Understanding Engineering Insurance Policies and Risks
Engineering insurance provides coverage for various phases of construction, machinery breakdowns, and other risks within the field of engineering. From contractors' risks to machinery breakdowns, different policies cater to specific needs, ensuring protection throughout project lifecycles.
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INTRODUCTION TO ENGG INSURANCE Definition of Engineering: Engineering is the designing, testing and building of machines, structures subsequent Usage ;using maths and science. Engineering Insurance has suitable policies for each phase of Construction /erection and usage. and processes and
CLASSIFICATION OF ENGINEERING POLICIES 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.
CONTRACTORS ALL RISKS CAR DAM UNDER CONSTRUCTION
ERCTION ALL RISKS EAR/SCE/MCE TURBINE ERECTION
MACHINERY BREAKDOWN MBD TRANSFORMER
ELECTRONIC EQUIPMENT INSURANCE-EEI MRI MACHINE
CONTRACTORS PLANT AND MACHY CPM MOBILE CRANE
BOILER PRESSURE PLANT- BPP STEAM BOILER IN POWER PLANT
CIVIL ENGG COMPLETED RISKS CECR ROAD TUNNEL
MACHINERY LOSS OF PROFITS-MLOP BOILER EXPLOSION IN POWER PLANT
ADVANCE LOSS OF PROFIT-ALOP DAM DAMAGE DUE TO UK FLOODS
BASIS OF CLASSIFICATION OF POLICIES Coverage: All risks Vs Named Perils Policy Duration: Project Vs Annual Types: Material damage Vs Consequential Loss
ALL RISKS VS NAMED PERIL POLICIES 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.
MACHINERY INSURANCE 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.
MACHINERY INSURANCE CONTD . 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.
MACHINERY INSURANCE Insuring Clause Indemnifies the Insured against unforeseen and sudden physical damage excluded Insurer retains option by payment or reinstatement or repair. Whilst in the premises. Necessitating its immediate replacement. Applies after successful 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 by any cause not repair or completion of
MACHINERY INSURANCE CONTD . 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%
MACHINERY INSURANCE (EXCLUSIONS) General Exclusions under MBD 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 1.
MACHINERY INSURANCE (EXCLUSIONS) 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.
MACHINERY INSURANCE (EXCLUSIONS) CONTD . Political Risks Nuclear Risks Overload Experiments Gradually developing flaws, defects,not necessitating immediate stoppage, although at some future time repair or renewal of the parts affected may be necessary. Willful act, willful neglect or gross negligence of the Insured or his responsible representatives. Loss, damage due to Pre Existing Defects Consequential Loss-MLOP Loss, damage and/or liability due to explosions in Chemical Recovery Boilers, explosions for e.g. smelt, chemical, ignition, explosions etc. 2. 3. 4. 5. 6. 7. 8. 9. other than pressure
MACHINERY INSURANCE (EXCLUSIONS) CONTD . 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). .
MACHINERY INSURANCE (EXCLUSIONS) CONTD . 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 belt is conveyor belt 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. belts(Endless that conveyor been has made Manufacturers liabilities like Guarantees/warranties 3.
MACHINERY INSURANCE CONTD 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.
MACHINERY INSURANCE CONTD 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 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. Total Loss: Cost of repairs as detailed 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.
MACHINERY INSURANCE CONTD 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: documents in case of total loss where the Insured is unable to replace the damaged equipments for reasons beyond their control. May, however, not insist for bills and
MACHINERY INSURANCE CONTD 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 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. Insurance: If the Sum Insured is less than the
MACHINERY INSURANCE CONTD 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.
MACHINERY INSURANCE CONTD Period between successive overhauls Terms & Conditions Beyond 32,000 hrs/4 years and upto 48,000 hrs/6 years Excess subject to a minimum of 150% of tariff excess Excess shall be 37.5% of claim subject to a minimum of 200% of tariff excess Excess shall be subject to a minimum of 300% of tariff excess Excess shall be subject to a minimum of 500% of tariff excess and compliance with recommendations and satisfactory report by the insurance company s engineer. shall be 25% of claim Beyond 48,000 hrs/6 years and upto 56,000 hrs/7 years Beyond 56,000 hrs/7 years and upto 64,000 hrs/8 years 50% of claim Beyond 64,000 hrs/8 years and upto 72,000 hrs/9 years 50% of claim subject manufacturer s to
MACHINERY INSURANCE CONTD 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.
MACHINERY INSURANCE CONTD 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.
MACHINERY INSURANCE CONTD OTHER INSURANCE: applies. Principle of Contribution 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.
MACHINERY INSURANCE CONTD Tariff Proviso 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.) Excess amounts are minimum and cannot be eliminated by payment of additional premium. Projects located outside India would be outside the jurisdiction. 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 shortage, shortage of water supply and similar inputs. Standstill items like boilers, TG sets, steam engines and Diesel Generating Sets, in 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. 1. 2. 3. 4. raw materials, acute power lieu of sufficient standby
MACHINERY INSURANCE CONTD 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.
MACHINERY INSURANCE CONTD 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. Pre Inspection: Every risk shall be accepted only after satisfactory inspection. 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. 7. 8. 9.
MACHINERY INSURANCE CONTD 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.
MACHINERY INSURANCE CONTD 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: Necessitating replacement of crankshaft, 20 % of the cost of crankshaft replacement will be borne by the insured in addition to the Excess stipulated above. Claims of DG Sets
MACHINERY INSURANCE CONTD 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 Equipment Excess against each claim Excess applicable for Glass Lined Vessels, Glass & Graphite equipments - Excess shall be 10 % of Sum Insured for each claim. a) b) For other items - i) Furnace Transformers Excess shall be 2% of Sum Insured subject to minimum of Rs. 250/-. Excess shall be 5% of Sum Insured subject to minimum of Rs. 1000/-. ii) Photo Copiers c) For items other than (a) and (b) above - Sum Insured (SI) upto Rs. 2.5 crores 1.0% of Sum Insured subject to a minimum of Rs. 2500/- 0.8% of Sum Insured subject to a minimum of Rs. 2,50,000/- 0.6% of Sum Insured subject to a minimum of Rs.4, 00,000/- 0.5% of Sum Insured subject to a minimum of Rs.6, 00,000/- i) Sum Insured more than Rs. 2.5 Crores and upto Rs. 5.0 Crores. Sum Insured more than Rs. 5.0 Crores and upto Rs. 10.0 Crores. Sum Insured more than 10.0 Crores i) i) i)
MACHINERY INSURANCE - ADD ON COVERS ( A A E E O T)CONTD 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 machines may be granted under the escalation clause. Increased each day by an amount representing 1/365thof 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 percentages for different
MACHINERY INSURANCE - ADD ON 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 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. shall be reduced in the
MACHINERY INSURANCE - ADD ON COVERS ( A A E E O T)CONTD 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
MACHINERY INSURANCE - ADD ON COVERS ( A A E E O T)CONTD 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. 5.
MACHINERY INSURANCE - ADD ON COVERS ( A A E E O T)CONTD 6. Additional Custom Duty The additional Customs Duty, 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. which may be incurred by the
MACHINERY INSURANCE CONTD Loss Minimisation warranties/ Clauses DG Set Clause Carding machines Induction Furnace Reduction Gear Box Expeller Gears Ropes in Lifts/Cranes/Ropeways Wind Mills
(2)ELECTRONIC EQUIPMENT INSURANCE Applicability: Electronic is defined as device that used low voltage/Current +Solid 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. 1. state ICs for
ELECTRONIC EQUIPMENT INSURANCE CONTD Pre Requisites for Issuance of Policy: Policy applies only after successful Completion of Performance/Acceptance Tests. Duration of Policy: Annual The policies, if to be issued for shorter period than twelve months should be issued at the rates set out . 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 ??? 2. 3. 4.
ELECTRONIC EQUIPMENT INSURANCE CONTD Coverage/Perils: 5. 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 replacement or repair. by payment in cash,
ELECTRONIC EQUIPMENT INSURANCE CONTD Sec II- External Data Media including the Cost of restoration of Data SI should be furnished i) Data Media (type and quantity) ii) Expenses 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. for Reconstruction and
