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Erection All Risk Policy

Erection All Risk Policy is also known as Storage Cum Erection insurance or SCE /EAR) is an insurance policy that is designed to protect the interests of Principals/EPC Contractors against damage or destruction of engineering projects where the value of Plant & Machinery comprises more than 50% of the total project cost. The protection extends to accidental damages to the project works, contractors plant & machinery employed in the project and also to damages and defects during the subsequent period of maintenance for which the EPC contractor is responsible. The Principal/Main contractor for the entire project (including the various sub‐contracts) can take the policy. The sub‐contractors can also take this policy to cover their interests if they are not covered under the main contract. The policy is issued in the joint name of the Principal and the Contractor.

The policy can be issued to cover all kinds of engineering projects where the value of civil construction is less than 50% of the total project cost. Some of the examples of such projects are: Air‐conditioning plants, aerial ropeways, blast furnaces, boiler houses, cable lying, combined cycle power plants, diesel generating houses, distilleries, etc. SCE/EAR can be taken for projects that are located in India only.

SCE/EAR is an "All Risk" Policy which means that every hazard is covered, unless specifically excluded. By "every hazard", we mean any sudden and unforeseen loss or damage to the property insured, which occurs during the period of insurance.
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For the sake of better understanding, SCE/EAR normally covers the following:
  • Fire & Lightning
  • Accidental damages during erection (such as dropping or falling down of objects etc) as well as during testing
  • Flood, Storm, Tempest, Inundation, Water damage
  • Collapse, Collision, Impact
  • Theft & Burglary, Riot, Strikes & Malicious Damage (Excluding Terrorism)
  • Subsidence, Landslide and Rockslide, etc.
The policy can also be extended to cover transit risks (including Custom Duty and Additional Custom Duty) in respect of the materials and equipment pertaining to the project, to obtain a seamless cover. If this is done, the policy will be known as “Marine – cum – Erection” (MCE) Insurance.

General Exclusions

  • War, Invasion, Mutiny, Civil Commotion etc. (the burden of proving that the loss is not caused by an excepted peril falls upon the insured)
  • Damage by order of any government or municipality or local authority (the burden of proving that the loss is not caused by an excepted peril falls upon the insured)
  • Nuclear reaction, radioactive contamination
  • Willful act or Negligence of the insured
  • Cessation of work whether total or partial

Add On Covers

The following extensions are also available on payment of additional premium:--
  • Storage Risks at fabricators premises
  • Clearance & Removal of Debris
  • Contractors Plant and Equipment not exceeding 5% of SCE/EAR Sum Insured
  • Third Party Liability and Cross Liability
  • Terrorism risks
  • Owners Surrounding Property
  • Escalation of Sum Insured
  • Additional Cost of Air Freight
  • Express Freight, Overtime wages and Holiday wages
  • Transit Insurance (including Customs Duty Cover) connected with SCE/EAR insurance
  • Additional Customs Duty
  • Maintenance Visits & Extended Maintenance Visits
  • Cover for “Hot Testing” of Catalyst in respect of Fertilizer and Chemical plants

Features of EAR / SCE Policy:

  • Period of Insurance - The cover under SCE/EAR normally commences from the time of arrival of first consignment at erection site.
  • Can the Policy Be Extended? The policy can be extended at the request of the Insured, prior to the expiry of the policy, on payment of additional premium.
  • Sum Insured - The Sum Insured should be the completed value of the project. It should include the following:
    • Landed cost of all materials (imported or indigenous), including materials supplied by the Principals.
    • Cost of Erection (excluding pre‐operating expenses, but including cost of specialist’s visits/supervision charges etc).
    • Permanent Civil Engineering Works and temporary works
    • Escalation
  • What happens if a project is completed ahead of the schedule? If the project is completed ahead of the expiry date of the Policy, then refund of premium is allowed subject to the following conditions:
    • The period of insurance is 18 months and above
    • Notice of early completion must be given to the insurers in advance, before commencement of testing or in any case not later than 7 days after commencement of testing
  • Can the sum insured be increased during currency of the policy period - The Sum Insured under SCE/EAR can be increased if required. However, the premium for the increase shall be calculated from the inception of the policy.
  • How the premium is to be paid? The premium is payable in advance, prior to the commencement of the risk. For projects that have a policy period up to 12 months, the entire premium is payable in advance
  • Excess
    • In SCE/EAR, there are three types of "excess", viz., Normal Excess, Testing Excess and Act Of God (AOG) Excess.

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