The document provides an overview of engineering insurance, detailing its significance in safeguarding construction projects against various risks such as damage and accidents. It categorizes different types of insurance products, including Erection All Risks (EAR) and Contractor's All Risks (CAR), and outlines their coverage, exceptions, and extensions. Additionally, it highlights specific insurance for machinery breakdown and electronic equipment, emphasizing the importance of comprehensive coverage for project-related risks.

1. PONDICHERRY UNIVERSITY
Karaikal Campus
Assignment
On
Engineering Insurance
MBA (Insurance Management)

2. Engineering Insurance
Submitted To Submitted By
S.A SENTHIL KUMAR PRASOON VERMA
Associate Professor MBA Ist Year
Department of Management
Pondicherry University Pondicherry University

3. Definition :
Engineering insurance refers to the insurance that provides
economic safeguard to the risks faced by the ongoing construction
project, installation project, and machines and equipment in
project operation.
Product categories: Depending on the project, it can be divided
into construction project all risks insurance and installation
project all risks insurance; depending on the attribute of the
object, it can be divided into project all risks insurance, and
machinery breakdown insurance.

4. Products

5. ERECTION ALL RISKS (EAR)
INSURANCE
EAR insurance provides a very wide and
comprehensive insurance cover to the client in respect of
any sort of contingency from the moment the material is
unloaded at the site of the project and continues during
storage, physical erection commissioning, testing and
maintenance (if covered). Since the duration of the cover
can be as long as 36 months or even more, care must be
taken while negotiating the proposal as well as assessing
the moral hazard of the client.

6. SCOPE OF COVER
This is a comprehensive insurance cover that is available to
the client in respect of any sort of contingency from the
moment the materials are unloaded on the site of the
project / works and continuous during storage, physical
erection and till the test run is over which covers all
physical losses or damage as under:
• Fire, lightning, theft & burglary.
• Impact from falling objects, collision, failure of changes
or tackles.
• Failure of safety devices, leakage of electricity, insulation
failure, short circuit, explosion.
• Carelessness, negligence, fault in erection, strike & riots.
• Storm, tempest, flood, landslide, rockslide, earthquake.

7. EXTENSION OF COVER
• While the standard policy include all Acts of God perils,
it has to be noted that the earthquake peril is covered at
an appropriate additional premium as per the erection
tariff.
• Extension of basic cover to provide for extension of the
policy period itself can be given at additional premium
per erection tariff.
• Dismantling cover in case of already erected second
hand plant can be given at an appropriate additional
premium as per tariff.
• Additional premium are also chargeable for the removal
of debris, contractor’s plant and equipment, third party
liability, if they are to be included in the sum insured.

8. CONTRACTOR’S ALL RISKS (CAR)
although a CAR policy may be taken by the principal or by the
contractor, but usually, under the terms of the agreement between
the contractor and the principal, it is obligatory on part of the
contractor to effect a CAR insurance in their joint names before
the commencement of the project.
The sum insured under the policy must not be less than the full
value of the contract works at the completion of contract inclusive
of all materials, wages, freight, custom duties, construction cost
and material or items supplied by the principal.
TYPE OF PROJECTS
The CAR insurance policies generally issued for all types of Civil
Engineering projects like dwellings, office building, commercial
building, go downs and warehouses, hospitals, schools, silos, steel
structure, roads, water supply lines, construction work, etc.

9. EXTENSION OF COVER
• While the standard policy include all Acts of God perils, it
has to be noted that the earthquake peril is covered at an
appropriate additional premium as per the erection tariff.
• Extension of basic cover to provide for extension of the
policy period itself can be given at additional premium per
erection tariff.
• Dismantling cover in case of already erected second hand
plant can be given at an appropriate additional premium as
per tariff.
• Additional premium are also chargeable for the removal of
debris, contractor’s plant and equipment, third party
liability, if they are to be included in the sum insured.

10. MATERIAL DAMAGE SECTION
• The Scope of insurance is virtually the same as that of EAR
insurance. Under this section the insurer agreed to
indemnify for any loss or damage to the insured property
by any cause other than those specifically given under the
exclusions.
• The various exclusions under the CAR policy:
• General exclusions (applicable to Section I and Section II).
• Exclusions applicable to Section II - Third Party liability.
• Exclusions applicable to Section I - Material Damage
are exactly the same as under EAR Policy.

11. MACHINERY BREAKDOWN (MB)
• Machinery Breakdown insurance was developed to grant industry
effective insurance cover for expensive plant, machinery and
mechanical equipment. This insurance is important for everyone who
operates the machines. This policy should support our property
insurance and hence this insurance must not be granted on a stand -
alone basis.
SUBJECT MATTER INSURED
• All types of machinery, plant, mechanical equipment and apparatus
may be covered under MBD insurance, such as for example power
generating units, power distributing plant as well as production
machinery and auxiliary equipment, etc.
SCOPE OF COVER
• By its nature, Machinery Breakdown Insurance is an “accident”
insurance on machinery. Thus,
• It covers unforeseen and sudden physical loss of or damage to the
insured items.
• Faulty design faults at workshop or in erection, defects in casting and
material.
• Faulty operations, failure of safety system / lubrication system /
control system, lack of skill, negligence.

12. EXTENSION AVAILABLE UNDER THIS POLICY
• Third party liability.
• Expediting costs.
• Additional customs duty.

13. BOILER AND PRESSURE PLANT (BPP)
• This policy covers explosion of boilers and pressure plants but does
not cover rupture of tubes inside the boilers. Both these perils can be
covered under MB policy and hence we should wherever possible
include this in our MB portfolio since it would practically mean
granting extra cover within the scope of tariff provisions.
TYPES OF EXPLOSIONS
• It can be broadly classified under two categories for the purpose of
insurance cover.
Chemical Explosions
• It is a matter of common knowledge that gun powder, similar explosive
compound could cause explosion under the influence of mechanical or
thermal shocks. Highly inflammable fluids and dusts can cause
explosions if their concentration in the atmosphere exceeds the
explosive limits. From the insurance concept, these explosions are
considered as very rapid form of combustion.
Physical Explosions
• In respect of pressure vessels handling inert fluids such as steam,
explosion can occur due to variation in fluid pressure. The variation
being only in physical form and there no chemical reaction or changes
responsible for such explosions as such these are classified as Physical
Explosions.

14. SCOPE OF COVER
• The policy covers pressure vessels both fired &
unfired against the risk of explosion and
collapse and indemnified the insured against:
• Damage to the boilers & / or other pressure
plant.
• Damage to surrounding property of the insured
or the property held by the insured in trust for
which he is responsible.
• Death or bodily injury to any person.
• Damage to property not belonging to the
insured or held in trust or on commission for
which he is responsible.

15. EXCEPTIONS OF POLICY
• Loss or damage raising from fire and allied
perils which can be covered separately.
• Damage by chemical explosion except in
recovery boilers and waste heat boiler.
• Contractual liability, manufacturer’s supplier’s
liability.
• Loss arising from an existing defect.
• War group of perils, social group of perils.
• Nuclear perils.
• Loss due to gross negligence.
• Failure of individual tubes.

16. OTHER EXTENSIONS AVAILABLE UNDER THIS POLICY
Steam Pipes
• The portion of the steam pipe up to the safety valve alone is
deemed to form integral part with boiler. The remaining
portions of the steam pipes can be included under this
extension.
Expediting Costs
• Expenses towards overtime, night work, work on public
holidays, express freight can be included under this extension.
The same will be indemnified after a loss provided these
expenses are incurred following a loss due to an insured peril
under this policy.
Air Freight
• Expenses towards air - lifting parts of the boiler following a loss
can be included under this extension.
Policy Period: This policy is issued on annual basis.

17. CONTRACTOR’S PLANT & MACHINERY (CPM)
• Whilst it is possible to have the Contractor’s plant and
machinery covered under an EAR or CAR policy at specific
project sites, CPM policy has been designed to provide a cover
on an annual basis to a contractor who may be using his plant
and machinery at different projects during the course of the
year. The cover under a CPM policy is not limited to a specific
project site and is operative at all sites wherever the plant and
machinery is in use and even while the same is lying at the
contractor’s own premises. We therefore have to ensure that all
the sites where the insured items are being used are mentioned
on the face of the policy.
SCOPE AVAILABLE UNDER CPM POLICY
• The Contractor's plant and machinery insurance comes under the policies
available under the Project Insurance and like the EAR / CAR Policy offers a
comprehensive cover as given below:
• Fire, lightning, external explosion, earthquake, flood, inundation, subsidence,
landslide and rockslide.
• Storm, tempest, hurricane, typhoon and tornado.
• Burglary, theft, riot and strike and malicious damage.
• Accidental damage while at work due to faulty man - handling, dropping or
falling, collapse, collision and impact.

18. EXCLUSIONS
• The insurer will not indemnify in respect of loss or damage given
below:
• Excess as stated in the policy schedule, which has to be borne by the
insured in any one occurrence. If more than one item is lost or
damaged in one the occurrence insured has to bear the highest single
excess applicable to such items.
• Loss or damage due to electrical or mechanical breakdown, failure
breakage or derangement freezing of coolant or other fluid, defective
lubrication or lack of oil or coolant, but if as a consequence of such
breakdown or derangement an accident occurs causing external
damage, such consequential damage will be indemnifiable.
• Loss of or damage to replaceable parts and attachments such as bits,
drills, knives or other cutting edges, saw blades, dies, moulds, patterns,
pulverizing and crushing surfaces, screens and sieves, ropes, belts,
chains, elevator, and conveyor bands, batteries, tyres, connecting wires
and cables, flexible pipes, joining and packing material.
• Loss or damage due to explosion of any boiler or pressure vessel
subject to internal steam or fluid pressure or of any internal
combustion engine.
• Loss of or damage to vehicles designed and licensed for general road
use unless these vehicles are exclusively used on construction sites.
• Loss or damage to the hull and machinery of water borne vessels.

19. • Loss or damage while in transit from one location to another
location.
• Loss or damage due to wear and tear corrosion, rust etc.
• Loss occurring while an insured item is undergoing any test.
• Loss to any plant or machinery working underground.
• Losses arising out of war and war like perils and due to nuclear
radiation or radio active contamination.
• Damage due to faults or defects existing at the time of
commencement of the policy with the knowledge of the insured.
• Any willful act or gross negligence of the insured resulting in a
loss.
• Loss for which the supplier or the manufacturer is responsible.
• Loss discovered only at the time of taking the inventory or
during routine servicing.
• Loss to plant and machinery mounted or operated on a floating
vessel / barge.

20. ELECTRONIC EQUIPMENT INSURANCE (EEI)
• The Electronic Equipments such as computers, Micro - processors, Word -
processors, Tele - communication equipments. Machine meant for medical use
and other misc. Equipments like films, television studio equipments can be
covered under this policy. This scope of this policy is ALL RISK.
SCOPE OF COVER
This insurance indemnifies the insured against any physical loss or damage due to
following perils:
Location Perils
• Fire, lighting, explosion, flood, storm, etc.
Break Down
• Any electrical / mechanical breakdown.
Faults
• Faulty design, faulty materials, faults in manufacturing / assembly erection.
Effect of Moisture
• Damage due to moisture and humidity.
Carelessness
• Damage due to faulty / careless / negligent operation by employees.
Riot & Strike
• Riot & strike damage and malicious damage.

21. SUBJECT MATTER INSURED
• This policy is recommended for the following instruments:
• Electronic data processing equipment comprising central processor with flexible
programmability.
• Peripheral equipments such as readers, printers, tape or card punchers or sorters.
• Tapes, and discs.
• Auxiliary equipment such as air conditioning, heating and power conversion or main
power control plant.
• Electronic office equipments, material testing and research equipment.
• Electro medical installations.
• Telecommunication equipment, etc.
• Computerized numerical control system used in connection with production
machinery.
INSURED PARTIES
• The insured can be either the owner or the hirer of the electronic equipment. The
insurance protects, on the basis of the insurance conditions.
The Owner
• As operator against material damage, for which the manufacturer is not responsible
under a guarantee.
The Hirer
• Against material damage for which, he is responsible either legally or through a
leasing agreement.

22. GENERAL EXCLUSIONS
Inherent Vice
• Wear & tear, loss due to defects known to the insured at the time of
commencement of the policy. Manufacturers responsibility:
• The loss / damage for which the suppliers are responsible under
guarantee.
Willful Act
• Due to any willful act or willful negligence of the insured or his
representatives.
Cessation
• Cessation of work whether total or partial.
Expected Perils
• War, invasion and the like, nuclear reaction / radiation, loss or damage
due to interruption caused by the failure of any gas, water or electricity
service or supply.
Functional Failure
• Maintenance costs.
Hired Equipments
• For the equipment hired for which the owner is responsible.

23. Process of Insurance

24. Claim settlement Process

25. Thank You