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INSURANCE IN CONSTRUCTION
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CAR – Contractors All Risk
Overview:
The Contractors All Risks Insurance offers comprehensive coverage for all
types of civil construction risks. This policy covers physical loss or damage to property,
as well as third party liability related to work conducted on the contract site.
Cover includes:
The coverage for physical loss or damage to property is on an "All
Risks" basis, i.e. the policy insures against damage to property in the course of
construction by all sudden, accidental and unforeseen causes other than specified
excluded perils and forms of damage. This cover includes works brought on to the site
for the purposes of the contract as well as temporary works erected or constructed on-
site. Additionally, the policy includes coverage for physical loss or damage to
construction plant & machinery, equipment and tools used per the insured contract.
Third party liability
: This policy also includes third party liability coverage. This insures
against accidental bodily injury or illness to third parties as well as accidental loss of, or
damage to property belonging to third parties, caused by an accident at the
construction site. The policy also indemnifies for legal costs and expenses recovered
by a claimant from the insured.
CAR
consists of two main types of work:
building works and civil works.
Building works
involves the construction of dwellings, office blocks, universities,
stadiums, hospitals and factories.
Important features include:
• The location
• Demolition
• Exposure to adjoining properties and proximity to roads and other structures
• Excavation depth and precautions taken to safeguard adjacent property
• Exposure to the public
• Use of cranes
• Type and method of construction
• Exposure to contractors/sub-contractors, their employees and all workers on site
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Civil works
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Civil works
involves the construction of roads, airports, railways, tunnels, bridges,
viaducts, dams, pipelines and the like.
This type of work generally being outdoors and thus exposed to the
elements, usually attracts the most frequent and serious losses.
In general terms the premium is determined on the basis of the following factors:
Removal of Debris
Architects, Engineers or Surveyors Fees
Expediting Expenses.
Surrounding property etc.
Insured's legal liability for compensation in respect of personal injury or property
damage to third parties arising from the contract works is covered under Third Party
Liability Insurance. The policy can be extended to cover:
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EAR – Erection All Risks
EAR Insurance covers plant and machinery
construction risks and can be extended to include
third-party liability related to work conducted on
contract sites.
EAR
EAR
is the other branch of contract works insurance (EAR) which essentially
covers all risks involved in the erection and installation of machinery, plant &
equipments and steel structures of many different types.
EAR
insurance policy protects the project companies, suppliers,
manufacturers of the machinery or plant or contractors who carry out the
erection work or is responsible for it. A supply and erection contract typically
requires the contractor to arrange insurance against physical damage from
any cause to the items to be supplied and erected, both whilst in transit and
after arrival at the erection site.
The insurance usually includes the erection tools and tackle.
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Erection projects are usually exposed
to the following perils:
• Fire , lightning , explosion
• Earthquake
• Flood & Inundation
• Windstorm
• Subsidence or collapse
• Theft or burglary
• Faulty workmanship,
• Malicious acts
• Faults in erection
• Negligence, lack of skill, lack of experience
• Short circuiting, arcing, excess voltage
• Excess pressure or vacuum, destruction due to centrifugal force
• Any other unforeseen or sudden event such as collapse
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EAR insurance cover can be extended to cover
the following:
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Removal of Debris
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Surrounding property
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Errors and Omissions
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Loss minimization expenses
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Professional Fees
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Automatic Reinstatement of Sum Insured
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Expediting Expenses
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Escalation Prevention of Access
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Offsite storage and fabrication
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Removal to place of safety
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Time Adjustment (72 Hours clause)
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Waiver of subrogation
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Non-vitiation clause
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On Account Payment
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Free issue materials
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Extended Maintenance etc.
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EAR insurance requires the following
information:
• Technical specification of the relevant project, contract price and
value of items
• Experience and expertise of the erection firm
• Flow chart of the production process and a lay out plan where
necessary
• Geological, hydrological and meteorological data as applicable
• Supply and erection time schedule and detail of pre storage
facilities with notes on security and fire prevention in storage and on
site
• Availability of replacement parts or machines and extra costs
associated therewith e.g. imported machinery
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Advance Loss of Profits Insurance
This insurance is commonly referred to as
ALOP
(Advance Loss
of Profits) and is designed to protect the interests of the Principal
(=Client).
Other terms often seen are "Loss of Profits following Delay in
Completion" or "Advance Rentals" or "Delay in Start Up".
The policy offers cover against loss of anticipated
earnings/profits due to the delay in commissioning of the project
following a loss covered under the project insurance policies. It
is normally written in conjunction with CAR/EAR Insurance.
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Contractors Plant & Machinery
Insurance provides cover to Contractors Plant and
Machinery against unforeseen and sudden physical
damage whether at work or rest, while being
dismantled or in the course of such operations or
while being shifted, re-erected while such items are
at the erection site.
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Annual Policy (“Floater Covers”)
Annual policy is generally issued on a Contract Commenced
basis. Cover will only be provided for works actually
commenced during the policy period. Another method of
issuing an Annual policy is on a Turnover basis. Under both
the methods contract works that have already commenced
before the inception of the policy will not be covered unless by
arrangement but work commenced during the currency of the
policy remains covered until completion.
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General Terms and Conditions
of Insurance
Munich Re
FM Global (USA)
Gerling
PZU
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Duration of validity of the policy
Insurance amount
Insurance fee
Deductible (amount)
Examples of insurance policy
names:
Liability Insurance
Third Party Insurance
Fully Comprehensive
Liability Insurance + Third Party
Breakdown Cover
Fire&Theft Insurance.
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Differences ?
INSURANCE COMPANY
INSURANCE BROKER