Contractors All Risk Policy (Car) vs Erection All Risks Policy (Ear)
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Sl. No. |
Category |
CAR |
EAR |
| 1. | What Coverage is available | Contractors all risk policy caters to all primarily civil construction (civil
works costs more than 50 percent of the total project cost) and is similar
to the Erection all risk policy. The contractor is responsible for loss or damage to
works until they are handed over to the principals. This liability can be insured
under the CAR policy. It provides a comprehensive cover for the entire civil
engineering project from the time of arrival of the first lot of materials at site
and continues while the work is in progress till such time it is completed. This
policy does not cover the interest of professional advisers, namely architects
consulting engineers against their liabilities arising out of professional
negligence. The policy consists of the following two sections - Section 1: Material damage for damage to the any part of the project Section 2: Third party liability to any outsider at project site |
The basic concept of E.A.R. insurance is to offer a comprehensive protection against
all the risks involved in the erection of machinery and plant or structures of any
kind. Today it is a mandatory condition of financing of a project of a reasonable
size to have an EAR policy as a protection/comfort factor for the promoters and
the financiers. The policy covers the risks under two heads Section 1: Material damage Section 2: Third party liability |
| 1a | I. Material damage | Operational perils like i. Fire ii. Lightning iii. Explosion/implosion iv. Impact by any rail/road vehicle or animal v. Burglary, theft vi.Short-circuiting, arcing, excess voltage vii. Excess pressure or vacuum, tearing apart on account of centrifugal force viii. Any other sudden and unforeseen events such as loss or damage due to collapse, any foreign object, onsite transport of items to be erected etc Acts of God perils like i. Food, inundation, cyclone storm, tempest, hurricane, tornado ii. Earthquake, fire and shock iii. Rockslide, landslide and subsidence Human factors like i. Riot and strike malicious damage ii. Fault in erection iii. Negligence lack of skill and carelessness |
Operational perils like i. Fire ii. Lightning iii. Explosion/implosion iv. Impact by any rail/road vehicle or animal v. Burglary, theft vi.Short-circuiting, arcing, excess voltage vii. Excess pressure or vacuum, tearing apart on account of centrifugal force viii. Any other sudden and unforeseen events such as loss or damage due to collapse, any foreign object, onsite transport of items to be erected etc Acts of God perils like i. Food, inundation, cyclone storm, tempest, hurricane, tornado ii. Earthquake, fire and shock iii. Rockslide, landslide and subsidence Human factors like i. Riot and strike malicious damage ii. Fault in erection iii. Negligence lack of skill and carelessness |
| II. Third party liability | The policy covers:
i. Legal liability for accidental loss or damage caused to the property of other persons including property held in trust or in custody of the insured, for which he is responsible ii. Legal liability for fatal or nonfatal injury to any person other than the insured’s' own employees or workmen All costs and expenses of litigation recovered by any claimant from the insured. |
The policy covers:
i. Legal liability for accidental loss or damage caused to the property of other persons including property held in trust or in custody of the insured, for which he is responsible ii. Legal liability for fatal or nonfatal injury to any person other than the insured’s' own employees or workmen All costs and expenses of litigation recovered by any claimant from the insured. |
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| 2. | What is covered | The policy covers the property on the project site like
a. Structures, machines, installation, temporary installation forming part of the contract. b. Contractor plants and equipment's c. Other property on or near the site for which the contractor is responsible during erection d. Other insurable item. The cover is valid during the erection period from the start of works until handing over to the Principals |
The policy covers the property on the project site like
a. Structures, machines, installation, temporary installation forming part of the contract. b. Contractor plants and equipment's c. Other property on or near the site for which the contractor is responsible during erection d. Other insurable item. The cover is valid during the erection period from the start of works until completion of operational tests preceding provisional acceptance of the works, or until ' de facto ' taking into use |
| 3. | What is the Amount of cover | The policy defines the sum insured as completely erected value of the property inclusive of all related expenses like freight, customs duty, erection cost. In brief, the sum insured under the policy should represent the total estimated, erected project cost. The project cost or the sum insured has following components: i. Bare cost of equipment's or prime cost ii. Variable cost that is equipment related expenses and erection and supervision expenses iii. Other charges Expediting charges to foreign agents for location of suppliers and follow-up for timely expedition of fabrication, and dispatch .by air or express freight. |
The policy defines the sum insured as completely erected value of the property inclusive of all related expenses like freight, customs duty, erection cost. In brief, the sum insured under the policy should represent the total estimated, erected project cost. The project cost or the sum insured has following components: i. Bare cost of equipment's or prime cost ii. Variable cost that is equipment related expenses and erection and supervision expenses iii. Other charges Expediting charges to foreign agents for location of suppliers and follow-up for timely expedition of fabrication, and dispatch .by air or express freight. |
| 4. | What is the Cost of cover | The basic rate for three month period ranges from 1 % to 5 %. | The basic rate for one-month erection and one month testing ranges from 2% to 4%. |
| 5. | General exclusions | 1. War and war like perils.
2. Nuclear radiation and radioactive contamination. 3. Willful act or willful negligence of the insured or of his responsible representative 4. Cessation of work whether total or partial. |
1. War and war like perils.
2. Nuclear radiation and radioactive contamination. 3. Due to falling aircraft are other aerial devices. 4. Willful act or willful negligence of the insured or of his responsible representative 5. Cessation of work, whether total or partial. |
| 5a | Exclusion applicable to material damage. | 1. Inventory loss.
2. Policy excess. 3. Normal wear and tear 4. Faulty design, faulty material and bad workmanship. |
1. Inventory loss.
2. Policy excess. 3. Normal wear and tear 4. Faulty design, faulty material and bad workmanship. |
| 5b | Exclusions applicable to third party liability. | 1. The excess as stated in the policy schedule
2. Expenses incurred on repairing anything covered under section 1 of this policy. 3. The liability for bodily injury to employees or workmen of the insurer or are any other firm connected with the project. 4. Loss or damage to property belonging to or held in the custody of the insured or any firm connected with the project. 5. Liability following an accident caused by vehicle licensed for road use or water borne or aircraft. 6. Any liability attaching by virtue of an agreement, which would not have attached in the absence of such agreement. |
1. The excess as stated in the policy schedule
2. Expenses incurred on repairing anything covered under section 1 of this policy. 3. The liability for bodily injury to employees or workmen of the insurer or are any other firm connected with the project. 4. Loss or damage to property belonging to or held in the custody of the insured or any firm connected with the project. 5. Liability following an accident caused by vehicle licensed for road use or water borne or aircraft. 6. Any liability attaching by virtue of an agreement, which would not have attached in the absence of such agreement. |