INTRODUCTION

The purpose of these Engineering Underwriting Guidelines is to provide the following:

  • A definition of Engineering Business.

  • Our underwriting philosophy and risk acceptance criteria.

  • 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.