In Victoria, all registered builders must purchase a DBI policy on behalf of the owners for all major domestic building projects $16,000 or more.

The purpose of a DBI policy is to provide the owner with a monetary sum to ensure that they are covered for loss in relation to non-completed building work or defective building work. This policy can be obtained from a designated insurance broker.

The owner can make a claim under their DBI policy if one or more of the following scenarios occurs:

1. The builder dies
2. The builder disappears
3. The builder becomes insolvent; or
4. The builder fails to adhere to a tribunal or court order.

The policy will indemnify the owner in respect of loss or damage resulting from:

• Non-completion of the domestic building work;
• Domestic building work that is defective and one of the triggers listed above applies;
• A breach of any implied warranties as listed under Section 8 of the Domestic Building Contracts Act 1995 (Vic) (DBCA); 
• A failure to maintain a standard or quality of building work specified in the domestic building contract; and or
• The builder's conduct in connection with the domestic building contract when it contravenes a trade practices provision.

A DBI claim is only valid if one of the above triggers take place. Therefore, if the builder remains alive, is contactable, and remains trading, the builder is expected to return to site, inspect the supposed defective works and determine whether the owner's claims are within the builder's scope of works.

Should the defective works be within the builder's scope of works, the builder is expected to remedy these works. Otherwise, the owner has 10 years to commence a legal proceeding against the builder for failing to uphold their statutory warranties under Section 8 of the DBCA.

Section 8 of the DBCA expects the builder to warrant:

• the building works will be carried out in a proper and workmanlike manner and in accordance with the plans and specifications set out in the contract.
• the materials supplied by the builder are good and suitable for the purpose which they are to be used, and unless otherwise stated in the contract, the materials will be new.
• the building works will be carried out in accordance with, and comply with, all laws and legal requirements including, without limiting the generality of this warranty, the Building Act 1993 (Vic) and the Building Regulations 2018 (Vic).
• the building works will be carried out with reasonable care and skill and will be completed by the date (or within the period) specified by the contract.
• that, if the work consists of the erection or construction of a home, or the work is intended to renovate, alter, extend, improve or repair a home to a stage suitable for occupation, the home will be suitable for occupation at the time the work is completed.
• that, if the contract states the purpose for the work required, or the result which the building owner wishes the work to achieve demonstrates that the building owner relies on the builder's skill and judgement:
  • the builder warrants that the work and any material used in carrying out the work will be reasonably fit for that purpose; or
  • will be of a nature and quality that they might reasonably be expected to achieve that result.

Under a DBI claim, structural defects are limited to a six-year limitation period, and two years for non-structural defects.

Otherwise, the general 10-year period applies if the builder remains in business, unless the defect is subject to a timeframe noted in the Victorian Guide to Standards and Tolerances.

Generally, determining whether a defect is structural or non-structural is dependent on the merits and is measured against codes and standard requirements.