This policy is specially designed to protect the interests of contractors & principals in respect of civil engineering projects like construction of buildings.bridges, dams, canals, tunnels, roads, multi-storied buildings. Airports, metros, rapid transport system, highways etc.
The policy provides an “all risk” Cover, subject to certain exclusions.
The important causes/perils Covered Are:-
Fire, Lightning, Explosion
Flood, Inundation
Windstorm Of Any Kind Cyclone/Tempest,Typhoon,Hurricane, Tsunami, Landslide, Subsidence
Theft And Burglary
Collapse, Impact Etc. Accidental Damage, Negligence, Malicious Acts Or Human Error
General Exclusions :-
Wilful act or wilful negligence of the insured or of his representatives cessation of work, whether total or partial war and alike risks and nuclear risks.
Period Of Cover Construction Period
It’s important to understand the validity of period of insurance as it’s not annual policy like other traditional insurance policies. Period of insurance is as per the specific need of each project. Since it’s a comprehansive insurance therefore the period has to commence from the date of start of the first acitivity of the project and should continue untill it’s ready for handing over to the principal or else put to its commercial use. The arrival of project material or machinery at the site of construction would decide its commencement of the date of insurance.in other words it would commence from the date of unloading of the property related to the project.it’s imaterila the mode of conveyance for delivery of the project related material. The period would expire on the date specified in the policy. It’s important to understand that if a portion of the project is complete and either handed over to the principal or put to its commercial use then that portion would automatically go out of the insurance policy. It can happen earlier than the policy expiry date mentioned in the policy.so in other words the insurance policy does not continue untill that date. There is another possibility that the date mentioned in the policy gets over but the project is still under construction. In that case the project insurance period is required to be extende untill the next expected date of completion. It’s always benificial to select a longer period of extension as it’s cheaper to extend the policy period rather than increasing in bits and pieces. Extension in beats and pieces would reuslt into higher outgo of primium.
There may be possibilty of actual construction period is shorter than the period indicated in the policy, in that case no refund of premium is allowed normally. But depending upon case to case basis the insurance company can consider refund even.
Coverage Is Under Two Sections:-
- Material Damage
- Third Party Liability
Material Damage (Section I)
This section provides that if the insured property be lost, damaged or destroyed by any of the covered perils, such loss will be made good by repair or replacement subject to the sum insured of each item and overall.
EXCLUSIONS :-
Loss Discovered At The Time Of Inventory
Normal Wear & Tear, Rusting Etc.
The cost of correction of any error during construction unless resulting in physical damage
Files, Drawings, Currency, Cheques
Packing Materials
Penalties For Non-Fulfillment Of Delivery Or Completion Schedule
Loss Or Damage Due To Faulty Design.
Cost Of Repair Or Replacement Of Defective Material &/Or Workman-Ship
Loss Or Damage Due To Vehicles Licenced For General Road Use Or Waterborne Vessels
No Liability Under The Policy In Respect Of The Amount Of “Excess”
Since There Is Separate Excess For Major Perils / Act Of God
The Major Peril/Acts Of God Claims Shall Mean
Claims Arising Out Of
Earthquake – Fire & Shock
Landslide/Rockslide/Subsidence,
Flood/Inundation
Storm/Tempest/Hurricane/Typhoon/Cyclone/
Lightning Or Other
Atmospheric Disturbances.
Collapse
Sum Insured
Sum insured is required by the policy to be equal to the estimated completely erected value of the contract works
It Includes
1. The Cost Of Materials,
2. Wages,
3. Construction Costs,
4. Freight,
5. Customs Duties
6. Items Supplied By The Principal.
It’s important to keep updating the sum insured as otherwise the insurance company would apply under insurance, in the event of damge (average clause-in the ratio of sum inured declared and the sum insured should have been based on the various components indicated above). It’s prudent to pay a small amount of additional premium for the adjustment of sum insured upward otherwise the reduction in claim due to the application of the aveage clause pinches a lot.
The Policy Carries A Clause To Safegaurd This Provision As Under;-
The Insured Undertakes To Increase Or Decrease The Sum Insured In The Event Of Material Fluctuations In Wages Or Prices
The sum insured is adjustable, at completion of construction, on the basis of actual values in respect of construction cost, freight, custom duties and additional premium charged or refund given.
However, any increase or decrease in the prime cost of material is not taken into account in premium adjustment.
Reinstatement Of Sum Insured:
Insured to pay pro-rata additional premium on the amount of claim paid from the date of loss to the expiry of the policy so that the sum insured is maintained at the original level
Basis Of Loss Settlement :
In case of repairable loss, the cost of repairs – less salvage (no depreciation)
In case of total loss, actual value of the property before the occurance – less salvage.
Supplementary / additional covers:
Following additional covers can be added with separate s.i. Under policy
Construction plant & machinery ( the construction machineries used for construction activities-like dumpers, cranes, tunnel drilling maching, road movers, jcbs, excavators etc.)
Can Be Covered On New Replacement Value
Excludes any loss or damage directly caused by its own mechanical or electrical breakdown or derangement.
Option To Cover Under Cpm Policy.
Surrounding property (it means any property in the near vicinity of the project activies. For example the collapse of structure under construction can cause damage to the adjesent property for which the contactor would be legally liable to make the loss good. Such proerties can be insured based on the selected sum insured. No need to declare the details of the surrounding property. It provides insurance on the liabilty basis as per the sum insured chosen under this extension)
Loss or damage to property Located on or adjacent to the Site, belonging to or held in care, Custody or control of the Principal or the contractor, if Occurring directly due to the Erection/ construction of insured Items.
Separate Sum Insured To Be Mentioned In The Schedule
3. clearance & removal of debris (sometimes the heavy damge to the structure under construction would resukts into statter of debries all around & it involves heavy expense to clear the site from such debries)
Cost of removal of debris of the insured property can be covered against separate sum insured Payable If Claim Is Otherwise Payable.
Maintenance Cover Extension
Cover During Maintenance Period, If Required Two Types Of Cover
a). Extended Maintenance
Covers loss or damage to contract works caused by the contractor in the course of operations carried out.
Occurring during the maintenance period rovided such loss or damage was caused on the site during the erection period.
b) Limited Maintenance (Visits)
Covers loss or damage to contract works caused by the contractor in the course of operations carried out. The premium shall be charged depending upon the period of maintenance cover selected i.e. 6 months or 12 months and type of cover required.
5. Additional Expenses For Overtime,Work On Public Holidays, Express Freight In Connection With Indemnifiable Loss.
6.Escalation Clause
7.Additional Expenses For Air-Freight
8.Additional Custom Duties
9. Act Of Terrorism
10. Earthquake Fire & Shock.
Third Party Liability Cover (Section II)
An optional cover, indemnifies against legal liability of the insured for accidental loss of or damage to third party person &/or property including legal cost, subject to the limits specified in the policy.
Limits Are In Two Parts :
Any One Accident (Aoa)
Any One Year (Aoy)
Exclusions Applicable To Section II
No liability towards employees or workmen of the insured or members of their families, any damage to property belonging to or held in the custody of the insured, liability following an accident caused by vehicles licenced for road use or waterborne vessels or aircraft, liability assumed by special agreement.
Excess
Excess Applies Seperately For Each
Type Of Claim As Under:-
Storage & Construction Claims
Maintenance Period Claims
Major Perils Claims.
Major perils, specified in the policy, are earthquake fire & shock, landslide, rock-slide, subsidence, storm, flood, inundation, collapse, water damage for wet risk i.e. Works in rivers, canals, lakes or sea.
Policy Conditions
Insured to take reasonable precautions and comply statutory requirements, notification of any material change in the risk and payment of additional premium.notice of claim, within 14 days of loss, subrogation of rights of recovery, contribution if more than one policy differences regarding quantum of claim to be submitted to arbitration, if the claim is fraudulent, all benefits under the policy are forfeited, cancellation of policy by insured- on short period basis. If by company than on pro-rata.
Rating :
It used to be triff business. Now it is detariff and rates of premium vary co. Wise according to the types of contract works & are provided on period of contract basis.
Underwriting :
Risk assessment is based on proposal form and risk inspection by insurer’s engineer, which provide complete information about the project.
The hazards of special type of civil engg. Works are assessed on the basis of additional questionnaire and risk inspection report.