Contractor’s All Risk (CAR) and Erection All Risks are Policies designed to meet the insurance obligations placed upon Contractors under the contract conditions. The Policy covers the works to be executed in accordance with the contract, temporary works, materials, construction plant and equipment brought into the site and liabilities arising out of the performance of the contract.

In general, CAR insurance is intended to cover buildings and civil engineering works under construction while EAR for erection of plant and machinery. Both are broad form in cover on All Risks basis. However, since EAR relates more to plant and machinery, cover is usually extended beyond erection to include testing and commissioning.

Section 1 of the CAR / EAR policy covers almost any sudden and unforeseen physical loss or damage occurring (except as specifically excluded) to the contract works/property/items insured, during the period of insurance.

Cover for Section II of the policy is in respect of third party liability for which the Insured shall become legally liable to pay as damages consequent upon :

• • Accidental bodily injury to or illness of third party
• • Accidental loss or damage to property belonging to third party

The third party liability cover is based on legal liability for accidental loss or damage in direct connection with the works and happening at or in the immediate vicinity of the site occurring during the period of cover.

All plant and machinery whether in use or in the course of manufacture, is susceptible to damage despite the quality or reliability or standards of care and due diligence. With rising costs of materials, labour and freight charges, repairs and replacements are increasingly expensive. Even though machines may individually be of fairly small value, an accident such as falling load or impact from an extraneous cause may result in machines being severely damaged or wrecked, causing huge losses. Machinery Breakdown insurance provides cover against a wide range of losses from breakdown of plant production equipment, boilers, pressure vessels, heating and cooling equipments etc.

The policy covers sudden and unforeseen damage to the insured machine whether at work or at rest and during cleaning, inspection, over-hauling, and removal to another position within the premises during subsequent re–erection.

The cause of sudden and unforeseen damages could be due to the following:

• faulty material, design, construction and erection
• vibration, mal-adjustment or mal–alignment
• defective lubrication, loosening of parts, abnormal stress, molecular fatigue, self–heating centrifugal force
• excessive electrical pressure, whether due to atmosphere electricity or otherwise
• short–circuits or arcing
• Lack of skill and carelessness in handling the machinery.

Thus, the main elements of a Machinery Breakdown insurance are electrical and mechanical breakdown and accidental damage from extraneous causes.  It excludes gradual damage and loss from any cause, which is foreseeable.

Under the Machinery Breakdown insurance, indemnity is provided in respect of damaged or destroyed machinery.  However, material loss is not the only loss sustained by the Insured in the event of a loss or damage to the insured machinery, since in most cases, a material loss also causes interruption or interference to the Insured’s business operations.  This is due to the time spent in arranging the repairs, awaiting delivery of replacement parts, starting up the plant and re-activating the production and so forth.

The end result is a financial loss to the Insured in the form of loss of profits and increased costs of working.  In many cases, the loss sustained as a result of interruption to the business operations by far exceeds the material loss suffered by the Insured. The Machinery Breakdown Loss of Profits is the protection against the financial consequence of the material damage happening.

The policy insures loss of Gross Profit following an accident or breakdown of the machinery which is indemnifiable under the Machinery Breakdown insurance policy.

This policy is specially designed to cover computers and other electronic equipment and it applies whether the insured items are at work or at rest or being dismantled for the purpose of cleaning, overhauling or of being shifted within the premises, or in the course of the aforesaid operations themselves, or during subsequent re-erection, but in any case only after successful commissioning.  The policy can also be extended to cover the external data media such as tapes and disks.

The Electronic Equipment policy is an "Accident" insurance policy covering losses to the insured items which are due to sudden and unforeseen causes.  The policy includes mechanical and electrical breakdown of the equipment unless such a breakdown is indemnified under the manufacturer’s warranty or a maintenance contract.  Such a breakdown is deemed to be caused by mechanical or electrical deficiencies, faulty material, faulty design, implosion, short-circuiting, over voltage, lightning-included traveling waves, magnetic fields or electrostatic inductions.

The policies comprises 3 sections as follows:

Section 1 (Material Damage) covers all hardware installation including peripheral equipment and accessories against any unforeseen and sudden physical loss or damage from any causes other than those specifically excluded.

Section 2 (External Data Media) covers the Data Media such as disks, tapes external to the computer system. Coverage is the same as Section 1 and it applies while the Insured data media are kept on the premises.

Section 3 (Increased Cost of Working) provides indemnity for increased cost of working following a material loss or damage. If the material damage indemnifiable under Section 1 gives rise to a total or partial interruption of operation of the insured Information Technologies (IT) equipment, the cost of hiring another computer to maintain the insured’s business operations are payable under this Section.  This substitute IT system must not be a subject matter of insurance under the policy.  The policy pays the agreed indemnification per day and not exceeding in all the sum insured in any one period of insurance.