ERECTION ALL RISK INSURANCE:
DEFINITION, COVERAGE, BENEFITS, COST,  CLAIMS

The Add-On Covers in an Erection All Risk Insurance Policy are as follows:

• Claim Preparation Costs: The Claim Preparation Costs Add-On Cover pays costs reasonably incurred by the Insured following a loss to the Insured Property to extract and compile information required by the Company from the Insured’s own records for the purpose of preparing a Claim under the Policy .

• Air Freight Cover: The Air Freight Cover provides coverage for Expenses incurred on Air freight in connection with the indemnifiable loss under the EAR Policy.

• Cover For Insured Contract Works Taken Over or Put into Service: The Put to Use Clause or Put into Service Extension covers loss or damage to parts of the Insured Contract Works which have been taken into use or operation after the Expiry of the Testing Period.

• Additional Custom Duty Cover: Additional Customs Duty Cover provides compensation for increased Customs Duty percentage payable on the replacement parts over and above the Custom Duty taken into account while arriving at the Sum Insured of the damaged item.

• Brands and Trademarks Clause: The Brands and Trademarks Clause determines the salvage value of any damaged property after removal of all brands or trademarks or other identifying characteristics in case of loss or damage to the Insured Property bearing a brand or trademark by an Insured Peril.

• Temporary Removal Cover: The Temporary Removal Cover provides coverage to the Insured Property whilst stored outside the Insured location, and temporarily removed for cleaning, renovation, repair or storage and even whilst in transit by road, rail or air.

• Cessation of Work: The Cessation of Work Add-On Cover provides coverage for loss or damage by a cause which is not excluded under the Policy and happens during the cessation of work.

• Owners’ Surrounding Property: Owners’ Surrounding Property extension covers Loss or or Damage to surrounding property of Owner located on project site if damage is caused directly due to the Erection, Construction or Testing of the property covered under the Policy.

• Extended Maintenance Period Cover: The Extended Maintenance Cover in in a Erection All Risks Insurance Policy provides coverage for Loss or Damage to the Insured Contract Works

  • caused by the Insured contractor in the course of the operations carried out for the purpose of complying with the obligations under the maintenance provisions of the contract.

  • occurring during the maintenance period provided such loss or damage was caused on the site during the erection period before the certificate of completion for the lost or damaged section was issued.

• Escalation Clause: Escalation Clause in an Erection All Risk Insurance Policy provides an automatic increase in the Policy Sum Insured upto selected % of Sum Insured and the Claim is settled at increased replacement/reconstruction cost as on date of loss subject to maximum of Sum insured of damaged item plus the selected % escalation cost.

• Loss Minimisation expenses: The Loss Minimisation Expenses Extension says that in normal circumstances, the Insured is supposed to take all steps to minimise further loss arising from a loss event and in the process of preventing further loss, if the Insured incurs an additional expense, this additional expense is payable under the Loss Minimisation Expense Extension of the Erection All Risk Insurance Policy.

• Professional Fees: The Professional Fees Add-On Cover covers the fees of Architects, Surveyors and Consulting Engineers or other Professional Fees incurred in the reinstatement of the Insured Property following an admissible claim under Material Damage Section of the Policy,

• Appraisement Clause: Under the Appraisement Clause, the Insurance Company does not conduct appraisement of the Insured undamaged property, if the aggregate claim for any one insured Loss or Damage does not exceed a pre-specified percentage limit.

• Removal of Debris: The Removal of Debris Add-On Cover covers the costs of demolishing or removing debris of Property insured under the Material Damage Section.

• Storage Risks at the Fabricator’s Premises: Storage Risks at the Fabricator’s Premises Extension covers loss or damage to Project material that happens at the Fabricator’s Premises or Workshop by a Peril not excluded under the EAR Policy subject to of all fabricator locations being declared under the Policy.

What is the Period of Cover under the Erection All Risks Insurance Policy?

The Duration of an Erection All Risk Insurance Policy is as per the following:

• The Policy commences from the date of arrival of first consignment of project material at site and shall expire on successful completion of testing & commissioning of project or the policy expiry date specified in the schedule, whichever is earlier.

• The Insurance Company’s liability under the Erection All Risks Insurance Policy shall expire for parts of the Insured Contract Works TAKEN OVER OR PUT INTO SERVICE by the Principal prior to the expiry date specified in the policy.

• In the event of non-completion of the project within the policy period, cover may be extended for such further time as may be required at additional premium.

What is the Sum Insured of the Erection All Risks Insurance Policy?

The Sum Insured under Erection All Risks Insurance Policy represents the Estimated Completely Erected Value. The Estimated Completed Erected Valus of the Project is the sum total of the following:

• Cost of Imported / Indigenous Machinery incl. freight, custom duty etc.

• Cost of Erection including Wages, Power.

• Civil Engg Works like- Factory shed, Storage & other Buildings.

• Cost of Free supply items supplied by the Principal.

• 50% of Escalation cost if opted for.

• Contractor’s Plant & Machinery can be covered under same EAR policy if the value is less than 5% of Total Project Cost subject to applying rates, terms & conditions of CPM policy.

Are third-party liabilities, such as bodily injury or property damage, included in EAR coverage?

Are professional fees covered under EAR policies?

Yes, Erection All Risk (EAR) insurance policies can cover professional fees, such as engineering or consultancy costs, but this coverage is typically not automatically included and often requires a specific endorsement or extension in the policy. Below is a detailed explanation of how professional fees are handled under EAR policies.

Coverage of Professional Fees in EAR Policies

1. Definition of Professional Fees:

   • Professional fees refer to costs incurred for services provided by professionals, such as engineers, architects, surveyors, or consultants, to assess, repair, or reinstate damaged property following an insured event. These may include fees for:

     • Designing or redesigning machinery or equipment after damage.

     • Conducting inspections, surveys, or technical assessments to evaluate losses.

     • Providing consultancy services to ensure compliance with regulations or to expedite repairs.

2. Coverage Scope:

   • When included, professional fees are covered as part of the additional expenses incurred to restore the project to its pre-loss condition after an insured event (e.g., damage to machinery during erection due to fire, accident, or natural disaster).

   • The coverage typically applies to fees directly related to the repair or replacement of insured property (e.g., machinery, equipment, or temporary structures) under the EAR policy.