Engineering Insurance Policies and Risks

ENGINEERING  

ACADEMICS

I

NTRODUCTION

TO

 E

NGG

 I

NSURANCE

Definition of 

Engineering

:



Engineering

 is the designing, testing and building

of machines, structures and processes and

subsequent Usage ;using maths and science.



Engineering Insurance has suitable  policies for each

phase of Construction /erection and usage.

C

LASSIFICATION

OF

 E

NGINEERING

 P

OLICIES



Annual

•

MBD – Operational Electro mechanical equipment

•

EEI – Operational Electronic equipment

•

CPM – Operational Construction Equipment

•

BPP - Boilers

•

CECR – Completed Civil Engg Risks



Project

•

EAR/SCE/MCE – Erction of Electro Mechanical Equipment

•

CAR – Construction of Civil Works



Consequential

•

MLOP – LOP triggered by Insured breakdown of Machinery /Boilers

•

ALOP – LOP triggered by Insured losses during Project phase

•

DOS – DOS followed by insured losses of connected machinery.

C

ONTRACTORS

 A

LL

 R

ISKS

 – CAR

DAM

UNDER

CONSTRUCTION

E

RCTION

ALL

RISKS

 – 

EAR

/

SCE

/

MCE

T

URBINE

ERECTION

M

ACHINERY

BREAKDOWN

 – 

MBD

TRANSFORMER

E

LECTRONIC

EQUIPMENT

INSURANCE

-

EEI

MRI

MACHINE

C

ONTRACTORS

PLANT

AND

MACHY

 –

CPM

M

OBILE

CRANE

B

OILER

PRESSURE

PLANT

- 

BPP

STEAM

BOILER

IN

POWER

PLANT

C

IVIL

ENGG

COMPLETED

RISKS

 –

CECR

ROAD

TUNNEL

D

OS

-

POTATO

M

ACHINERY

LOSS

OF

PROFITS

-

MLOP

BOILER

EXPLOSION

IN

POWER

PLANT

A

DVANCE

LOSS

OF

PROFIT

-

ALOP

DAM

 – 

DAMAGE

DUE

TO

UK

FLOODS

B

ASIS

OF

 C

LASSIFICATION

OF

 P

OLICIES



Coverage: All risks Vs Named Perils



Policy Duration: Project Vs Annual



Types: Material damage Vs Consequential

Loss

A

LL

 R

ISKS

 V

S

 N

AMED

 P

ERIL

 P

OLICIES



All Risks

:



It covers direct Physical, Sudden ,Unforeseen loss to the

insured property unless the Policy excludes or limits the

Coverage. Also 

called Named Exclusion Policies

.



The Burden shifts to Insurer to prove one of the excepted

Perils operated.



Named Peril Policy



Covers only what is specifically noted in the Policy



It is usually less expensive



The burden of Proof lies on the Insured that on of the named

peril caused the loss.

M

ACHINERY

 I

NSURANCE



Applicability



Group I - Electrical Machinery installed in Plants

other than Cold Storages and Ice Plants 

e.g.



Switch gear ,



Cables ,



Electrical Motors ,



DG Sets,



Transformers ,



TG Sets



Group II- MECHANICAL ITEMS (MACHINES

COMMON TO ALL INDUSTRIES) e.g



Compressors & Auxiliaries ,



Centrifuges ,



Gear Boxes ,



Lathes (CNC) ,



Material Handling Equipments(Conveyors) ,



Occupancy wise Machines like Textile ,Paint Mfg etc.

M

ACHINERY

 I

NSURANCE

C

ONTD

….



Group III - Machinery in Cold Storages and Ice

Plants



Group IV- Fertilizer Plants/Petrochemical

Plants/Refineries



Declined List of Machinery –



Stone Crushers ,



PVC lined, Rubber lined and such other lined vessels ,



Radios, Tape Recorders, TV Sets ,



Any Imported Machinery which cannot be repaired in the

country ,



Pumps-with glass, graphite, rubber impellers ,



Pipe lines ,



Computers and other Electronic Equipments ,



Portable and Mobile Equipments.

 M

ACHINERY

 I

NSURANCE

Insuring Clause



Indemnifies the Insured against 

unforeseen and

sudden physical damage

 by any cause not

excluded



Insurer retains 

option

 by payment 

or

 reinstatement

or

 repair.



Whilst in the 

premises

.



Necessitating its 

immediate repair or

replacement

.



Applies after successful completion of

performance/acceptance tests.



Whether they are



at work or



at rest, or



being dismantled for the purpose of cleaning or overhauling, or



in the course of the aforesaid operations themselves, or



when being shifted within the premises, or



during subsequent re-erection

M

ACHINERY

 I

NSURANCE

C

ONTD

….



Sum Insured



Sum Insured shall be equal to the cost of

replacement of the insured property by new

property of the same kind and same capacity



Which shall mean its replacement cost including

Packing

, 

freight

 and 

customs

 duties, if any,

and 

erection

 costs.



Policy Period



Annual



The policies, if to be issued for shorter period

than twelve months should be issued at the rates

set out. 1 wk/10% to 8 m/85%

M

ACHINERY

 I

NSURANCE

(

E

XCLUSIONS

)

General Exclusions under MBD

1.

Loss, damage and/or liability caused by or arising from

or in consequence, directly or indirectly from the

following are not payable

.:



Fire including extinguishment of a fire or clearance of

debris and dismantling  , Smoke



Lightning



Explosion of any kind (

other than 

bursting or disruption

of turbines, compressors, cylinders of steam engines,

hydraulic cylinders or fly wheels or other apparatus subject

to 

centrifugal force, internal pressure- 

Which is

Writeback

)



Theft



Collapse of Buildings



S/LR Risks



Water which escapes from water containing apparatus

M

ACHINERY

 I

NSURANCE

(

E

XCLUSIONS

)



STFI /EQ/ other Acts of God



Impact of land borne or waterborne or airborne craft or

other aerial devices and/or articles dropped therefrom.



Writeback:

 Any damage by 

fire within the electrical

appliances 

arising from or occasioned by overrunning,

excessive pressure, short circuiting, arcing, self heating or

leakage of electricity, from whatever cause (

lightning

included

), 

is covered

;This coverage 

shall apply only to

the particular electrical machine; so affected 

and not

to other  machine which may be destroyed or damaged by

fire so set up.

M

ACHINERY

 I

NSURANCE

(

E

XCLUSIONS

)

C

ONTD

….

2.

Political Risks

3.

Nuclear Risks

4.

Overload Experiments

5.

Gradually developing flaws, defects,not necessitating

immediate stoppage, although at some future time

repair or renewal of the parts affected may be

necessary.

6.

Willful act, willful neglect or gross negligence of the

Insured or his responsible representatives.

7.

Loss, damage  due to Pre Existing Defects

8.

Consequential Loss-MLOP

9.

Loss, damage and/or liability due to explosions in

Chemical Recovery Boilers, 

other than pressure

explosions

 for e.g. smelt, chemical, ignition, explosions

etc.

M

ACHINERY

 I

NSURANCE

(

E

XCLUSIONS

)

C

ONTD

….

Special Exclusions

1.

Excess

2.

Parts of Short life or Consumable in nature like



Belts, ropes, chains



Rubber tyres



Dies, moulds



Blades, cutters, knives or exchangeable tools



Objects made of glass, porcelain, ceramics



All operating media e.g. lubricating oil, fuel, catalyst,

refrigerant, dowtherm(A heat transfer fluid).



.

M

ACHINERY

 I

NSURANCE

(

E

XCLUSIONS

)

C

ONTD

….



Felts

(Felt is a dense, non-woven fabric and without any

warp or weft : Felt is used in  within appliances as gasket,

or as a sealant in industrial machinery)



Endless conveyor belts(

Endless conveyor

belt

 is 

conveyor belt

 that has been made

into 

endless

 without joint in the process of production.

The 

belt

 is flat in surface and even in tension, thus it runs

smoothly and its elongation in working is low) or wires.



Sieves, fabrics, heat resisting and anti-corrosive lining.



Packing material(Gaskets,O Rings etc), parts not made of

metal (except insulating material) and non-metallic lining

or coating of metal part.

3.

Manufacturers liabilities 

like Guarantees/warranties

M

ACHINERY

 I

NSURANCE

C

ONTD

…

Policy Provisions

1) 

Sum Insured

: by new property of the same kind and same

capacity / i.e.Replacement cost including freight and customs

duties,if any,and erection costs

2)BASIS OF INDEMNITY IN CASE OF CLAIMS



Partial/Repair Losses

:



Expenses necessarily incurred to restore the damaged

machine to its former state of serviceability.



Plus the Cost of dismantling and re-erection incurred as

well as ordinary freight to and from a repair shop,

customs duties if any to the extent such expenses have

been included in the Sum Insured.



If Repaired at Insured’s Workshop

: Pays the cost of

materials and wages  plus a reasonable percentage to

cover overhead charges.

M

ACHINERY

 I

NSURANCE

C

ONTD

…



Depreciation

: No deduction shall be made for depreciation in

respect of parts replaced 

except for 

(i) 

wear and tear

parts

(

which do not last whole machine life

) and (ii)

parts for which manufacturers have specified a 

fixed life 

for

use.



Salvage

: The value of any salvage will be taken into account.



Constructive Total Loss

: Cost of repairs as detailed

hereinabove equals or exceeds the 

actual value

 of the

machinery immediately before the occurrence of the damage

,the settlement shall be made on the basis provided for in 

(ii)

below.



Repair Bills

: will make payments only after being satisfied,

with the necessary bills and documents

, that the repairs have

been effected or replacements have taken place.

M

ACHINERY

 I

NSURANCE

C

ONTD

…



Total Losses/insured item is destroyed



will pay the actual value of the item 

immediately before the

occurrence of the loss

 including costs for ordinary 

freight

erection and customs

 duties if any provided such expenses have

been included in the sum insured.



Actual value

: to be calculated by deducting proper depreciation

from the replacement value of the item.



Dismantling

 charges of the machinery destroyed , will also be

paid.



Salvage

 will be taken into account.



Replacement Bills

:  May, however, not insist for bills and

documents in case of total loss where the Insured is 

unable to

replace

 the damaged equipments for reasons beyond their

control.

M

ACHINERY

 I

NSURANCE

C

ONTD

…



Common to both modes



Company not liable for



Makers' drawings, patterns and Core boxes necessary for the

execution of a repair.



cost of any alterations, improvements or overhauls.



Provisional repairs will be borne by the Company if such repairs

constitute part of the final repairs.



Under Insurance

: If the Sum Insured is less than the

NRV+Incidentals

, the Company will pay only in such proportion

as the Sum Insured bears to the amount required to be insured.

Every item if more than one shall be subject to this condition

separately.

M

ACHINERY

 I

NSURANCE

C

ONTD

…

INSPECTION OF TURBINES AND TURBO

GENERATORS



All Mechanical and Electrical parts of any steam turbine,

gas turbine or generator

 shall be 

inspected and overhauled

thoroughly under the supervision of Maker's representatives, in a

completely opened up state

.



Upto 30,000 KW:at least every two years



Exceeding 30,000 KW:After 32,000 

hours of operation 

or 

every

four years.



If the insured fails to comply with the requirements of his

condition, the Company 

shall be free from all liability

 for loss or

damage caused by any circumstances, whatsoever.



Extension

: The insured may apply for an extension of the period

between any two regular inspections, and such extension may be

considered if in the opinion of the Company the 

risk is not

aggravated

thereby. This concession can be allowed only, 

when

the health of the machine is certified by the manufacturer

or any competent agency

 in the field.

M

ACHINERY

 I

NSURANCE

C

ONTD

…

M

ACHINERY

 I

NSURANCE

C

ONTD

…



All benefit under this Policy shall be forfeited.



If a claim is in any respect fraudulent/false declaration/fraudulent

means or devices are used.



If a claim is made and rejected and no action, or suit is

commenced within three months after such rejection.



Policy shall be void unless its continuance be

agreed by endorsement signed by the Company

.

In the event of any



Material change in the original risk



Alteration, modification or addition to insured item.



Departure from prescribed operating conditions, whereby the risk

or loss or damage increases.



Changes in the Insured's Interest (such as discontinuation or

liquidation of the business or being placed in receivership).



TRANSFER OF INTEREST:The interest in which shall pass from

the Insured otherwise than by will or operation of law.

M

ACHINERY

 I

NSURANCE

C

ONTD

…



DUTIES FOLLOWING AN ACCIDENT



immediately notify the Company giving an indication as to the

nature and extent of loss or damage.



minimise the extent of the loss or damage



preserve the damaged or defective parts & furnish all such

information and documentary evidence.



Claim filing Limitation

: The Company shall not be liable for

any loss or damage of which no notice and completed claim

form have been received by the Company 

within Fourteen

days of its occurrence

.



Provisional Repairs 

: After notification of a claim, the insured

may proceed with the repair of any minor damage not

exceeding Rs. 2,500/- provided that the carrying out of such

repair is without prejudice to any question of liability of the

Company.

M

ACHINERY

 I

NSURANCE

C

ONTD

…



OTHER INSURANCE: Principle of Contribution

applies.



POSITION AFTER A CLAIM



Insured shall not be entitled to abandon any property whether

taken possession of by the Company or not.



Reinstatement of SI: Post loss , SI gets reduced by amount of

Compensation. This amount must be reinstated by paying Prorata

Premium  

from the day repaired item is again put to work

.



TERMINATION OF INSURANCE



Insured’s Request

: May be terminated at any time at the request of

the insured, in which case the Company will retain the premium

calculated at the customary 

short period rate

 for the time the policy

has been in force.



Insurer’s Option

: 

By 15 days notice

 to that effect being given to the

insured, in which case the Company shall be liable to repay on

demand a 

rateable proportion

 of the premium for the unexpired

term from the date of the cancellation.

M

ACHINERY

 I

NSURANCE

C

ONTD

…

Tariff Proviso

1.

No Policy to be issued on 

first loss basis

. Or on 

agreed value

basis. (

A first-loss policy

 is used when it is inconceivable that

all property would be lost in a single claim. 

A first-loss policy

 is

an insurance policy for goods in which a total loss is unlikely and

the insurer provides cover for a sum less than the total value of

the goods.)

2.

Excess amounts are minimum and cannot be eliminated by

payment of additional premium.

3.

Projects located outside India would be outside the jurisdiction.

4.

Refund of premium for standstill period



Can be considered under this Policy.



Minimum

: 3 months continuous stand still period required



Causes of standstill for complete plant should be as under



Due to non-availability of raw materials, acute power

shortage, shortage of water supply and similar inputs.



Standstill items like boilers, TG sets, steam engines and

Diesel Generating Sets, in lieu of sufficient standby

equipments being available in the plant.



In case of continuous process plant, due to a major breakdown

of any item the whole plant cannot be run and as such refund

is to be considered.

M

ACHINERY

 I

NSURANCE

C

ONTD

…



Scales: Min 3 months/15% Refund and Max 12 months/50%



only when the claims experience under the policy for which the

discount is sought is less than 60%



Standstill discount 

will not apply

 during overhauling period

(including Hydraulic Testing of Boiler Tubes under BPP

Policies)



Refund of premium for standstill period can be considered for

Diesel Generating Sets.



Refund on account of lockout is not permissible.

5.

Seasonal Industries:



No Standstill  refund  for seasonal industries like sugar

factories.



The rate applicable for machinery shall be 95 % of the rate.

6.

MB proposals during the overhauling of the

turbines and/or turbine generating sets



Should not be allowed.

M

ACHINERY

 I

NSURANCE

C

ONTD

…

7.

The Machines to be rated should be in worthy working

condition with proper preventive maintenance programme.

Safety devices wherever provided on the machines must be

in proper operating condition.

8.

Pre Inspection:



Every risk shall be accepted only after satisfactory inspection.

9.

Machines, which are under erection or testing and

commissioning



Only after successful commissioning

10.

No Machinery Insurance Policy should be issued to cover

Electronic Equipments .

11.

Gear Boxes 

&

Turbo chargers 

should not be insured in

isolation but should be insured either with the 

drives

 or

the 

driven

 equipment.

12.

Parts of machines should not be insured separately.

13.

In respect of Turbo generator sets Break up



Turbine, Alternator, Gear Box, Control Panel ,Cables

14.

In cases where the proposal specifically provides for

covering foundation, their values should be declared

separately.

M

ACHINERY

 I

NSURANCE

C

ONTD

…

15.

Mid Term Increase in SI



SP Scale to increased amounts



If renewed for 12 months for an amount not less than the increased

sum insured, the difference of premium between short period scale

of rate and pro-rata rate may be refunded.

16.

Mid term decrease in SI



Short period scale of rates shall apply on the reduced Sum Insured

17.

Standby Equipments



All equipments 

having standby

, 50 % discount on Tariff rate.



The Discount could be considered for Identical machines but only

one working at any time, the discount being applicable to any one

of the machines. Alternate working clause shall attach.



D.G. sets are not eligible for any discount for stand-by/ spare

equipment.

18.

Spares



spares

 of machines like rotors of generators, compressors, turbines

or windings of transformers etc. can be covered along with the

machines separately by charging 50% of premium rate.

M

ACHINERY

 I

NSURANCE

C

ONTD

…

19.

Warranty in Policy Schedule



Warranted that the machinery described in above schedule of

Machinery does not embrace any



foundations



masonry and brickwork or



Oil in transformers and other electrical equipment



damage thereto being covered by the Policy only when

specifically described in the said schedule

.



Separate value for 

foundations masonry and brickwork

or Oil in transformers 

and other electrical equipments are

to be specified if cover is required.

20.

Diesel Generator Sets

: Claims of DG Sets

Necessitating replacement of crankshaft, 20 % of

the cost of crankshaft replacement will be borne

by the insured 

in addition 

to the Excess

stipulated above.

M

ACHINERY

 I

NSURANCE

C

ONTD

…



Deductibles



SI Based



Different excesses applicable



Glass Lined Vessel



Furnace Transformers



Photo Copiers



Others based on SI Bands ranging form 1% to

0.5%

MBD -

EXCESS

M

ACHINERY

 I

NSURANCE

 - A

DD

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N

C

OVERS

 ( A A E E O T)

C

ONTD

…

1.

Escalation



The selected percentage increase shall not exceed 25 %

of the Sum Insured.



The additional premium, payable in advance, will be at

50 % of the full rate, to be charged on the selected

percentage increase.



Different escalation percentages 

for 

different

machines 

may be granted under the escalation clause.



Increased  each day by an amount representing

1/365

th

 of the specified percentage increase per

annum



The Automatic increase operates from the date of

inception upto the date of operation of any of the

Insured Perils.



Sum Insured @ Renewal : Unless notified Escalation to

be added to the expiring SI

M

ACHINERY

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NSURANCE

 - A

DD

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N

2.

Express freight (air freight excluded), holiday and

overtime rates of wages



Extra charges are incurred in connection with any loss of or

damage to the insured items recoverable under the policy.



Under Insurance :

If the sum(s) insured of the demand

item(s) is/are less than the amount(s) required to be

insured ; the amount payable  shall be reduced in the

same proportion

3.

Air freight only



Air Freight incurred by the Insured in connection with the

indemnifiable loss under the Policy.



Excess: 5 % of the admissible Air Freight incurred 

over and above

the excess 

as applicable under the policy.

M

ACHINERY

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NSURANCE

 - A

DD

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N

 C

OVERS

 (

A A E E O T)

C

ONTD

…

4.

Owners Surrounding property



Cover loss or damage to property located 

at

 or 

adjacent

 to the site

and 

belonging to 

or

held in care, custody, control of the

principal(s) or the contractor(s)

 if 

occurring directly due to

damage of items mentioned in the schedule 

while at rest or in use

for construction or erection during period of policy.



The Company will pay to the insured the value of the damaged

property at the time of accident 

.



Excess : Policy Excess.



Underground

 piping tunnelling or underground cables and other

underground facilities-Prior info of exact locations or positions to

be ascertained by Insured. Actual Repair Cost is payble.

 Cracks

that neither impair the stability of the structure nor safety

of its users are not covered.



Additional premium of 25 % of the gross average MB rate

M

ACHINERY

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NSURANCE

 - A

DD

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C

OVERS

 ( A A E E O T)

C

ONTD

…

5.

Third Party Liability



PD: Legal liability for the accidental loss or damage caused to the

property of other persons



BI: Legal liability  for fatal or non-fatal injury to any persons 

other

than



the

 insured or



his own employees or



employee of the owner of the works/site/premises location or



employees of the other firms/connected with any other work

site/premises/location or



members of the family of the insured or any of the aforesaid



Exclusions

:



Policy Excess on PD Liability



Expenditure incurred in doing or redoing or making good or

repairing or replacing any thing covered.



loss of or damage to property belonging to or held in trust by or

under custody of the owner of the works/site/ premises/ location

of any other firms/contractors or an employee/workmen/family

members of any of the aforesaid.



any accident caused by vehicles licensed for general road use or

by waterborne vessels or by aircraft.

M

ACHINERY

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DD

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C

OVERS

 ( A A E E O T)

C

ONTD

…

6.

Additional Custom Duty



The additional Customs Duty,   which may be incurred by the

Insured over and above the Customs Duty amount taken into

account 

in arriving at the Sum Insured

 of the affected items



First Loss Basis



Computation of indemnity under the Additional Customs Duty

extension, 

exchange rate

 applicable on date of occurrence of

loss shall be considered



Specific limit for Additional Custom Duty - either in percentage

or in amount



Can be reinstated in the event of loss



Excess: 5 % of the admissible Custom Duty increased, in

addition to the Excess amount applicable for the affected item

under the Policy.

M

ACHINERY

 I

NSURANCE

C

ONTD

…



Loss Minimisation warranties/ Clauses



DG Set Clause



Carding machines



Induction Furnace



Reduction Gear Box



Expeller Gears



Ropes  in Lifts/Cranes/Ropeways



Wind Mills

(2)E

LECTRONIC

 E

QUIPMENT

 I

NSURANCE

1.

Applicability

:



Electronic is defined as device that used low

voltage/Current +Solid state ICs for

processing&/or Transmission  of Data.



Electronic Hardware



Data Processing equipment



Computers



Electro Medical Equipment



All Equipment which operate on small currents



Excluded Equipment

: Dish Antenna/ Portable

Electronic Equipments like notebook, lap top

computer /sonography are also excluded.

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…

2.

Pre Requisites for Issuance of Policy:



Policy applies only after successful Completion of

Performance/Acceptance Tests.

3.

Duration of Policy:



Annual



The policies, if to be issued for shorter period than

twelve months should be issued at the rates set out .

4.

Sum Insured:



Sum Insured is determined by the Insured and should

correspond to New price of electronic equipment .



Customs duties , Freight & Erection Charges can be

added on.



Cost of UPS ,Printers &

System Software(OS)

 can be

included along with Computers. 

Application S/W ???

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…

5.

Coverage/Perils:



An All Risks Policy subject to exclusions & Excess



Cover available in 3 Sections

Sec I – Equipment (Material Damage)



If insured items   shall suffer any 

unforeseen and

sudden physical loss or damage from any

cause, other than those specifically excluded

, in

a manner necessitating repair or replacement, the

Company will indemnify   by payment in cash,

replacement or repair.

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Sec II- External  Data Media including the Cost of

restoration of Data



SI should be furnished i) Data Media (type and

quantity) ii) Expenses for Reconstruction and

rerecording of information.



Peril insured under MD section should operate.



Time limit for Restoration of Damaged Media & Data is

12 months



Attracts Separate Excess



How about Data loss due to Computer Virus

??



Exclusions under Sec

-II



Excess



False Programming ,inserting, Loss of data due to

magnetic fields.

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Sec III- Increased Cost of Working

 On Cost of Hiring of substitute EDP equipment to

sustain Normal Business Operations following

Insured equipment gets damaged by an Insured

peril.



SI should be furnished for Rental of Substitute

EDP Equipments –



Indemnity Limit Per Hour  Rs. ____



Indemnity Period per occurrence Weeks ____



Limit per occurrence (a x b) Rs _______



Aggregate indemnity limit during the period of insurance

Rs._____



Personnel Expenses Rs



Transportation of Materials Rs

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…

Policy Provides Coverage



At Work



At Rest



During Dismantling/Overhauling/Cleaning



During aforesaid Operations themselves



While being shifted within the Premises



During Reerection.

Add On Perils/Covers:



Air Freight



Additional Customs Duty



Expediting Charges



Escalation



Owners surrounding Property



TP Liability

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LECTRONIC

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ONTD

…

Tariff  Regulations :



Uniform Premium Rate @ 1%  irrespective of Nature of

equipment,



Warranty relating to 

Maintenance agreement(AMC) 

is

mandatory for all insured equipment ; But it can be

waived by suitable loading of premium.



AMC should cover



Safety Checks



Preventive Maintenance



Remedial maintenance for Normal Ops & Ageing



AMC can be waived for



PCs upto Rs 1 lac value



All Equipment 

other than Medical

,Where Competent In House

Maintenance facilities are available



Fire & Allied Perils can be deleted in lieu of Discount

where a subsisting SFSP in place.

E

LECTRONIC

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ONTD

…



Mid Term Increase in SI



Short period scale of rates shall apply to increased amounts



If the policy is renewed thereafter for 12 months for an

amount not less than the increased sum insured, the

difference of premium between short period scale of rate

and pro-rata rate may be refunded.



Mid term Decrease in SI



Short period scale of rates shall apply on the reduced Sum

Insured

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…



General  Exclusions :



Political Risks



Nuke  Risks



Wilful Act 

or  Negligence of Insured or Representative



Cessation of work whether total or partial.



Cost Incurred/time involved in the movement of machinery

and/or any other property and/or personnel outside the

territorial limits of India.



Derangement(disturb the order, arrangement, or functioning

of) of the Insured property 

not accompanied by damage

.



Losses falling under terms of the Maintenance Agreement.



Losses  occasioned by pressure wave caused by aircraft and

other aerial devices travelling at Sonic or Supersonic speeds.



Failure due to interruption of Gas, Power or Water



Loss to consumables /Operating Media(e.g. Lubricants ,Fuels,

Chemicals)



Aesthetic defects like scratches etc



Costs of Maintenance or functional failures



Loss on expendable parts like Bulbs, belts, Chains etc

E

LECTRONIC

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…



PROVISIONS APPLYING TO SECTION – I



SUM INSURED

: Sum Insured shall be equal to

the cost of replacement of the insured property by

new property of the same kind and same capacity,

which shall mean its replacement cost including

freight, dues and customs duties, if any and

erection costs. 

The sum insured of the

equipment insured under this section shall

include the value of ‘System Software’..

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

BASIS OF INDEMNITY



Partial Losses



If damage to an insured item can be repaired the Company

will pay expenses necessarily incurred to restore the damaged

machine to its former state of serviceability 

plus

 the cost of

dismantling and re-erection incurred for the purpose of

effecting the repairs 

plus

 ordinary freight to and from a repair-

shop 

plus

 customs duties and dues if any, to the extent such

expenses have been included in the Sum Insured.



If the repairs are executed at a workshop owned by the

Insured, the Company will pay the cost of materials and wages

incurred for the purpose of the repairs plus a reasonable

percentage to cover 

overhead charge

.

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

Depreciation: No deduction shall be made for depreciation

in respect of parts replaced, 

except those with limited

life.



Salvage: value of any salvage will be taken into account.



Under Insurance: If the sum insured is less than the

amount required to be insured as per Provision –a

hereinabove, the Company will pay only in such proportion

as the sum insured bears to the amount required to be

insured.



Repair Bills

: The Company will make payments only after

being satisfied, with necessary bills and documents that the

repairs have been effected or replacements have taken

place.

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…



Constructive Total Losses



If the cost of repairs as detailed hereinabove equals or exceeds

the actual value of the machinery insured immediately before

the occurrence of the damage, the settlement shall be made on

the basis provided for in (iii) below.



Total Losses



Actual value:Company will pay the actual value of the item

immediately before the occurrence of the loss, 

including costs for

ordinary freight, erection and customs duties

 if any, provided

such expenses have been included in the sum insured, Such

actual value to be calculated by deducting proper depreciation

from the replacement value of the item.

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LECTRONIC

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…



Dismantling Costs :The Company will also pay any normal charges

for the dismantling of the machinery destroyed,



Salvage

 will be taken into account.



Obsolescence

: In cases where the Insured item is subjected to 

total

loss 

and meanwhile it becomes obsolete, all costs necessary to

replace the lost or damaged insured item 

with a follow-up model

(similar type)

 of similar structure/ configuration (of similar

quality) i.e low, average or high capacity – will be reimbursed.



Under Insurance

: If the sum insured is less than the amount

required to be insured as per Provision – a hereinabove, the

Company will pay only in such proportion as the sum insured bears

to the amount required to be insured.



Replacement Bills

: The Company may, however, not insist for bills

and documents in case of total loss where the Insured is unable to

replace the damaged equipment for reasons beyond their control. In

such cases claims can be settled on ‘Indemnity Basis’.

E

LECTRONIC

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QUIPMENT

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ONTD

…



Maintenance warranty

:



It is warranted that the Maintenance Agreement 

in

force at the inception of this policy

 is maintained during

the currency of this policy and 

no variation in the terms

of the Agreement shall be made without the written

consent of the Company being obtained.



word ‘

Maintenance

’ shall mean the following –



Safety checks,



Preventive maintenance



Rectification of loss or damage or faults arising

from normal operation as well as from ageing.

E

LECTRONIC

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ONTD

…



SPECIAL EXCLUSION TO SECTION – I



Excess stated in the Schedule. If more than one item is lost

or damaged in one occurrence ,highest single Excess

applicable.



Pre existing faults/Defects within the knowledge of the

insured.



Wear & Tear : Losses due to   continual influence of

operation (e.g. wear and tear, cavitations, erosion, corrosion,

incrustation) or of gradual deterioration due to atmospheric

conditions;



Functional Failures

: Any costs incurred in connection with

the elimination of 

functional failures

 unless such failures

were caused by an indemnifiable loss of or damage to the

insured items;



Maintenance

: Any costs incurred in connection with the

maintenance of the insured items, such exclusion also

applying to parts exchanged in the course of such

maintenance operations;

E

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…



Manufacturer’s liability

 :loss or damage for which

the manufacturer or supplier of the insured items

is responsible either by law or under contract;



Rented Equipment

: loss of or damage to rented or

hired equipment for which the owner is

responsible either by law or under a lease and/or

maintenance agreement.



Short Life/Renewabale parts

: loss of or damage to

bulbs, valves, tubes, ribbons, fuses, seals, belts,

wires, chains, rubber tyres, exchangeable tools,

engraved cylinders, objects made of glass,

porcelain or ceramics sieves or fabrics, or any

operating media (e.g. lubricating oil, fuel,

chemicals).



Aesthetic defects.

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LECTRONIC

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QUIPMENT

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ONTD

…

Section II – EXTERNAL DATA MEDIA



SCOPE OF COVER –



If the external data media  inclusive of the information

stored thereon, which can be directly processed in EDP

systems, shall suffer any material damage caused by peril

covered under Section 1 of this Policy, the Company will

indemnify the Insured as hereinafter provided in respect of

such loss or damage .



This cover applies while the insured data media are 

kept

on the Premises

.



Coverage against restoration of data under Section II only

to be granted if 

backup system

 is available.

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QUIPMENT

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…



SPECIAL EXCLUSIONS TO SECTION II



Excess stated in the Schedule to be borne by the Insured in

any one occurrence;



any costs arising from false programming, punching,

labelling or inserting, inadvertent cancelling of information

or discarding of data media, and from loss of information

caused by magnetic fields.



PROVISIONS APPLYING TO SECTION II –



Memo 1 Sum Insured: It is a requirement of this Insurance

that the sum insured shall be the amount required for

restoring the insured external data media by replacing lost

or damaged data media by new material and reproducing

lost information.

E

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QUIPMENT

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…



Memo 2 Basis of Indemnity:



The Company will indemnify 

any expenses

 that can be

proved to have been incurred by the Insured 

within a

period of 12 months

 as from the date of the occurrence

strictly for the purpose of 

restoring the insured external

data media to a condition equivalent to that existing

prior to the occurrence and necessary for permitting

data processing operations to be continued in the

normal manner

. If it is not necessary to reproduce lost

data or information, or if such reproduction is not effected

within 12 months after the occurrence, the Company shall

only be liable to indemnify the expenses incurred for

replacing the lost or damaged data media themselves by

new material.



Reinstatement

: As from the date of an indemnifiable

occurrence the sum insured shall be reduced for the

remaining period of insurance by the amount of indemnity

paid, unless the sum insured is reinstated.

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…

Section III – INCREASED COST OF

WORKING



Scope of Cover: Notwithstanding Special

Exclusion (i) under Section 1 of this Policy the

Company hereby agrees to indemnify the Insured

for 

all additional costs which the Insured

shall incur to ensure continued data

processing on substitute equipment 

if such

costs arise as an unavoidable consequence of an

indemnifiable loss or damage during the period of

insurance to property insured under the Material

Damage Section of this Policy.

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…



SPECIAL EXCLUSIONS TO SECTION III –



Costs incurred for use of substitute equipment during the

Time Excess



Costs for replacement of data media, data and

regeneration of data



Lack of funds causing delay in repairs or replacement of

damaged equipments,



PROVISIONS APPLYING TO SECTION III –



Memo 1 INDEMNITY PERIOD: The Indemnity Period

shall commence with putting into use the substitute

equipments. The insured shall bear that proportion of

each claim, which corresponds to the Time Excess agreed.

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…



Memo 2 SUM INSURED

: The `

indemnity limit per hour'

 and

`

total sum insured’

 stated in the schedule shall be declared by the

insured. The total sum insured shall represent the aggregate limit of

indemnity payable for all events occurring during the period of

insurance. The Company will also reimburse the insured for

personnel expenses and costs for transportation of materials

following an event giving rise to a claim under this Section of the

Policy provided separate sums therefore have been entered in the

Schedule. As from the date of an indemnifiable occurrence the sum

insured shall be reduced for the remaining period of insurance by an

amount of indemnity paid unless - reinstated by payment of an

additional premium prescribed by the Company.

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

Memo 3 LOSS SETTLEMENT

: The Company shall indemnify

those costs and expenses, which can be proved to have been incurred

during the indemnity, period to maintain data processing operations

to their previous extent, that are additional to those which would

have been incurred during the same period if no insured event had

occurred. The total indemnity per event shall not exceed an amount

equal to the agreed `indemnity limit per hour' or the `actual hourly

rate payable for the use of substitute equipments,' whichever is less

multiplied by the number of working hours stated as `Indemnity

Period’ in the schedule or by the actual number of working hours for

which the substitute equipment is put into use, whichever shall be

less. However, if it is found, following an interruption, that the limit

selected `per hour’ is less than the amount actually incurred per

hour for use of substitute equipment, the Company shall be liable to

indemnify the insured in the same proportion as the limit selected

`per hour' bears to the amount actually incurred per hour.

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LECTRONIC

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…



Policy Conditions:



Excess/Deductibles: Separate Excesses for

Equipment value uptoRs 1 lac / Above Rs 1 lac

Hard Discs/Winchester Drives

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…



Claim Settlements:



Partial Losses



Pays for costs of repairs + Expenses on Dismantling

&Reerection +Freight to the extent they are insured



Depreciation deductible  only on Limited Life parts. Salvage

is deducted



If repaired at Insured’s Own workshop => Pays for Material

+ wages+ Overhead Charges



Production of Bills Mandatory as proof of effecting R&R



Total Losses



Pays Actual Value (Replacement value-Depreciation) +

Expenses on Customs Duty, Freight & Erection Costs to the

extent they are insured.

(3) C

ONTRACTORS

 P

LANT

 & M

ACHINERY



Applicability:



Covers Different types of Machines used at Project sites for Material

handling , Construction . This Policy can be issued for Motor Vehicles

registered under MV Act engage at Work in a specified location.



Machinery mounted on Floating Marine vessel too can be covered

E.g., Cranes ,



Pre Requisites for Issuance of Policy:



Mandatory Successful commissioning after performance of

Acceptance Tests.



Policy applies only when operates at the Insured premises



Each Machinery should be entered separately with necessary

specifications



Duration of Policy

: Annual



Sum Insured:



New Replacement value



Cost of Customs duties & Dues ,Freight & erection Cost too can be

added

C

ONTRACTORS

 P

LANT

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ACHINERY

CONTD

…

Insuring Clause:



The Company will at its own option by payment or

reinstatement or repair indemnify the Insured against

unforeseen and sudden physical loss or damage

 by any cause

not hereinafter excluded to any Insured Property.



 Whilst at the location mentioned therein necessitating its

immediate repair or replacement.



The 

difference

 with other Policies like CAR/EAR/EEI/MI

which cover internal damages also under (SUP damage

coverage)



Policy Provides Coverage



At Work



At Rest



During Dismantling/Overhauling/Cleaning



While being shifted within the Premises



During subsequent Re erection

C

ONTRACTORS

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LANT

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ACHINERY

CONTD

…



Policy Provisions



SUM INSURED



BASIS OF INDEMNITY



Partial losses: No deduction shall be made for depreciation in respect of

parts replaced, 

except those with limited life.



CTL



Total Losses



Add On Perils/Covers:

a)

Additional Customs Duty

b)

Air Freight

c)

Escalation

d)

Expediting Charges incl OT ,HW etc

e)

Owners surrounding Property

f)

TP Liability

g)

Clearance & Removal of Debris

h)

DISMANTLING OF CPM EQUIPMENT AND

SHIFTING TO A NEW LOCATION rate @ 0.20%

i)

EQ

j)

Terrorism

C

ONTRACTORS

 P

LANT

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ACHINERY

CONTD

…



Tariff Regulations :



CPM Policy can be issued covering equipment

on “Anywhere in India basis” with following

stipulations.



Full Equipment details



Zone-1 EQ rate



10% Floater Extra premium



No Transit Risks



Named location Floater @ 10% Extra



All Acts of God Perils other than Earthquake

(Fire and Shock) are taken care of in the rates

prescribed in Rate Schedule. However, no

reduction in the rates can be allowed for

excluding any of these perils.

C

ONTRACTORS

 P

LANT

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ACHINERY

CONTD

…



The Acts of God Perils shall mean - a) Earthquake

(Fire & Shock) b) Landslide, Rockslide, Subsidence c)

Flood, Inundation d) Storm, Tempest, Hurricane,

Typhoon, Cyclone. 

Lightning ????



For deletion of Exception „K‟ under the Policy regarding

Machinery working underground

, applicable tariff

rate should be loaded by 50%



The  Machinery &Equipments mounted on floating

vessel/craft and used for the purpose of contract work

shall attract the rates prescribed in Table I of Rate

Schedule. They will attract AOG excess.



Abandonment

: Loss or damage due to abandonment

of any plant and/or machinery working in underground

mines or tunnels shall be excluded from the cover.



Pay Loaders on barges 

cannot be covered under

CPM Policy.

C

ONTRACTORS

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LANT

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ACHINERY

CONTD

…



Policy Exclusions :



Internal Electric or Mechanical Breakdown



Due to Explosion



Whilst in transit from One location to another



W&T, Corrosion etc



When used other than the Purpose designed for



Exclusions (k) Machinery working underground(this can

be Added on by 50% Loading).



Note: Note- This does not apply to Machineries used in Tunnelling

works



Immersion under tidal waters



Manufacturer’s liabilities



Pre Existing defects



Nuke Risks ,Political Risks



Wilful Act



Consequential Loss



Terrorism Damage Exclusion warranty



Not for parts like



Replaceable parts like Drills , Bits, Tyres

C

ONTRACTORS

 P

LANT

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ACHINERY

CONTD

…



Policy Conditions:



Excess/Deductibles:



For claims arising out of 

AOG perils



For claims arising out of perils 

other than

AOG



Claim Settlements:



Partial Losses



Total Losses

(4)ERECTION ALL RISKS POLICY

Applicability: Pre dominant Electromechanical ( > 50% of

Project Value)



Designed to cover loss or damage to Projects that

involves 

erection/installation of plant Machinery,

Equipment 

ranging from a single machine to a large

Power Plant. Civil Works relating to foundations of

machinery can be covered.



All permanent Civil Engineering Works 

such as

buildings, foundations earthwork including materials

for the constructions thereon & 

All temporary works

such as buildings , sheds can be included subject to “

Civil Engineering Works “ Endorsement

.



Policy covers Breakdown during 

Testing

of New

Machinery also. This Testing cover is not available for

Second hand or Used Machinery.

ERECTION ALL RISKS POLICY 

CONTD

…



Policy Coverage:



Preamble: Will indemnify the Insured against

sudden and unforeseen physical loss of or damage

to the property insured.



SECTION I - MATERIAL DAMAGE: The property

(except packing materials of any kind) or any part

thereof described in the   Schedule If lost, damaged

or destroyed by any cause, other than those

specifically excluded hereunder, in a manner

necessitating replacement or repair.



SECTION II - THIRD PARTY LIABILITY



PD: Legal liability for accidental loss or damage caused to

property of other persons

 including property held in trust

by 

or

 under custody of the Insured for which he is responsible

excluding

 any such property used in connection with

erection thereon.

ERECTION ALL RISKS POLICY 

CONTD

…



BI: Legal liability (liability under contract excepted) for

fatal or non-fatal injury to any person 

other than

the Insured's own employees

 or

 workman 

or

 employees

of the owner of the works or premises or other firms

connected with any other erection work thereon, 

or

members of the Insured's family or of any of the

aforesaid; directly consequent upon or 

solely due to

the erection of any property described in the

Schedule

.



Legal Expenses: Company will, in addition, indemnify

the Insured All cost and 

expenses of litigation

recovered by any claimant from the Insured & All costs

and expenses incurred with the written consent of the

Company.

ERECTION ALL RISKS POLICY 

CONTD

…



General Exclusions



Political Risks



Nuclear Risks



Wilful act or wilful negligence of the Insured. (

Wilful

= Deliberate/Intentional

)



Cessation of work whether total or

partial.(Cessation=

Stoppage of 

work

 / standstill

period)



NB: Contractor's All Risk as well as the Erection All Risk

policy under the General Exclusion excludes any liability,

loss or

damage arising out of or aggravated by (directly or

indirectly) cessation of work total or partial. This means

that the

policy ceases to cover any loss which might have arisen due

to the cessation of work / work stoppage.



In addition to this condition no. 4 (b) of the policies also

stipulate that any material change in the risk needs to be

intimated to the insurers by the insured

.



Any Advance Loss of Profit cover ( ALOP ) if taken as an

extension to the project policies also ceases to exist, if there

is partial or total stoppage of work.

ERECTION ALL RISKS POLICY 

CONTD

…



Exclusions to Sec – I



Excess in the Schedule



Inventory losses



Normal wear and tear, gradual deterioration



Loss or damage due to faulty design, defective material or

casting, bad workmanship 

other than faults in erection

.

Note

: This exclusion shall be limited to the items

immediately affected and shall not be deemed to exclude loss

or damage to 

other insured items

 resulting from such excluded

perils.



Cost for Rectification of Erection Error unless resulting in

damage.



loss of or damage to files, drawings,  currency, stamps, deeds,

evidence of debt, notes, securities cheques, 

packing materials

such as cases, boxes, crates.



Any damage or penalties on account of the Insured's non-

fulfilment under his Contract  

or

 any obligations assumed

there under including consequential loss   

or

 for any aesthetic

defects 

or

 operational deficiencies.

ERECTION ALL RISKS POLICY 

CONTD

…

Exclusions to Sec – II



The Excess to be borne by the Insured in 

any one

occurrence

 related to 

property damage



any accident caused by vehicles licensed for general road

use or by waterborne vessels or aircraft;

ERECTION ALL RISKS POLICY 

CONTD

…



Policy Period:



Fresh Risks

:



The EAR/SCE period has to commence from the 

date of arrival of

first consignmen

t at the site of erection and 

shall continue



Until immediately after the first test operation or test loading is

concluded.



But in no case beyond four weeks from the 

day on which

 after

completion of erection a trial running is made and/or readiness

for work is declared by the erectors/contractors, 

whichever is

earlier

.



However, a 

part of a plant

 or 

one or several machine

/s is/are

tested and put into operation the cover  for that particular part of

the plant or machine ceases; whereas it continues for the

remaining parts which are not yet ready.

ERECTION ALL RISKS POLICY 

CONTD

…



Testing Period Extension

: After the expiry of four

weeks of trial running, approval of the plant or any

part thereof is 

not given

 by the concerned

Authorities the cover for the extended period of

further trial running can be covered at extra

premium.



Secondhand Machinery

: In the case of second-

hand/used property, the insurance hereunder shall

however, cease immediately on the commencement

of the testing



Insurance at a later date

: irrespective of the date of

commencement of the insurance policy, the SCE rate

has to be computed for the total period commencing

from the date of arrival of the first consignment at

the site of erection. Subject to ,any damages which

have taken place prior to commencement of the

insurance, are not covered by the policy.

ERECTION ALL RISKS POLICY 

CONTD

…



Sum Insured(Memo 1):



Sum of Insurance shall not be less than the completely erected

value of the property inclusive of freights, customs duty,

erection cost and the Insured undertakes to increase or

decrease the amount of insurance 

in the event of any material

fluctuation in the level of wages or prices.



Under Insurance: At the time of loss if it is found that the Sum

Insured   of the property and/or of particular items involved is

less than the amount required to be insured =>

amount

recoverable

 shall be reduced in such proportion as the Sum

Insured bears to the amount required to be insured.



Marine (Imports) -landed cost at site



Marine (Indigenous) -landed cost at site



Cost of Erection (

exclusive of preoperative expenses but

inclusive of cost of visits of specialists and supervision charges

).



Permanent Civil Engineering Works (Temporary Works can

also be itemised)



Half the escalated value, if escalation is opted for

ERECTION ALL RISKS POLICY 

CONTD

…



Tariff Provisions:



Applies to all Risks located in India.



Marine/Transit Insurance connected with

Erection All Risks Insurances of any project can

be placed  in one combined or under separate

Policies in one department or in different

departments.



Excess should be applied on the net claim amount

after adjusting for salvage, depreciation and

underinsurance.



MID-TERM INCREASE IN SUM INSURED:

Premium should be collected on the additional

Sum Insured at applicable EAR/SCE rate. It is

not permissible to charge pro-rata premium.

ERECTION ALL RISKS POLICY 

CONTD

…



EXTENSION BEYOND POLICY PERIOD



Separate Extension Rates apply



Extension rates shall apply on the value on the remaining part

of the project, which is yet to be completed.



Testing Period Extension



Rate Schedule contains rates for Extension of Testing Cover

within Policy Period.



Petrochemical Plants, Fertilizer Plants, Petroleum Refineries,

Power Plant and Gas Turbine/Combined Gas Cycle Plant

attract Extension Rates of 0.50 pm per month(Within) & 0.70

pm per month(Beyond)



Rest of the Risks>Extension beyond Policy period-0.50 per

mille per month

ERECTION ALL RISKS POLICY 

CONTD

…



REFUND OF PREMIUM FOR EARLY

COMPLETION OF THE PROJECT-may be allowed

subject to the undernoted conditions being complied

with



period of insurance is 18 months and above



Notice for early completion being given in advance to the

insurer i.e. before commencement of testing or in any

case not later than 7 days after commencement of

testing.



Claims Experience under the policy being less than 60 %



Minimum period for which refund can be claimed shall

be 3 months



REFUND OF PREMIUM FOR CANCELLATION OF

EAR/SCE POLICY



Can be considered due to abandonment of projects,

double insurance etc.

ERECTION ALL RISKS POLICY 

CONTD

…



ISSUE OF FIRE POLICY DURING THE

TESTING PERIOD –



No Fire Policy can be issued during Testing Period



Instalment Facility



If Policy period in excess of 12 months , quarterly payments

allowed.



First instalment 5% more than the rest and last instalment to be

received 6 months before Expiry.

Excess:



For Storage & Erection(Normal) Claims



For Testing Period Claims



For Acts of God Claims (as per Memo 6)



For Fire/Explosion Claims



Theft/Burglary Claims



For DE Claims

ERECTION ALL RISKS POLICY 

CONTD

…



Add On Covers



Storage Risks at the Fabricator’s Premises/Workshop



Rate @



Excess:



Dismantling Cover.



Rate@60 % of SCE Rate 

irrespective of the period for Dismantling



Earthquake (FIRE & SHOCK) Perils.



Rates: Zonal wise annual rates for 4 zones  with district classification

as per Fire Tariff.



Additional rates are to be charged on pro-rata basis for period shorter

than one year.



Excess: As per AOG/Major perils Excess.



All `Acts of God’ perils other than Earthquake (Fire & Shock) are

taken care of in the SCE Rates prescribed. However no reduction in

the rate can be allowed for excluding any of these perils.



Earthquake cover on first loss basis

 - Earthquake cover could be

granted on first loss basis with Sum Insured limits of 20% (OR 10%) of

the total Sum Insured at the rates of 50 % (OR 40 %) of the tariff rate

calculated on the total sum insured.

ERECTION ALL RISKS POLICY 

CONTD

…



Clearance and removal of Debris



@ SCE Rate



Where the Project is a mix of both old and new machinery,

the EAR/SCE Rate as applicable for the new machinery is

to be charged.



If no premium is realized, the question of Indemnification of

such expenses would not arise. However, if for such

damaged property 

which may have a salvage value

,

retrieval expenses are incurred, such expenses may be paid

for on merits of each case.



No separate excess for debris removal need be applied.

ERECTION ALL RISKS POLICY 

CONTD

…

Third Party Liability



@ SCE Rate.(Project is mix of both old and new

machinery the EAR/SCE rate as applicable for the new

machinery)



Excess: Normal/Testing Periods/AOG applies depending

on Cause.



TPL Limit:



For policies with Sum Insured upto Rs. 10 Crores



Any one

person 



 Any one accident 



 During the entire period of

SCE/EAR cover Upto Rs. 1 Crore



For policies with sum insured above Rs. 10.0 Crores



 Any

one person 



Any one accident 



 During the entire period of

SCE/EAR cover 10% of the completely erected value of the

project or Rs.10 Crores whichever is low.



Third Party Liability Insurance in excess of the above limits

should be underwritten in the Miscellaneous Department.

ERECTION ALL RISKS POLICY 

CONTD

…



Reinstatement: No.TPL Cover cannot be reinstated

after occurrence of loss.



During Extended maintenance: Third Party Liability Cover

cannot be granted during extended maintenance.



CROSS LIABILITY COVER: TPL can be modified to

offer cover to the insured parties named in the Policy

schedule as if a separate policy has been issued to each

party. Additional Rate @ 50% of TPL Premium.



CIVIL WORKS



The civil works related to machinery foundations should

necessarily be covered along with the machinery.



SURROUNDING PROPERTY OF THE INSURED



Rate @ 50% of EAR



Excess: The policy excesses (Normal/Testing period) should apply.



Reinstatement: Allowed after occurrence of claim.

ERECTION ALL RISKS POLICY 

CONTD

…



Escalation



Limited to a maximum of 50 % of the sum insured.



Escalation limit shall be expressed in percentage and

permitted only once at the time of inception



@ SCE Rate on 50% of Escalation SI.



EXPRESS FREIGHT (AIR FREIGHT EXCLUDED)

HOLIDAY AND OVERTIME RATES OF WAGES



@ SCE Rate(Excl Add Ons Rate)



Reinstatement: Allowed on payment of additional

premium after occurrence of claim.



AIR FREIGHT



Rate:@ 5% on Limit Selected



Excess:5 % of the Air Freight incurred per claim, in

addition to policy Excess



Reinstatement: Allowed on payment of additional

premium after occurrence of claim.

ERECTION ALL RISKS POLICY 

CONTD

…



ADDITIONAL CUSTOMS DUTY



Rate: @ 2% on Limit



Excess: 5 % of the Additional Custom Duty incurred, in addition

to the excess amount applicable for the affected item under the

policy.



Reinstatement: Not allowed



The cover for Additional Customs Duty will be on first Loss

Basis



CONSTRUCTION MACHINERY PLANTS AND

EQUIPMENTS



Where SI does not exceed 5 % of the Sum Insured for EAR/SCE

Insurances, or Rs. 25 lakhs whichever is lower => Terms as per

CPM Tariff



Where the SI exceeds 5 % of Sum Insured for EAR/SCE

Insurance or Rs. 25 lakhs whichever is lower => Separate CPM

Policy



MAINTENANCE VISITS COVER AND

EXTENDED MAINTENANCE COVER –

ERECTION ALL RISKS POLICY 

CONTD

…

TESTING PERIOD



PLANTS OTHER THAN THERMAL POWER PLANTS



Shall cease to operate with the commencement of the commercial

production or with the handing over of the plant to the principal

whichever is earlier.



Testing period shall not exceed 12 months(Treaty ??)



SUSPENSION OF TESTING PERIOD



If testing is suspended for more than 7 days, after commencement,

it can be treated as erection period, 

provided



it is within the policy period



it does not fall within testing 

extension 

period(

Beyond in built

one month

)



due to fortuitous accident happening anywhere at site & beyond

control of Insured.



Testing period shall remain reduced by number of days the

testing was carried out in the initial test run.

ERECTION ALL RISKS POLICY 

CONTD

…



Policy Provisions



Provisional Repairs : Rs 7500



Termination



At Insured’s Request: Permitted any time subject to



ICR < 60% of reworked Premium



Unexpired period is not less than 3 months or 25% of the

policy period, whichever is less.



Testing period should not have commenced



option of the Insurer



15 days notice



Rateable proportion of the premium for the unexpired

term.

ERECTION ALL RISKS POLICY 

CONTD

…



Memo 1- Sum Insured



Memo 2. PREMIUM ADJUSTMENT



The sum insured   shall be adjustable at completion of

erection on the basis of the actual values to be declared by

the insured in respect of 

freight and handling charges,

customs dues and costs of erection

 and the difference in

premium shall be met with by payment.



Any increase or decrease in prime cost of 

Plant and

Equipment

 shall not be the subject matter of premium

adjustment.

ERECTION ALL RISKS POLICY 

CONTD

…



Memo 3. BASIS OF LOSS SETTLEMENT



Partial losses

: In the case of damage which can be repaired, the

cost of repairs necessary to restore the items to their condition

immediately before the occurrence of the damage 

less salvage.



CTL:

 All damages which can be repaired shall be repaired, but if

the cost of repairing any damage 

equals or exceeds

 the value of the

items immediately before the occurrence of the damage the

settlement shall be made on the basis provided for in (iii) above.



Total Losses

: The actual value of the items immediately before the

occurrence of the loss 

less salvage.



The cost of any alterations, additions and/or improvements shall

not be recoverable under this Policy.



Reinstatement

: Insured undertakes to pay a pro-rata additional

premium of   each claim from the date of such loss till expiry.

ERECTION ALL RISKS POLICY 

CONTD

…



Memo 6 – MAJOR PERILS/ACTS OF GOD

CLAIMS(

For the Purpose of Excess

)



Earthquake - Fire & Shock



Landslide/Rockslide/Subsidence,



Flood/Inundation,



Storm/Tempest/Hurricane/Typhoon/Cyclone/

lightning or

other atmospheric disturbance

(5) C

ONTRACTORS

 A

LL

 R

ISKS

I

NSURANCE

-CAR



Applicability:



Cover Civil Engineering projects like Buildings,

Dams, Air Ports, Bridges, Specialised Risks.



Pre Requisites for Issuance of Policy:



Duration of Policy:



Commences: From the time of Commencement of

work 

or

 after unloading of Project material at the

site.



Expires: At the expiry date shown on the Policy



But Liability ceases for parts of Contract taken

over or put into service by the Principal.

C

ONTRACTORS

 A

LL

 R

ISKS



Sum Insured: CEV. Otherwise UI applies



Coverage/Perils:



Sec I – Material Damage



Liable for the damages of the Property by Any Cause other

than excluded in a manner necessitating repair or

replacement



Sec II-TPL



Legal Liabilities for Non fatal or Fatal injuries to Third

Parties caused due to the construction. Does not Cover

Insured’s  Workmen/Contractor’s workmen/Insured’s family

members



Legal Liability to accidental loss to property of other

persons including held in the custody of insured (Excludes

any property used for construction purpose)

C

ONTRACTORS

 A

LL

 R

ISKS



Add On Perils/Covers: Similar to EAR



Important Regulations :



AOG Perils/Major Perils

a)

EQ F&S

b)

Landslide/Rockslide/Subsidence

c)

Flood/Inundation

d)

Storm/Tempest/Hurricane/Typhoon/Cyclone/

Lightning

or other atmospheric disturbances.

e)

Collapse

f)

Water Damage for Wet Risks (Involving works in

canals, Lakes, Rivers, Sea)

C

ONTRACTORS

 A

LL

 R

ISKS



Policy Exclusions :



General Exclusions : Similar to EAR



Separate Exclusions for Sec-I & II



Sec-I



Loss due to faulty design



Cost of Repair for defective material or workmanship for the

items immediately affected; But if correctly executed items suffer

any loss due to the former such loss is payable.



Inventory losses



Policy Conditions:



Excess/Deductibles:



Normal (Storage/Construction)



AOG/Major/Collapse



Specialised Risks

C

ONTRACTORS

 A

LL

 R

ISKS



Claim Settlements:



Partial Losses: in the case of damage which

can be repaired the cost of repairs necessary to

restore the property to their condition

immediately before the occurrence of the

damage less salvage, or



Total Losses: the 

actual value 

of the property

immediately before the occurrence of the loss

less salvage.

(6) 

BOILER 

AND

 PRESSURE PLANT INSURANCE



Applicability: Boiler & Pressure Plant



Pre Requisites for Issuance of Policy: In the

form of warranties



Annual Inspection by Govt Authority and valid

Certificate



Operated by Qualified Personnel licensed under

Boiler Act.



Duration of Policy: Annual



Sum Insured:



Should be insured for present day replacement

value to avoid UI



No Agreed Value/No First Loss Policies/No

Bonus

BOILER 

AND

 PRESSURE PLANT INSURANCE



Coverage/Perils:

Its a Named Peril Policy

. It

covers the following on account of

Explosion/Collapse/Flue Gas explosion(

Flue

gas

 is the 

gas

 exiting to the atmosphere via a 

flue

, which is a

pipe or channel for conveying exhaust 

gases

 from a fireplace,

oven, furnace, boiler or steam generator)



Damage to the Boiler &/or Pressure Plant

(Other than by FIRE)



Damage to Owner’s Surrounding Property



Third Party D_BI & PD

BOILER 

AND

 PRESSURE PLANT INSURANCE

Insuring Clause

: caused by and 

solely due to Explosion

or Collapse

 of any Boiler or other Pressure Plant

occurring in the course of ordinary working.

Indemnify the Insured against

a)

Damage (other than by fire) to the Boilers and/or other

Pressure Plant

b)

Damage (other than by fire) to surrounding property of

the insured/or to property held by the insured in trust or

on commission or for which he is responsible.

c)

Liability of the Insured at law on account of



Death of or bodily injury to any person (other than a person

under a contract of service/apprenticeship of Insured/Principal

etc  sustaining D/BI   in the course of employment )



Damage to property not belonging to the Insured 

nor 

held in

trust or on commission nor for which he is responsible

BPP 

C

ONTD



Add On Perils/Covers: 6 like other Annual Policies



Important Regulations :



WARRANTIES



Annual Inspection

: The Boiler and Pressure Plants  are

annually inspected

 by Inspectors appointed by the appropriate

Government; Where there is no statutory requirement for

Government Inspection; the inspections are to be carried out by an

independent competent person.



The Boilers and Pressure Plant shall only be operated by

Attendants

 holding a 

valid certificate of competency

 issued

under the appropriate Boiler Act.



Unqualified permission

 in writing of the competent Inspecting

Authority to 

operate

 the said Boilers and Pressure Plant. 

If the

maximum pressure or load upon safety valve immediately prior to

any explosion or collapse was in excess of that stipulated by the said

Authority the Insured shall not be entitled to any compensation or

indemnity under this policy in respect of such explosion or collapse.

BOILER 

AND

 PRESSURE PLANT

INSURANCE 

CONTD

….



DEFINITIONS



Boiler’ shall mean any fired closed vessel or a combined container

piping system in which 

steam is generated under pressure

.



‘Pressure Plant’ shall mean any unfired closed container under

steam gas or fluid pressure.



‘