Does insurance still apply during the Defects Liability Period?

Yes, but only if it was extended. PAM 2018 does not let the policy run out quietly at Practical Completion. It requires the extended maintenance cover to run for the Defects Liability Period plus a further three (3) months, and requires that extension to be arranged not less than one (1) month before the insurance currently in force expires. A CAR or worker policy nobody touched after handover has already lapsed by the time a defect shows up at month eight — the wording never protected it that long in the first place.

What PAM 2018 actually demands

The same formula appears five separate times in PAM 2018 — once for the worker policy covering local workers outside the social security scheme (Clause 19.3), once for foreign workers (19.4), and once in each of the three versions of the CAR clause (20.A, 20.B, 20.C, depending on which one survived being struck out). Every one of the five says the same thing in the same words:

“The insurance policy shall be valid up to the Completion Date and the extended maintenance cover shall be for the Defects Liability Period plus a further three (3) Months. If the Contractor is unable to complete by the Completion Date or complete making good the Defects within the insured period, he shall ensure that the insurance is accordingly extended for the same period of delay. The Contractor shall effect the said extension of the insurance cover not less than one (1) Month before the expiry of the insurance currently in force.”

Three separate obligations sit inside that one paragraph. First, the base term: cover to the Completion Date, then extended for the Defects Liability Period plus three months on top — not the DLP alone. Second, if the job runs late, the cover has to be extended by the same period of delay; a slipped Completion Date does not shrink the insurance requirement, it pushes the whole schedule out. Third, that extension is not something to arrange when it is convenient — it has to be in place not less than one month before the existing policy expires.

The Defects Liability Period itself is defined at Clause 15.4 as the period stated in the Appendix, and where the Appendix is left blank, PAM 2018 defaults it to twelve months running from the date stated in the Certificate of Practical Completion. So for a typical job with no special Appendix entry, "DLP plus three months" usually means roughly fifteen months of cover running past Practical Completion — and that is before any delay extension.

What the maintenance extension pays for — and what it does not

Having the extension in force is not the same as having the extension pay for what a contractor usually wants it to pay for. Standard Malaysian CAR wordings carry a special exclusion that applies for the life of the policy, including during the maintenance extension: the cost of replacing, repairing or rectifying defective material or workmanship is excluded. That exclusion is limited to the items directly affected — it does not exclude loss or damage to correctly executed items resulting from an accident caused by that defective material or workmanship.

Read that as two different claims. A waterproofing membrane fails and lets water into a finished unit below, staining the ceiling and damaging fittings that were installed correctly — the damage to the ceiling and fittings is the kind of loss the policy is there for. Re-laying the waterproofing membrane itself is not; that is redoing defective work, and it sits outside what a CAR policy — even one correctly extended through the Defects Liability Period — was ever written to fund. This is not one insurer's house rule. The same exclusion, close to word for word, sits in the standard CAR wordings checked for this page.

For the liability side, PAM 2018 asks for something different but related. Clause 19.1(d) requires the public liability policy to carry an endorsement for automatic extension or renewal of the insurance up to the issuance of the Certificate of Making Good Defects — the certificate the Architect issues under Clause 15.6 once all defects notified under 15.4 have been made good. That endorsement is one of four named in Clause 19.1 and, as covered on what a contractor needs before tendering, it is one of the ones most often missing from the policy that actually gets handed over.

The delay trap

The scenario that catches contractors is rarely a forgotten renewal on an otherwise normal job. It is a job that ran late. Picture a shop-lot block handed over in stages — a few units at a time as each block is finished. Under Clause 16.1(b), Practical Completion and the Defects Liability Period for each occupied part are deemed to start on the date the employer actually takes possession of that part, not on one single date for the whole project. Every staged handover starts its own clock, and the insurance extension has to be worked out against each of those dates, not against the contract's original completion date.

Now add ordinary delay. The final block finishes three months behind programme. Nobody goes back to the insurer to push the CAR's expiry date out by that same three months, because nobody thinks about the policy again once the certificates are chased and the retention is released. The contractor is called back at month ten to look at a leak. The policy that was meant to still be running has already lapsed — not because the contract allowed it to, but because the one-month-ahead extension that PAM 2018 requires was never arranged.

Before your Defects Liability Period starts

• Confirm the actual Defects Liability Period from the contract Appendix under Clause 15.4 — do not assume the twelve-month default applies.
• Get the Certificate of Practical Completion date in writing. The DLP, and the DLP-plus-three-months insurance term, both run from that date.
• Diary the extension at least one month before the policy's current expiry — not one month before the DLP ends.
• If handover is staged under Clause 16.1, work out the DLP and the insurance extension separately for each occupied part.
• If Practical Completion or the making-good of Defects runs late, extend the insurance by the same period of delay — it does not extend itself.
• Check the schedule states cover to "the Defects Liability Period plus three months," not just to the Completion Date.
• Confirm the 19.1(d) automatic extension endorsement is actually on the liability policy, not assumed to be standard.
• Know what the extension will and will not pay for: damage caused by defective work to correctly executed items, yes; the cost of redoing the defective work itself, no.

Frequently asked

Does insurance still apply during the Defects Liability Period?

Only if it was extended. PAM 2018 requires the extended maintenance cover to run for the Defects Liability Period plus a further three months, requires that cover to be extended by the same period if completion or making good the Defects runs late, and requires the extension to be arranged not less than one month before the insurance currently in force expires. A policy nobody extended has already lapsed by its original expiry date, whether or not the Defects Liability Period is still running.

How long must a contractor extend insurance for after Practical Completion?

Under PAM 2018, cover runs to the Completion Date and the extended maintenance cover has to run for the Defects Liability Period plus a further three months. Where the contract Appendix does not state a Defects Liability Period, PAM 2018 defaults it to twelve months from the date in the Certificate of Practical Completion, which puts the total insurance term at roughly fifteen months past Practical Completion before any delay is added. If completion or making good the Defects is delayed, the insurance must be extended by the same period of delay.

Does the Defects Liability Period insurance cover the cost of fixing the contractor's own defective work?

No. Standard Malaysian CAR wordings exclude the cost of replacing, repairing or rectifying defective material or workmanship, limited to the items directly affected. What is not excluded is loss or damage to correctly executed items resulting from an accident caused by that defective material or workmanship — for example water damage to finished work below a failed waterproofing membrane. So the extension can pay for the consequence of a defect, but not for redoing the defective work itself.

What happens to the insurance if Practical Completion is delayed?

PAM 2018 requires the insurance to be extended by the same period as the delay — the requirement does not lapse or shrink because the job overran. That extension still has to be arranged not less than one month before the policy currently in force expires. On a staged handover under Clause 16.1, Practical Completion and the Defects Liability Period for each occupied part start on the date that part is actually taken over, so each stage needs its own extension worked out against its own dates.

Clause references are to the PAM 2018 standard form of building contract. Other contract forms, including the PWD / JKR family used on government work, are structured differently and the clause numbers do not correspond. The Defects Liability Period and Completion Date figures in your own contract Appendix govern over any default described here. This page is general information, not advice on a specific policy.