ENGINEERING INSURANCE 

Renewable Engineering Policies

The table below lists three of the most common types of renewable policies issued in the engineering department and briefly describes the coverage and main exclusion of each the policies:

1.       Boiler and Pressure Vessels

• Damage (other than by fire) to boiler or pressure vessel (driven by steam or hot water) due to explosion or collapse.

• Legal liability for third party (Surrounding) property damage.

• Legal liability for third party injury or death.

2.       Machinery Breakdown and Loss of Profits

• Sudden and unforeseen damage (other than by fire) to machinery and plant at work or being dismantled for the purpose of cleaning, inspection, overhauling, subject to a) Annual maintenance agreement; and b) Regular inspection warranty).

• Loss of profits policy cover loss of operating profits and standing charges consequent to machinery breakdown.

3.       Electronic Equipment

• “All Risks’ basis of cover for any physical loss of or damage to electrical data processing systems and its peripherals.

• Section 1 Material Damage to computer hardware

• Section 2 External Data Media and cots o reprocessing lost data

• Section 3 Increase Cost of Working

Main Exclusion:

1.       Boiler and Pressure Vessels

• Wear and tear but explosion or collapse arising from wear and tear is covered.

• Failure of expendable parts (that is parts requiring routine maintenance) unless such defects result in explosion or collapse.

• Damage caused by fire to property belonging to the insured.

• Damage or liability cause by willful act or neglect by the insured.

• Loss sustained by stoppage of work.

• Loss or damage caused by typhoon, hurricane, volcanic eruption, earthquake and the like.

2.       Machinery Breakdown and Loss of Profits

• Normal wear and tear

• Loss or damage arising from fire and explosion.

• Inundation, subsidence, earthquake and the like.

3.       Electronic Equipment

• Earthquake, volcanic eruption hurricane, cyclone, or typhoon.

• Faults or defects existing at the commencement of policy within the knowledge of the insured.

• Failure or interruption of any gas, water, or electricity supply.

• Atmospheric conditions

• Maintenance costs,

• Loss or damage for which the supplier or manufacturer is responsible by law or contract.

• Consequential loss or liability

Non-Renewable Engineering Policies

These types of policies are mainly issued in conjunction with civil or mechanical engineering project works which are associated with highs inured values and long duration of cover which may last several years in some cases.

Contractors’ All Risks

Contractors’ all risks (CAR) insurance is designed for the purpose of complying with a contractor’s obligations under civil engineering contract which includes construction of buildings, bridge, and road, etc on an ‘all-risks’ basis. Material damage to the works and third-party liability arising from the work occurring during the period of construction and during the ‘maintenance’ or ‘defects liability’ period will be covered.

Section 1 – Material Damage – covers physical loss of or damage to:

a)       Contract works and all materials incorporated and on site.

b)      Contactor’s plant, machinery and equipment used in the construction.

c)       Existing or surrounding properties of the principal or employer.

Section 2 – Third Partly Liability – covers insured’s legal liability for:

a)       Accidental property damage and/or

b)      Bodily injury to a third party arising from the execution of the contract work.

The purpose of contractors’ all risks insurance is to provide immediate funds following an accident to mitigate the risk o delay or non-completion. The risk becomes more acute nearing completion due to the high insured value in turn would increase the severity of a loss or damage compared to the beginning stage of the construction.

Erection all Risks

Erection all risks (EAR) insurance is similar to contractors’ all risks insurance in that the coverage is on an ‘all-risks’ basis coving material damage to the works and third-party liability arising from the works. The distinction is that EAR involves mechanical engineering projects and covers the erection of a plant r installation of specialised machinery whereas CAR covers mainly civil engineering works as explained above.

The policy has two sections:

1.  Material Damage – section covers damage to the plant or machinery including materials on site. The limit of indemnity represents the total contract value including all materials on site.

2.  Third Party Liability – Section covers property damage and/or bodily injury that result from the execution of the work insured. The limit of the indemnity should take into account the existing and surrounding properties and inhabitants exposed to such peril.

The period of insurance begins from the time of installation and continues during testing and commissioning until handed over to the principal.

EAR may cover a single large machinery its apparatus and assembly lines or a turnkey project involving a power producing plant and its facilities. Both types of work my include the following items: -

• Incidental and related civil engineering works.

• Contractor’s plant, machinery or equipment used in execution of the work.

• Existing property on site belonging to or held in the care and custody of the insured.

• Expenses incurred for the clearance of the debris after a loss.

• Additional expenses incurred for overtime, express freight, etc.

Main Exclusion under CAR and EAR:

• • Faulty design, defective materials or workmanship

  • Wear and tear, corrosion and deterioration

  • Mechanical and/or electrical breakdown of construction plant and machinery

  • Motor vehicles licensed for public road use or waterborne vessel or aircraft

  • Document, files, drawings, accounts, bills, currency, notes, securities and cheques

  • Stock taking or inventory

  • Excess or deductible

  • Consequential loss

  • Willful acts of any director, manager or employee