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INTRODUCTION The purpose of these Engineering Underwriting Guidelines is to provide
the following:
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A definition of Engineering Business.
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Our underwriting philosophy and risk acceptance criteria.
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The rules by which this business is to be
underwritten.
PRODUCTS Following is the list of products under Engineering Insurance, which are
governed by the tariff prescribed by the Tariff Advisory Committee.
ERECTION ALL RISKS (EAR) INSURANCE EAR insurance provides a very wide and comprehensive insurance cover to
the client in respect of any sort of contingency from the moment the
material is unloaded at the site of the project and continues during
storage, physical erection commissioning, testing and maintenance (if
covered). Since the duration of the cover can be as long as 36 months or
even more, care must be taken while negotiating the proposal as well as
assessing the moral hazard of the client.
SCOPE OF COVER This is a comprehensive insurance cover that is available to the client
in respect of any sort of contingency from the moment the materials are
unloaded on the site of the project / works and continuous during storage,
physical erection and till the test run is over which covers all
physical losses or damage as under:
Fire, lightning, theft & burglary. Impact from falling objects, collision, failure of changes or tackles. Failure of safety devices, leakage of electricity, insulation failure,
short circuit, explosion. Carelessness, negligence, fault in erection, strike & riots. Storm, tempest, flood, landslide, rockslide, earthquake.
EXTENSION OF COVER
While the standard policy include all Acts of God perils, it has to be
noted that the earthquake peril is covered at an appropriate additional
premium as per the erection tariff.
Extension of basic cover to provide for extension of the policy period
itself can be given at additional premium per erection tariff.
Dismantling cover in case of already erected second hand plant can be
given at an appropriate additional premium as per tariff.
Additional premium are also chargeable for the removal of debris,
contractor’s plant and equipment, third party liability, if they are to
be included in the sum insured.
CONTRACTOR’S ALL RISKS (CAR)
Although a CAR policy may be taken by the principal or by the
contractor, but usually, under the terms of the agreement between the
contractor and the principal, it is obligatory on part of the contractor
to effect a CAR insurance in their joint names before the commencement
of the project. The sum insured under the policy must not be less than the full value of
the contract works at the completion of contract inclusive of all
materials, wages, freight, custom duties, construction cost and material
or items supplied by the principal.
TYPE OF PROJECTS The CAR insurance policies generally issued for all types of Civil
Engineering projects like dwellings, office building, commercial
building, go downs and warehouses, hospitals, schools, silos, steel
structure, roads, water supply lines, construction work, etc.
EXTENSION OF COVER
While the standard policy include all Acts of God perils, it has to be
noted that the earthquake peril is covered at an appropriate additional
premium as per the erection tariff.
Extension of basic cover to provide for extension of the policy period
itself can be given at additional premium per erection tariff.
Dismantling cover in case of already erected second hand plant can be
given at an appropriate additional premium as per tariff.
Additional premium are also chargeable for the removal of debris,
contractor’s plant and equipment, third party liability, if they are to
be included in the sum insured.
MATERIAL DAMAGE SECTION
The Scope of insurance is virtually the same as that of EAR insurance.
Under this section the insurer agreed to indemnify for any loss or
damage to the insured property by any cause other than those
specifically given under the exclusions.
The various exclusions under the CAR policy:
General exclusions (applicable to Section I and Section II).
Exclusions applicable to Section II - Third Party liability.
Exclusions applicable to Section I - Material Damage
are exactly the same as under EAR Policy.
MACHINERY BREAKDOWN (MB)
Machinery Breakdown insurance was developed to grant industry effective
insurance cover for expensive plant, machinery and mechanical equipment.
This insurance is important for everyone who operates the machines. This
policy should support our property insurance and hence this insurance
must not be granted on a stand - alone basis.
SUBJECT MATTER INSURED
All types of machinery, plant, mechanical equipment and apparatus may be
covered under MBD insurance, such as for example power generating units,
power distributing plant as well as production machinery and auxiliary
equipment, etc.
SCOPE OF COVER
By its nature, Machinery Breakdown Insurance is an “accident” insurance
on machinery. Thus,
It covers unforeseen and sudden physical loss of or damage to the
insured items.
Faulty design faults at workshop or in erection, defects in casting
and material.
Faulty operations, failure of safety system / lubrication system / control
system, lack of skill, negligence.
EXTENSION AVAILABLE UNDER THIS POLICY
Third party liability.
Expediting costs.
Additional customs duty.
CLAIM PROCEDURE
The policy condition clearly lays down the procedure to be followed by
an insured in the event of damage to the insured machinery.
It would be desirable to obtain a claim from duly completed and signed
and to check that both the item and the risk involved are insured under
the policy. It is also essential at the outset to check whether there is
any machinery Loss of Profits insurance in force covering the damaged
machinery. If so, immediate action is necessary for minimizing the loss
under the Machinery Breakdown policy.
A qualified engineer surveyor is generally deputed to assess the loss
who will then scrutinize claims estimates, determine the cause of the
accident and certify that the charges claimed for repairs are
reasonable. An up - to - date copy of the policy should be made available to
the Independent Surveyor, if engaged in the initial stage so that he is
fully acquainted with the terms, conditions and excess under the policy.
LOSS SETTLEMENT PROCEDURE
Partial Loss Basis
In cases where the damage can be repaired, the basis of indemnification
is the cost of restoration to working order based on the customary daily
rates of wages together with normal freight and erection costs and other
duties. Customs duties and dues, if any have been included in the sum
insured. In such cases of repairable damage, no deduction is made for
wear and tear, depreciation, etc.
For parts with limited life, depreciation factor has to be taken into
consideration.
Total Loss Basis
If the cost of the repair as mentioned above equals or exceeds the
actual value of the machinery insured immediately before the occurrence
of the damage the settlement shall be made on Total Loss Basis.
Under total loss basis, the basis of indemnification is the market value
of the item immediately before the accident plus the cost of removing
the damaged machinery less the value of the salvage.
Any extra charges incurred towards repairs, such as Express Delivery,
Overtime and holiday rates and wages, are payable only if special
provision for these items has been made in the Policy in consideration
of which an additional premium is charged.
All costs of alterations, additions, improvements and overhauls carried
out on the occasion of a repair are to be borne by the insured. The Cost
of provisional repairs will be borne by the insure if such repairs
constitute part of the final repairs and do not increase total repair
expenses. The insurer will make payments only after being satisfied by
production of the necessary bills and documents, that the repairs have
been effected or replacement have taken place as the case may be.
POSITION AFTER A CLAIM
The insured is not entitled to abandon any property to the insured
whether taken possession of by the insurer or not.
From the day of the loss the sum insured for the remainder period of
insurance is reduced by the amount of compensation. To prevent under
insurance during the remaining period of insurance the sum insured must
be reinstated. The premium will be calculated pro - rata from the day the
repaired item is again put to work up to the date of expiry of the
policy.
BOILER AND PRESSURE PLANT (BPP)
This policy covers explosion of boilers and pressure plants but does not
cover rupture of tubes inside the boilers. Both these perils can be
covered under MB policy and hence we should wherever possible include
this in our MB portfolio since it would practically mean granting extra
cover within the scope of tariff provisions.
TYPES OF EXPLOSIONS
It can be broadly classified under two categories for the purpose of
insurance cover.
Chemical Explosions
It is a matter of common knowledge that gun powder, similar explosive
compound could cause explosion under the influence of mechanical or
thermal shocks. Highly inflammable fluids and dusts can cause explosions
if their concentration in the atmosphere exceeds the explosive limits.
From the insurance concept, these explosions are considered as very
rapid form of combustion.
Physical Explosions
In respect of pressure vessels handling inert fluids such as steam,
explosion can occur due to variation in fluid pressure. The variation
being only in physical form and there no chemical reaction or changes
responsible for such explosions as such these are classified as Physical
Explosions.
SCOPE OF COVER
The policy covers pressure vessels both fired & unfired against the risk
of explosion and collapse and indemnified the insured against:
Damage to the boilers & / or other pressure plant.
Damage to surrounding property of the insured or the property held by
the insured in trust for which he is responsible.
Death or bodily injury to any person.
Damage to property not belonging to the insured or held in trust or on
commission for which he is responsible.
EXCEPTIONS OF POLICY
Loss or damage raising from fire and allied perils which can be
covered separately.
Damage by chemical explosion except in recovery boilers and waste heat
boiler.
Contractual liability, manufacturer’s supplier’s liability.
Loss arising from an existing defect.
War group of perils, social group of perils.
Nuclear perils.
Loss due to gross negligence.
Failure of individual tubes.
WARRANTIES
Under the BPP insurance the following warranties will be incorporated
during the currency of the policy:
The Boilers and Pressure Plants described in the schedule are annually
inspected by inspectors appointed by the Government except where there
is no statutory requirement for Government inspection; the inspections
are to be carried out by independent competent persons.
The Boilers and pressure plant described in the schedule shall only be
operated by attendants holding a valid certificate of competency issued
under the appropriate Boiler Act.
The insured shall be in possession of the unqualified permission in
writing of the competent inspecting authority to operate the said
boilers and pressure plant. If the maximum pressure of 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.
OTHER EXTENSIONS AVAILABLE UNDER THIS POLICY
Steam Pipes
The portion of the steam pipe up to the safety valve alone is deemed to
form integral part with boiler. The remaining portions of the steam
pipes can be included under this extension.
Expediting Costs
Expenses towards overtime, night work, work on public holidays, express
freight can be included under this extension. The same will be
indemnified after a loss provided these expenses are incurred following
a loss due to an insured peril under this policy.
Air Freight
Expenses towards air - lifting parts of the boiler following a loss can be
included under this extension.
Policy Period
This policy is issued on annual basis.
CLAIM PROCEDURE
In the event of a loss the insured should comply with the following:
Immediately notify the insurer giving an indication as to the nature
and extent of loss.
Take all reasonable loss minimization steps.
Preserve the salvage.
Furnish all information and documentary evidence as required by the
insurer.
The insured may proceed with the repair of any minor damage not
exceeding Rs.2500/-.
Claim form duly completed and signed should be sent to the insurer.
Generally, claims are for substantial amounts and require great care
during investigation and negotiations. It is necessary to investigate
the cause of the damage and ascertain whether the claim falls under the
policy definition of 'Explosion' or 'Collapse'. The certificate issued
by the Government Inspector of Boiler must be checked to ensure that the
accident occurred within its validity period and that all its terms and
conditions have been complied with. It is preferable to have assessments
of Boiler Explosion claims carried out by qualified engineer surveyor
who can determine the exact cause of the loss and arrive at a fair
assessment as to the quantum of claim payable.
CONTRACTOR’S PLANT & MACHINERY (CPM)
Whilst it is possible to have the Contractor’s plant and machinery
covered under an EAR or CAR policy at specific project sites, CPM policy
has been designed to provide a cover on an annual basis to a contractor
who may be using his plant and machinery at different projects during
the course of the year. The cover under a CPM policy is not limited to a
specific project site and is operative at all sites wherever the plant
and machinery is in use and even while the same is lying at the
contractor’s own premises. We therefore have to ensure that all the
sites where the insured items are being used are mentioned on the face
of the policy.
SCOPE AVAILABLE UNDER CPM POLICY
The Contractor's plant and machinery insurance comes under the policies
available under the Project Insurance and like the EAR / CAR Policy offers
a comprehensive cover as given below:
Fire, lightning, external explosion, earthquake, flood, inundation,
subsidence, landslide and rockslide.
Storm, tempest, hurricane, typhoon and tornado.
Burglary, theft, riot and strike and malicious damage.
Accidental damage while at work due to faulty man - handling, dropping
or falling, collapse, collision and impact.
EXCLUSIONS
The insurer will not indemnify in respect of loss or damage given below:
Excess as stated in the policy schedule, which has to be borne by the
insured in any one occurrence. If more than one item is lost or damaged
in one the occurrence insured has to bear the highest single excess
applicable to such items.
Loss or damage due to electrical or mechanical breakdown, failure
breakage or derangement freezing of coolant or other fluid, defective
lubrication or lack of oil or coolant, but if as a consequence of such
breakdown or derangement an accident occurs causing external damage,
such consequential damage will be indemnifiable.
Loss of or damage to replaceable parts and attachments such as bits,
drills, knives or other cutting edges, saw blades, dies, moulds,
patterns, pulverizing and crushing surfaces, screens and sieves, ropes,
belts, chains, elevator, and conveyor bands, batteries, tyres,
connecting wires and cables, flexible pipes, joining and packing
material.
Loss or damage due to explosion of any boiler or pressure vessel
subject to internal steam or fluid pressure or of any internal
combustion engine.
Loss of or damage to vehicles designed and licensed for general road use
unless these vehicles are exclusively used on construction sites.
Loss or damage to the hull and machinery of water borne vessels.
Loss or damage while in transit from one location to another location.
Loss or damage due to wear and tear corrosion, rust etc.
Loss occurring while an insured item is undergoing any test.
Loss to any plant or machinery working underground.
Losses arising out of war and war like perils and due to nuclear
radiation or radio active contamination.
Damage due to faults or defects existing at the time of commencement
of the policy with the knowledge of the insured.
Any willful act or gross negligence of the insured resulting in a loss.
Loss for which the supplier or the manufacturer is responsible.
Loss discovered only at the time of taking the inventory or during
routine servicing.
Loss to plant and machinery mounted or operated on a floating
vessel / barge.
CLAIM PROCEDURE
Claims under this policy may arise due to many causes, e.g. fire, riot,
flood, storm, earthquake, theft, accidental damage to contractors plant
and machinery. Proper claims forms should be used when processing the
claims. The insurer is not liable for additional cost incurred for
alteration or improvement carried out at the time of repairs.
Insurers generally insist upon immediate notification of any claim for
this class of insurance in order that the cause and circumstances of the
loss may be ascertained and repair / replacement costs checked.
All theft claims require careful investigation conjunction with the
local police authority. Losses discovered only at the time of taking
inventory are not covered under this policy. Salvage materials should be
disposed off, preferably on 'as is where is' basis at best available
prices and this will minimize the loss to a certain extent.
ELECTRONIC EQUIPMENT INSURANCE (EEI)
The Electronic Equipments such as computers, Micro - processors,
Word - processors, Tele - communication equipments. Machine meant for
medical use and other misc. Equipments like films, television studio
equipments can be covered under this policy. This scope of this policy
is ALL RISK.
SCOPE OF COVER
This insurance indemnifies the insured against any physical loss or
damage due to following perils:
Location Perils
Fire, lighting, explosion, flood, storm, etc.
Break Down
Any electrical / mechanical breakdown.
Faults
Faulty design, faulty materials, faults in manufacturing / assembly
erection.
Effect of Moisture
Damage due to moisture and humidity.
Carelessness
Damage due to faulty / careless / negligent operation by employees.
Riot & Strike
Riot & strike damage and malicious damage.
Burglary
Loss or damage due to theft or burglary / house breaking.
SUBJECT MATTER INSURED
This policy is recommended for the following instruments:
Electronic data processing equipment comprising central processor with
flexible programmability.
Peripheral equipments such as readers, printers, tape or card punchers
or sorters.
Tapes, and discs.
Auxiliary equipment such as air conditioning, heating and power
conversion or main power control plant.
Electronic office equipments, material testing and research equipment.
Electro medical installations.
Telecommunication equipment, etc.
Computerized numerical control system used in connection with
production machinery.
INSURED PARTIES
The insured can be either the owner or the hirer of the electronic
equipment. The insurance protects, on the basis of the insurance
conditions.
The Owner
As operator against material damage, for which the manufacturer is not
responsible under a guarantee.
The Hirer
Against material damage for which, he is responsible either legally or
through a leasing agreement.
GENERAL EXCLUSIONS
Inherent Vice
Wear & tear, loss due to defects known to the insured at the time of
commencement of the policy. Manufacturers responsibility:
The
loss / damage for which the suppliers are responsible under guarantee.
Willful Act
Due to any willful act or willful negligence of the insured or his
representatives.
Cessation
Cessation of work whether total or partial.
Expected Perils
War, invasion and the like, nuclear reaction / radiation, loss or damage
due to interruption caused by the failure of any gas, water or
electricity service or supply.
Functional Failure
Maintenance costs.
Hired Equipments
For the equipment hired for which the owner is responsible.
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