The Recovery Brief: Legal Strategies Post-Crisis for Businesses & Communities (Issue 1)- Nine Critical Construction and Insurance Queries Arising from the Recent Earthquake

Welcome to The Recovery Brief: Legal Strategies Post-Crisis for Businesses & Communities (“The Recovery Brief”), a dedicated resource from Rajah & Tann (Thailand) created in response to the 28 March 2025 earthquake that has significantly impacted Thailand and beyond. The Recovery Brief series aims to provide a set of practical Q&A-based responses addressing key issues arising from the 28 March 2025 earthquake.

In the aftermath of natural disasters, navigating the legal landscape can be overwhelming for the business community and individuals alike. In response to numerous questions that we have received about a wide range of topics, including liability for property damage and support from insurance companies, we have prepared this Update titled “Nine Critical Construction and Insurance Queries Arising from the Recent Earthquake“, the first instalment of The Recovery Brief series. 

We hope that you find our Update of interest and assistance to you.

1. How does Thai law handle disputes between project owners and contractors over force majeure claims?

When an earthquake or other type of natural disaster disrupts a construction project, disputes often arise between project owners and contractors over force majeure claims. Thai law addresses such disputes through a combination of contractual provisions and civil law principles.

Most construction contracts in Thailand define force majeure and outline procedures for handling delays or termination. A party invoking force majeure due to an earthquake must prove that the earthquake was beyond the parties’ control, unforeseeable, and unavoidable. Furthermore, the party invoking force majeure (usually the contractor) must demonstrate that the force majeure event made performance of the obligations stipulated in the contract impossible. If the contractor successfully invokes the force majeure clause, it must comply with the contractual mechanisms to secure its rights to an extension of time, contract suspension, or contract termination if the force majeure event triggers the contractual requirement, e.g. delays extend beyond a specified period.

If a construction contract does not define force majeure events, the parties may rely on provisions of Thai law, which broadly define force majeure as an event that could not have been prevented even with appropriate care by the party invoking it. The law does not provide an exhaustive list of force majeure events. However, according to previous Supreme Court decisions, force majeure events include severe natural disasters, accidents, and riots. In such cases, the court typically assesses whether the parties could have taken preventive measures (e.g. reinforcing structures before the earthquake) and whether alternative performance was possible (e.g. using different construction methods). If a party successfully proves force majeure, it may be relieved from liability such as delays by contractors.

While an earthquake may, in some cases, constitute a force majeure event that exempts liability, this defence cannot be used where the damage stems from non-compliance with applicable construction laws, technical standards, or professional obligations (which will be further discussed in Question 2). The Building Control Act B.E. 2522 (1979) (“Building Control Act“) imposes legal duties on engineers and architects to ensure structural safety in accordance with law, including compliance with Ministerial Regulations issued under section 5 of the Building Control Act, such as those prescribing seismic design standards in designated risk zones. Failure to observe these requirements may result in liability regardless of the natural disaster that contributed to triggering the collapse. Accordingly, where the collapse is even partially attributable to substandard design, insufficient supervision, or the use of inappropriate materials, legal responsibility may be imposed on the relevant party notwithstanding the presence of an earthquake.

2. Is the project owner or contractor responsible for construction costs in case of construction site collapses caused by natural disasters like earthquakes? 

Under Thai law, the liability for a construction site collapsing during natural disasters such as earthquakes hinges on whether the incident was truly unforeseeable and unpreventable, or whether it resulted, in whole or in part, from human negligence. Unless the parties agree otherwise, under Thai law, among other factors, the determination of liability also depends on who is responsible for the procurement and supply of materials to the project, as follows:

• • Where the contractor procures and supplies the materials, if the construction collapses or is damaged before due delivery, the contractor may bear the loss provided that such loss is not caused by any act of the project owner (employer).

• • In contrast, where the project owner (employer) procures and supplies the materials, the employer may be liable for the collapse or damage caused by the defective materials. However, if the contractor knew or should have known that the materials were unsuitable and failed to raise objections or take necessary precautions, liability may still fall on the contractor. 

3. To what extent can contractors and engineers be held responsible for structural failures following an earthquake? 

Contractors and engineers may incur civil, professional, or even criminal liability for structural failures following an earthquake if the failure results from negligence, non-compliance with standards, or breach of professional duty. Civil liability may arise if the contractor fails to carry out the work properly and does not perform it in a safe and lawful manner. From a regulatory standpoint, the Ministerial Regulations Specific to Seismic Design under the Building Control Act B.E. 2522 (1979) mandate compliance with seismic design standards. Failure to adhere to these obligations, such as not complying with required calculations or failing to supervise construction adequately, may constitute grounds for disciplinary action under the Engineer Act B.E. 2542 (1999) and the Architect Act B.E. 2543 (2000). These professional statutes require licensed practitioners to perform their duties in accordance with technical and ethical standards, and set out possible consequences for non-compliance including licence suspension, revocation, and civil liability.

In connection with criminal liability, under Thai law, if a structural failure caused by negligence results in bodily harm or death, criminal charges may be brought against the responsible individual. Therefore, while earthquakes are natural hazards, engineers and contractors may be held responsible to the extent that the damage was foreseeable and preventable through proper design, supervision, and adherence to applicable codes.

The project manager or the representative/consultant of the project owner (employer) may also be held liable for structural failures following an earthquake if they fail to exercise the level of skill, care, and diligence expected in managing projects of similar scale, nature, and complexity. An example would be failure to properly review drawings before construction begins.

4. If a building survives an earthquake but has hidden structural damage, who is responsible for repairs? 

If a building withstands an earthquake but sustains hidden structural damage from the earthquake, the responsibility for repairs depends on several legal factors, including contractual obligations, statutory liability, and insurance coverage.

Under Thai law, unless parties agree otherwise,  a contractor may be responsible for major structural defects for up to five years after project completion. Subject to the rights and obligations regarding force majeure discussed above, if hidden structural defects are discovered within this period and are found to be due to the contractor’s fault (e.g. poor workmanship, defective materials, or non-compliance with safety regulations), the contractor may be liable for repairs.

However, if the damage results from a fault in the project owner’s design or specifications (e.g. failure to account for expected seismic forces in the structural plans), the project owner may be responsible for the resulting damage, regardless of whether it occurs or is discovered within the five-year period.

If the construction contract includes specific warranty obligations, the contractor may be legally required to carry out repairs, even beyond the statutory defect liability period. Conversely, if an earthquake qualifies as force majeure under the contract, the contractor may be exempt from liability – unless the damage is attributable to a construction fault (e.g. structural deficiencies or deviations from approved designs).

5. What are the rights, responsibilities, and legal criteria under Thai law for each party in a construction project to cover and claim compensation for domino-effect damages arising from natural disasters, and what types of remedies are available to affected parties?  

Under Thai law, compensation claims for domino effect damages resulting from natural disasters in construction projects where it is proven that the Project Owner, Contractor or Subcontractor was at fault (e.g. using substandard materials, failing to meet construction standards, negligence, or other contributing faults) can be classified into two main categories:

5.1 Rights, Responsibilities, and Liabilities under Contractual Terms (by contract)

In the construction sector, the key relevant contracts include construction contracts, sub-construction contracts, and warranty contracts. Thai law upholds the principle of freedom of contract, allowing parties to enter into agreements as long as they do not violate legal provisions or public morality.

For contracting parties such as the Project Owner, Contractor, or Subcontractor – if a natural disaster triggers a domino effect causing damage and it is established that the Contractor or Subcontractor was at fault, the affected party may file a claim based on contractual terms or warranty provisions. If compliance with construction standards, agreements, and material specifications could have prevented the damage, the Project Owner or the Contractor, as the case may be, may seek compensation from the Contractor or the Subcontractor (where applicable) for each circumstance. Compensation may include:

1. 1. Direct losses resulting from the Contractor‘s or Subcontractor‘s fault, such as:

• • • medical expenses for injured workers;
    • compensation for deceased workers;
    • costs for material replacement, repairs, and labour; and
    • loss due to increased costs of materials or equipment beyond the agreed price.

1. 2. Opportunity Losses such as loss of income, business opportunities, or expected profits: However, for these claims, the claimant (Project Owner or Contractor) must prove that the at-fault party foresaw or should have foreseen the damages. This kind of damage falls under the special circumstances damages due to breach of contract and/or tort (wrongful act) principle in section 222, Paragraph Two of the Thai Civil and Commercial Code, as interpreted in Supreme Court Judgments No. 18292/2556 (2013) and No. 3931/2541 (1998).              

Additionally, claimants may also seek other compensation based on specific contractual terms and warranty conditions (if any).

Conversely, if the Project Owner is responsible (e.g. failure to provide agreed-upon quality construction materials), the Contractor may also file a compensation claim against the Project Owner.

5.2 Rights, Responsibilities, and Liabilities under the Law (by law)

Besides contractual claims, Thai law also provides legal remedies for contractual parties and/or individuals who are not direct parties to a construction contract but suffer damages due to a domino effect triggered by a natural disaster – where the Project Owner, Contractor, or Subcontractor was at fault. Examples include:

1. 1. Individuals who suffer physical injuries or their families (in case of death) may claim compensation under the tort (wrongful act) principle in the Thai Civil and Commercial Code, including medical expenses, funeral costs, other necessary expenses, damages for total or partial disability to work, loss of service for third party, damages which are not pecuniary loss, or compensation for deprivation of support (limited to statutory heirs under the law principle), etc.

   2. Business entities and individuals who suffer property damage and/or economic loss may claim compensation for the loss of use of their property, if the property becomes uninhabitable or prohibited for access. However, for economic losses, including loss of income, business opportunities, or expected profits such as loss of rental income, the claimant bears the burden of proving that such losses are a direct result of the tortfeasor’s actions. 

Additionally, if the purchased building/condominium has defects either before or at the time of handover that impair its value or fitness for ordinary use, or make it incapable of serving the purposes for which it was built as specified in the contract, the buyer may hold the project owner or seller liable under the defective sale and purchase contract, as outlined in section 472 of the Thai Civil and Commercial Code.

The validity of these claims depends on the nature of the damages, the contractual relationship, and the degree of fault attributable to the Project Owner, Contractor, or Subcontract. Nevertheless, total compensation is limited to the actual damages suffered by each party. In accordance with the provisions of the Thai Civil and Commercial Code along with the Supreme Court judgments, no claims may be made for losses exceeding the actual harm experienced. 

6. What types of insurance can provide coverage for earthquake-related damages?

Insurance serves as a vital tool for risk management, particularly in the face of significant catastrophes. Historical events such as the 2010 political unrest, the severe floods of 2011, and the recent COVID-19 pandemic have underscored the importance of insurance in mitigating losses. In the wake of devastating earthquakes, the resulting extensive damage and financial loss highlight the necessity for businesses to thoroughly review and leverage their insurance policies. By doing so, they can minimise losses and maintain financial stability, ensuring the seamless operations of their businesses. Given the multifaceted damage and liability resulting from the 28 March 2025 earthquake, various types of insurance will be instrumental in addressing this incident.

Businesses often hold multiple insurance policies; hence, it is prudent to take all the following types of insurance into consideration: 

1^st Tier 

The first tier of insurance policies to consider following the earthquake encompasses those that directly provide coverage for loss or damage to the insured property, consequential economic loss, and life and accident coverage for policyholders. Relevant insurance policies in this tier include Property, Fire, Residential Fire Insurance, Industrial All Risks (“IAR“), Construction All Risks or Contractor’s All Risks (“CAR“), Marine Cargo, Motor, Life, and Personal Accident (“PA“) insurance. 

2^nd Tier 

Even though losses or damages occurred following the earthquake, which is a natural disaster beyond human control, it does not mean that every loss will be regarded as proximately caused by force majeure, thereby exonerating business entities and individuals from liability. For example, if the loss is proximately caused by negligence in the construction or maintenance of property to meet professional standards, and such negligence results in damage to third parties, the relevant business entity and individuals may be exposed to legal liability to those third parties. Relevant insurance policies in this tier include Public Liability, Product Liability, Professional Liability, Directors & Officers (D&O) Liability, Carrier Liability, and Third-party Motor Liability insurance. It should be noted that some liability coverage is also typically included in IAR and CAR insurance mentioned in the primary tier.

3^rd Tier 

In addition to the primary and secondary tiers of insurance, there are other types of insurance that, while indirectly related to earthquakes, may become relevant under certain circumstances. For instance, a manufacturer in Thailand importing materials from an overseas seller might find itself unable to fulfil payment obligations due to a cash flow disruption caused by business interruption resulting from an earthquake. In such a scenario, trade credit insurance would indemnify the insured seller, helping the seller maintain financial stability and avoid domino effects. Furthermore, financial difficulties may compel business entities to consider reorganisation and employee layoffs, potentially leading to claims of unfair dismissal by affected employees. Such claims could exacerbate the financial strain on the business. This risk can be mitigated through Employment Practices Liability Insurance, which provides coverage for employment-related claims, including wrongful termination.

7. Are standard policy wordings of 1^st Tier insurance sufficient to cover loss or damage arising from earthquakes, or is it excluded? 

From the insurance policies listed above, for the purpose of this Q&A, we would like to first put our emphasis on the 1^st Tier insurance policies. 

• • Property Insurance (IAR) 

Industrial All Risks (IAR) policies provide comprehensive coverage for all losses or damage to insured property from any cause not specifically excluded in the policy. Since the occurrence of an earthquake is typically not listed among the exclusions, damage caused by earthquakes is generally covered. However, this coverage is subject to specific sub-limits stipulated in the insurance policy.

• • Fire Insurance 

Standard Fire Insurance operates on a “named perils” basis, meaning it covers only losses caused by specifically identified risks listed under the policy. Earthquakes are not typically included among these standard covered perils. However, policyholders can purchase an extension to include earthquake coverage for an additional premium.

The situation differs for Residential Fire Insurance policies (for houses and condominiums), where earthquakes are often included among the named perils. Nevertheless, without a specific extension, earthquake coverage is typically limited to only THB20,000, which may be insufficient for significant structural damage.

• • Construction All Risks or Contractor’s All Risks (CAR) / Contract Work Insurance (“CWI”) 

CAR/CWI policies provide broad “all risks” coverage, protecting against all perils not specifically excluded. Since earthquakes are typically not listed among the exclusions, damages caused by earthquakes are generally covered. These policies are distinctive in that they protect not only the physical assets (i.e. contract work, construction equipment, machinery, and existing properties, etc.), but also provide liability coverage against third-party claims.

It is important to understand that exclusions under CAR/CWI policies are technically complex and often require engineering expertise to interpret. As a result, claims under these policies typically involve thorough investigations by specialised surveyors and loss adjusters who can properly assess the technical aspects of earthquake-related damage.

• • Marine Cargo Insurance 

Marine cargo insurance policies generally adopt internationally recognised standard clauses, namely the Institute Cargo Clauses (“ICC“). These clauses define the scope of coverage for cargo during shipment, which are:

• • • ICC (A): Provides comprehensive “all risks” coverage, which includes earthquake damage since it is not specifically excluded;
    • ICC (B): Operates as a “named perils” policy that explicitly lists earthquake among its covered risks; and
    • ICC (C): Also a “named perils” policy but notably does not include earthquake in its list of covered perils.

• • Voluntary Motor Insurance 

Motor insurance policies provide earthquake coverage based on the following policy types:

• • • Type 1 Policies automatically include coverage for earthquake damage.
    • Type 2, Type 3, and Type 5 (2+ and 3+) Policies do not include earthquake coverage by default, but they can be purchased either as part of a broader natural disasters endorsement or as a separate earthquake-specific endorsement.

• • PA Insurance 

PA policies cover bodily injuries and death resulting from accidents, including those caused by earthquakes. This coverage extends to various injuries and medical expenses resulting from earthquake-related incidents, provided they meet the policy’s definition of an “accident“. 

• • Life Insurance 

Life insurance policies generally cover death resulting from earthquakes without special conditions. The only standard exclusions typically apply to: 

• • • Suicide within the first policy year; or
    • Homicide deliberately committed by the policy beneficiary.

Additional insurance types and their relationship to earthquake coverage will be addressed in our forthcoming publications.

8. Can businesses claim for economic loss or business interruption due to an earthquake?

Business interruption insurance is designed to indemnify policyholders against financial losses resulting from disruptions in their operations. Whether pure economic loss is covered by business interruption policies depends on the specific policy wording.

Typically, business interruption coverage is bundled with property damage insurance. Coverage under these policies generally requires demonstrating direct physical loss or damage to the insured property caused by a covered peril, such as fire or natural disaster. This requirement serves as a condition precedent to the insurer’s obligation to compensate for business income losses. In other words, the insured property must suffer physical damage for policyholders to be eligible to claim consequential economic loss.

Nevertheless, it is noteworthy that some business interruption policies do not require physical damage to the insured property as a condition precedent. For instance, certain provisions within these policies, such as “Civil/Public Authority” clauses, extend coverage to scenarios involving pure economic losses. These clauses provide indemnity for loss of business income when access to the insured premises is prohibited or impaired by an order of a public authority following a covered peril. For example, if an earthquake results in a governmental mandate closing roads or buildings, thereby restricting access to the insured property, the civil authority coverage may be triggered even in the absence of physical damage to the insured premises.

Other non-physical coverage extensions include Prevention/Denial of Access Clauses and Loss of Attraction Clauses where pure financial losses are claimable without any physical damage to the insured property.

9. What dispute resolution options are available for earthquake-related insurance claims? 

When facing disputes over earthquake insurance claims in Thailand, policyholders have specific resolution paths available to them.

Most insurance policies, except marine insurance policies, contain a standard optional arbitration clause or the so-called asymmetric arbitration clause, offering alternatives to traditional litigation. For earthquake claims, you may either submit your dispute to arbitration or file a lawsuit with the appropriate court.

• • File a Lawsuit with the Court

Earthquake-related claims valued at THB300,000 or lower are heard in district courts, while those exceeding this amount proceed to provincial courts. Appeals on judgments can be filed with the Court of Appeal and subsequently, with permission, the Supreme Court.

• • Arbitration

Where the insured opts for arbitration under the standard optional arbitration clause for an earthquake claim, the dispute will be submitted to the arbitration institute of the Office of Insurance Commission (OIC).

If the earthquake claim involves international elements, the Central Intellectual Property and International Trade Court has jurisdiction, with appeals possible through the Court of Appeals for Specialised Cases and, with permission, the Supreme Court, respectively.

Understanding these options ensures you can effectively pursue resolution for earthquake-related insurance disputes in Thailand. Insured parties are advised to carefully review their policy provisions and consider the relative merits of each dispute resolution option when pursuing earthquake-related claims. The selection of the appropriate forum may significantly impact both the timeline and outcome of the dispute resolution process. If claimants commence legal proceedings in the wrong forum, it is the duty of insurer’s lawyer to properly challenge and move the case to the appropriate forum.

For comprehensive consideration on forum shopping, you may refer to our recent article in this respect.

In Thailand, most non-life insurance companies have entered into mandatory arbitration agreements. The effect of these agreements is that disputes over recourse claims between the signatory insurance companies are to be resolved through the arbitration institute of the Thai General Insurance Association.

Reinsurance contracts generally feature an arbitration clause that specifies an arbitration institute seated in Bangkok, Thailand. However, these clauses seldomly indicate which specific arbitration centre or institute should hear the claim.

Closing Remarks

We hope the above information provides some useful guidance on the issues that many will need to consider following the earthquake on 28 March 2025. Our upcoming newsletters in The Recovery Brief series will guide you through other related and insightful topics, such as:

• • laws and regulations on seismic design standards;
  • laws, regulations, administrative orders and acts in response to the earthquake and resulting damage;
  • allocation of liability among relevant responsible parties;
  • insurance warranties in the Thai law perspective;
  • the effect of wilful misconduct or gross negligence of contractors in insurance claims;
  • total loss claims; and
  • the implications of depreciation and betterment on non-insurance and insurance claims, etc.

We also invite your suggestions on areas of interest.  

Our team at Rajah & Tann (Thailand) Limited possesses a deep knowledge of all aspects of dispute resolution proceedings, whether civil or criminal, contractual and insurance claims, government investigations and other regulatory actions, which may affect the business community and individuals following our recent natural disaster.  We stand ready to provide our clients with practical, timely and strategic assistance in all matters.

For a downloadable copy of this Newsletter, please click here. The Japanese version of the Newsletter is accessible here, and the Chinese version is accessible here.

Contribution Note

This Newsletter is contributed by the listed Contact Partners, with the assistance of Rawi Meckvichai (Counsel), Mr. Toon Thanakham (Senior Associate), Mr. Prat Naka (Senior Associate), Ms. Saruda Tangkulboriboon (Associate), Ms. Kwanchanok Inkam (Associate) and Mr. Irawin Vinitkul (Associate) of Rajah & Tann (Thailand) Limited.