Some of The Important Policies In Engineering Insurance
It’s a known fact that engineering insurance is a very integral to construction workers, it’s worth noting that they’re are a good number of policies that are under the engineering insurance, and some of those policies includes:
- All risk engineering insurance policy: Under this policy the company indemnifies the insured against sudden and unforseen physical loss of or damage to the property insured in the carrier and to the extent provided.
- General Exclusion: The company will not indemnify the insured in respect of loss, damage or liability directly or indirectly caused by or arising out of or aggravated by:
War, invasion, act of foreign enemy, hostilities or war like operations etc.
Nuclear reaction, nuclear radiation or radioactive contamination
Willful act or willful negligence of the insured or of his responsible representatives
Cessation of work whether total or partial
Period of cover
If any specific date is not mentioned in the schedule, the liability of the company shall commence with the unloading of the property (specified in the schedule) on the site and shall continue until immediately after the first test operation or test loading is concluded (whichever is earlier) but in no case the period shall extend beyond four weeks once the trail running has been done or completion (readiness) of work has been declared by the contractor, whichever is earlier.
If there are several machines or parts in the plant, the liability of the company for the parts/machine ceases, as they are declared ready.
If the actual erection period is shorter than the period indicated in the schedule, no refund of premium shall be allowed, unless specifically allowed by insurers. In the case of second-hand used property, the insurance here under shall, however, ceases immediately on the commencement of the testing.
If the latest, the engineering insurance shall expire on the date specified in the schedule but if the world of erection and test operations included in the insurance is not completed within the time specified here under, the company may extend the period of engineering insurance if not but the insured shall pay to the company additional premium at agreed rates, premium can be paid in quarterly instalment in advances.
- General Conditions: All the conditions are same as those specified for boiler and explosions, insurance policies (as the name itself suggest, they are general insurance) and the two perils that are worth mentioning here are:
- Just hike boiler and explosion policy: the insured is required to notify the company in the event of any occurrences that might give rise to a claim under the policy. Upon notification being given to the company under this conditions, the insured may carry out the repair or replacement of any minor damage not exceeding $1000.
- The insurance may be terminated at the request of the insured at any time in which case the insurer will refund appropriate premium amount subject to the following conditions.
Claims experiencing under the policy as on date of cancellation should be less than 60% of reworked premium
- The unexpected period is not less than 3 months or 25% of the policy period which ever is loss
iii. Testing period should not commenced
This engineering insurance may also at any time be terminated at the option of the insurer with 13 days notice to that effect being given to the insured in which case the insurer shall be liable to repay undermand a rateable proportion of the premium for the unexpected term from the date of cancellation.
Section I- Material Damage
The company would reimburse any loss caused to the items specified in the schedule, both for individual items as well as total sums.
Read more: The Origin of Engineering Insurance
The company will also reimburse the insured for the cost of clearance and removal of debris following upon any event giving rise to an advisable claim under this policy but not exceeding in all sum, (if any) set opposite there to in the schedule.
Exclusion to Section I
The company shall not, however be liable for:
- The first amount of the loss arising out of each and every occurrence shown as excess in the schedule
- Loss discovered only at the time of taking an inventory
- Normal water and tear, gradual detoriation due to atmospheric conditions or otherwise, rust-scractching of painted or polished surface or breakage of glass.
- Loss of damage due to faulty design, defective materials or casting, bad workmanship other than faults in erection.
This exclusion shall be limited time the items, immediately affected and shall not be deemed to exclude loss or damage to other insured items resulting from such excluded perils.
- The cost necessary for rectification in physical loss or damage
- Loss of or damage to files, drawings, accounts, bills, currency stamps, deeds, evidence of debt, notes, securities, cheques, packing materials such as cases, boxes, crates.
- Any damage or penalties on account of the insured’s non-fulfilment of the terms of delivery or completion under his contract of erection or any obligation, assumed there under including consequential loss of any kind or description or for any aesthetic defects or operational deficiencies.
Provisions Applying to Section-II
There are six memos attached to section I explaining the provisions applying to a regarding sum insured, premium adjustment, basis of loss settlement, construction plants, machinery and surrounding property, major perils /acts of god claims.
Memo I-sum insured
The Sum of insurance stated in the schedule couldn’t be less than the completely erected value of the property inclusive of freight, customs duty, erection cost, (sum of insurance stated in the policy) is greater than or equal to the completely erected value of the property).
Any changes in sum due to the rise and fall in the level of wages or prices can be incorporated with the knowledge of the company.
Read More: Clauses under construction all risk insurance
If it is found that the sum Insured (representing the completely erected value of the property and /or particular items involved) is less than the amount required to be insured the amount recoverable by the insured under the policy shall be reduced in such proportion as the sum Insured bears to the amount required to be insured.
Memo 2 – Premium Adjustment
After the completion of the project, the difference in premium (what should be charged and what is charged) due to differences in estimated and actual cost will be adjusted on the basis of the actual values to be declared by the insured in respect of freight and handling charges, custom due and cost of erection.
Any increase or decrease in prime cost of plant and equipment shall not be the subject matter of premium adjustment.
Memo 3 – Basis of loss settlement
In the event of any loss or damage the basis of any settlement under this policy shall be:
- In the case of damage which can be repaired, the cost of repair necessary to restore the items to their conditions immediately before the occurrence of the damage less salvage.
- In the case of a total loss the actual value of the items immediately before the occurrence of the loss less damage, if the cost involved in, the latter were lower than those in the former, the company would replace the item instead of replacing it.
The cost of any promisional repairs will be borne by the company if such repairs constitute part of the final repairs and do not increase the total repairs expenses.
The cost of any alternation, addition and or improvement shall not be recoverable under the policy.
The Engineering contract is also a very integral aspect of a general insurance, that’s why in this article we’re going to be looking at some of the various policies that one can find under an engineering contract.
This is just basically like the continuation of the previous article I listed abd some of these policies are:
Boiler and Pressure Plant Insurance Policy:
The Boiler and pressure plant insurance is an important policy that fills in the loop hole of the fire and allied perils insurance.
Boiler and pressure vessels are commonly used in the production plants like cotton Mill, paper mill, petrochemical plant etc.
Even though the boiler are regularly inspected, still there are certain defects that go undetected.
In such cases the explosion of the boiler would cause huge damage not only the boiler but also the surrounding property, which when damaged can cause huge class
Hence it is always prudent on the part of the producer to go for boiler and pressure plant insurance.
While studying the boiler explosion policy, it is important to keep in mind that it does not cover the losses covered by the fire policy, it’s role and scope is restricted by this, first of all we will clarify the different terms used at different places in the policy.
The terms used in this policy have been explained below:
- A Boiler is defined as any fired closed vessel or a combined container piping system in which steam is generated under pressure.
- Pressure plant: this means any unfired close container under steam gas or fluid pressure
- Explosion: this is the sudden and violent rendering or tearing apart of the paramount structure of a boiler or pressure plant or any part or parts thereof by force if internal steam gas or fluid pressure causing bodily displacement of the said structure and accompanied by the forable ejection of its contents:
The documents that contains the details of the engineering policy is called the schedule , beginning with policy number and date, the schedule contains details of the amount insured, the annual premium, period of policy, boiler and pressure plant insured, surrounding property insured, legal liability to third party as well as additional perils covered.
Steams or feed water piping, separating super heaters, separate economizer etc. Have to be mentioned specifically in the schedule.
The term “boiler” does not include them. Let’s see in details the different parts the policy covers.
- Damage (Other than by fire) to the boiler and / or other pressure point or surrounding property described in the schedule.
- Liability arising due to death of or bodily injury to any person provided he is not employed under apprenticeship with the insured.
- Liability arising from damage to any property whether the insured is responsible for it or not.
The damage listed above must be caused by abd solely by explosion or collapse of any boiler.
General exceptions:
- As we stated in the beginning, the damages arising directly or indirectly from fire that from explosion or collapse or any other cause.
- Damages caused by war, hostiles, or war like operations, natural calamities etc
Similarly damages from nuclear reaction, nuclear radiation or radioactive contamination are excluded.
- If the explosion results from any experiment requiring overloading or abnormal conditions
- Defects that are gradually developing and would require repairs at some future dates are both covered under this policy. Suppose what would happen if such defeats would be covered? Every insured would try to get his better work serviced before the expiry of the policy.
- Defects like wearing away or wastage of materials of any part of the boiler or failure of individual tube (if there are multiple tubes in the boiler) this is because such damages are not the result of explosions.
- Damages due to negligence
- Consequential losses
- Damages due to flaws known but not disclosed by the insured
Warranties
To prevent the insured from getting careless about the safety of boilers, these warranties are required on its part,
- Annual Inspection of Boilers by appropriate authorities
- Only certified competent people will handle the boiler
- The boiler must work under permissible pressure limits
Conditions
There are general conditions like the policy and the schedule that together form the contract, if any specific meaning is attached to any term in either of them, it would apply to whole of the policy.
The pressure on the safety values should not exceed the limit permitted in the latest inspection or the limit specified in the schedule, whichever is lower.
If there is any change in the type of fuel used in the boiler the details should be intimated to the insurer and the terms of the policy revised accordingly.
Any fraudulent means that are resorted to, in order to benefit from the policy or if the claim is rejected and no action taken within 3 months, the benefits under the policy would be infected.
The insurer cannot make any admission promises, payments or indemnity without the written consent of insurer, on the contrary, insurer mat act to settle the claims arising and the insured is bound to disclose all the relevant information to him in such circumstances.
If at the time or loss, the boiler or pressure plant turns out to be of greater value (including freight, custom duty and erection costs) the insurer will bear a notable share of the loss.
Basis of indemnity different when the item can be repaired and when it has to be replaced in the fact cause the insurer will pay the repairing cost and the incidental cost incurred. In restoring the term to conditions prior to damage.
The value of the salvage would be deducted- if the item is destroyed, the company will pay the value as assessed immediately before the accident.
It will also pay the incidental charges (to the extent provided in schedule) incurred in setting it up in the premise. The company shall deduct deprivation and salvage value.
The charges for extra work necessitated shall be paid only it mentioned in writing in the schedule.
Obligations of the insured are more or less same as warranties, the insured should carry out the profits listed in the warranties attached in the stranded engineering policy.
Besides, he should give the insured the right to inspect the bodies anytime, moreover he is obligated to make all arrangements for the inspection.
This includes stopping, checking emptying the boiler. If there is any material change in the subject matter of the policy.
The same would be rendered invalid unless revised and endorsed by the company.
In the case of an accident the insured is expected to observe the following duties
- Immediately notify the company by telephone or telegram as well as in writing, giving an indication as to the nature and extent of loss and damage
- Take all reasonable steps within his power to minimize the event of the loss or damage or liability.
- Pressure the damage or defective parts and makes them available for inspection by an official or surveyor of the company.
- Furnish all such information and documentary evidence as the company may require. The company shall not be liable for any loss or damage of which no notice is received or company nit received completed form within fourteen days of its occurrence.
Upon notification of a claim is covered under some other engineering insurance policy as well, the company will pay only it’s rateable proportion of such liability.
