design or specification issues such as glass panel failure, the question of whether the claim is properly characterised as a construction defect, a design defect, or both affects which policy responds and which professional or contractor carries the primary exposure.
The public liability dimension after handover
Construction defect claims occasionally have a third-party dimension that goes beyond the direct contractual relationship between the owner and the contractor. Where a defect in one unit causes damage to an adjacent unit, damage to common property, or injury to a resident or visitor, third-party liability claims can arise alongside the primary defect claim.
Water seepage is the most common example. A waterproofing defect in one unit that causes seepage damage to the unit below creates a third-party property damage claim from the affected lower unit owner. During the construction phase, third-party liability of this kind is addressed by the CAR policy's third-party liability section. After practical completion, it becomes a matter for the contractor's public liability policy or, if the defect is design-related, the design professional's PI policy.
For residents of a strata development, common property defects that affect all units or the development as a whole are typically the responsibility of the Management Corporation Strata Title (MCST), which holds its own insurance programme for common property. The MCST's programme generally includes property insurance for the building structure and public liability for common areas, but does not extend to defect claims against the original contractor or developer.
What to confirm in a construction insurance programme
For contractors, developers, and building professionals working on Singapore residential or commercial projects, three questions are worth confirming.
Does the contractor hold PI cover that extends beyond practical completion? CAR insurance ends at handover. If the contractor has any design responsibility, PI cover is needed on a continuing basis to address claims that may arrive years after the project is complete.
What is the retroactive date on the PI policy? A PI policy covering only conduct from its inception date forward does not cover claims arising from work done before that date. Where a contractor or design professional has been involved in projects over many years, the retroactive date should reflect the full period of that professional engagement.
Does the public liability programme address post-completion third-party claims? Third-party liability arising from defects discovered after handover is not automatically covered by the construction-phase CAR policy. A continuing public liability programme is needed to address claims that arise in the operational phase.
You can read more about our CAR cover, professional indemnity cover, and public liability cover on the products page.
If you are a contractor, developer, or building professional in Singapore and would like to understand how your current insurance programme addresses your post-completion liability exposure, we would be glad to work through it with you.
This article provides general information only. It is not insurance or legal advice. The Thio Keng Thay v Sandy Island Pte Ltd case details are sourced from Singapore Legal Advice. Singapore construction law limitation periods sourced from Chambers Construction Law 2026, Singapore chapter, Drew and Napier. The defects liability period framework is sourced from Singapore Legal Advice published guidance on the Defects Liability Period in Singapore. Policy availability, terms, conditions, and exclusions vary by insurer and product, and cover is subject to the full policy wording. Please contact TZY CO for advice on your specific situation.