SCE ( EAR ) / CAR 1

PROJECT POLICIES
( SCE / EAR & CAR )

INDEX :-

. GENERAL

COVERAGE / EXTENSION ETC- COVERAGE SECTION I ( MD )

COVERAGE SECTION II ( TPL)

EXCLUSIONS

PERIOD

RATING

PROVISIONS TO SEC. – I

SUM INSURED

PREMIUM ADJUSTMENT

COVER FOR CPM

OWN SURROUNDING PROPERTY

AOG Claims
& Major Peril Claims

CROSS – LIABILITY TPL COVER

SOME OTHER EXTENSIONS

 SCE ( EAR ) / CAR 2

BY D.KAUSHAL
PROJECT POLICIES
( SCE / EAR & CAR )

A. GENERAL

PROJECT POLICIES Policies whose period may exceed 1 Year

(i.e. policy period depends on period of project completion )

e.g.
CAR POLICY

EAR (OR SCE) POLICY

MCE POLICY

CAR POLICY For covering Civil Engg. Works ( e.g construction of bridges,flyovers etc )

EAR ( Erecrtion All For covering erection / installation of plant & machineries.
Risk) or
SCE ( Storage cum
Erection ) Policy

MCE ( Marine cum Combines marine / transit risk & erection risk under single policy.
Erection ) Policy
Marine cover is as per All Risk cover under ICC ‘A’ & / or Inland transit
Rail / Road Cl. A ( with same provisions as in marine policy clauses )

Policy for same project Depending on proportion of cicil works :-

involving both Civil
work & machinery a) If value of civil work : 50 % or more of total project value – CAR
erection work policy
&

b) if value of civil work : less than 50 % of total project value – EAR

policy
 SCE ( EAR ) / CAR 3

NOTE :- Most coverages , extensions , exclusions ,provisions etc are same for SCE &
CAR policies ( with only some differences )
Hence, the details for two policies are mentioned below side by side .

COVERAGE & EXCLUSIONS :-

2 SECTIONS IN BOTH EAR / SCE CAR

EAR & CAR:
SEC-I : Material Damage ( MD ) Material Damage ( MD )

SEC-II : Third Party Liability ( TPL ) Third Party Liability ( TPL )

COVERAGE UNDER SEC- I (MD )

POINTS EAR / SCE /MCE CAR

SECTION I( MD )

COVERAGE :- All Risk cover except for certain All Risk cover except for certain
exceptions specified in policy exceptions specified in policy

COVERING PERILS :- During storage , erection , testing. During storage & construction /
erection .
( & during maintenance – if opted ( & during maintenance – if
at extra premium ). opted at extra premium ).

- In case of IInd hand M/C :-

‘cover during Dismantling’ can be

given at extra premium.

SOME PERILS COVERED ARE :- SOME PERILS ARE :-

- Fire, Lightining , Explosion - Fire, Lightining , Explosion

 SCE ( EAR ) / CAR 4

- Theft , Burglary - Theft , Burglary

- AOG perils ( flood, storm etc. ) - AOG perils ( flood, storm

- Human risks like – RSMD, - Human risks like – RSMD,

carelessness, negligence , carelessness, negligence ,
faults in erection faults in erection

- damage due to defects in material , - defective material ,

workmanship ( but excluding costs for
rectifying these defects )
- Accidental External losses like –
falling , impact
workmanship ( but excluding
costs for rectifying these
defects )
- Accidental External losses like
– falling , impact

ETC. - Water damage for wet risks

ETC.

NOTE :- EARTHQUAKE ( Fire & Shock ) – EARTHQUAKE ( Fire & Shock) -

for Zone III & IV –covered without – for Zone III & IV –covered
additional premium without additional premium
For Zone I & II – by additional For Zone I & II – by additional
premium ( optional ) premium ( optional )

- can be opted only at commencement - can be opted only at

& for full period of policy commencement & for full period

- may be taken on ‘First loss’ basis - may be taken on ‘First loss’

basis

SECTION II ( TPL ) - COVERAGE - same for both EAR & CAR POLICIES :-

COVERAGE :- Legal Liability for:

a) Property damage
&
b) Injury ( fatal or non-fatal )

a) Property damage – of other persons ( third party )

& including property held in trust or custody by insured
( provided such held property not used in erection work thereon )
 SCE ( EAR ) / CAR 5

b) Injury - i) solely due to Erection work

& ii) to persons other than – Employees of insured

Employees of owner of works / premises
Family members of insured

Also payable are : Litigation expenses recovered by third party from insured
& other expenses incurred with Co’s consent .

ONE LIMITATION OF S.I. FOR TPL : -

TPL extn. under EAR/ CAR policy possible :-

- only if S.I for AOA / AOP is upto 10 % of SCE S.I. ( i.e. project value ) or Rs. 10 Crore whichever less

- & if S.I. exceeds above limit – TPL cover to be given by separate ‘Liability policy’ under miscll. deptt.
 SCE ( EAR ) / CAR 6

EXCLUSIONS :-

EXCLUSIONS 3 types –
a) General exclusions - for both SecI Same 3 types in CAR also.
& II ( MD & TPL

b) Exclusions - for only Sec I (MD )

c) Exclusions - for only Sec II (TPL )

General Exclusions EAR CAR

for both Sec I & II
a) War , invasion & related perils
etc , a) to d) same as in EAR

b) Nuclear / radioactive perils , BUT

e) – not excluded in
c) Wilful act / willful CAR
negligence
of insured

d)Cessation of work (total or

partial)

e) Things dropped by/from

Aeroplane
or other aero devices

EAR CAR

Exclusions only for

a) Imp. Exclusions in EAR are;- Whereas Exclusion in CAR
Sec I ( MD ) are :
loss due to -
i)Faulty Design i) Loss due to Faulty Design
ii) Defective material or
casting
& iii) Bad Workmanship ii) Cost of Rectification of
( but other than faults in erection ) Defective material & / or
( i.e. ‘ faults in erection ’ is covered ) Workmanship
‘only in resp. for items
Above 3 exclusions are only in resp. of immediately
 SCE ( EAR ) / CAR 7

items immediately affected affected’

WHILE resultant damages are payable.

NOTE difference of above exclusions in EAR & CAR :

a) Loss due to Faulty Design –

in CAR - not at all covered( completely excluded ) .

While in EAR - Only particular portion is excluded while resultant damage is

payable.

b) In CAR - limitation of ‘only in resp. for items immediately affected’ –

only for Cost of Rectification of Defective material & / or Workmanship

In EAR - limitation of ‘only in resp. for items immediately affected’ –

is for all 3 viz. Faulty Design
Defective material or casting
& Bad Workmanship

EAR CAR

Other Exclusions
Excess , SAME
for Sec I only
( MD ) Inventory losses , AS IN

Normal wear & tear , deterioration , ‘EAR’

Cost of rectification of errors during PLUS

erection ,
( unless presulting in physical damage ) ,
Files,drawings, stamps, cheques , securities
etc.,
Packing mar\terials ( e.g.cases,boxes,crates )
Penalities for non –fulfilment of terms of
contract etc.
One more exclusion in CAR
ONLY which is :-
LOSS TO – Vehicles for general
road use,
Water borne vessels ,
or M/C , equipment mounted on
floating vessel ,or aircraft

Exclusions only a) 3 Exclusions of Sec-I are also applicable to a) not so in CAR

 SCE ( EAR ) / CAR 8

for Sec II ( TPL ) Sec-II ( TPL ) also viz. :-

Faulty Design
Defective material or casting
& Bad Workmanship

b) Excess ( related to Property damage ) b) Excess ( related to Property

damage )

c) Injury to- Workmen, employees, or c) Same as for EAR

Illness family members of -
contractors ,
principals or
of any firm connected
with insured project .

d) damage to Property of –
contractors ,
principals or
connected firm
or their employees

d) not in CAR d) Liability due to accidents –

by vehicle for general
road use ,
or by vessels or aircraft

PERIOD
 SCE ( EAR ) / CAR 9

PERIOD From - time of unloading ( i.e. arrival ) of From - time of unloading ( i.e.
first material at site arrival ) of first material at site
( LIABILITY ) :-
Until after - First Test operation Until -
or Test loading whichever earlier contract work taken over
or
but not beyond - 4 weeks from date of Trial put into service by principal
Running
or Readiness of work declared or expiry date
whichever earlier .
whichever is earlier .
or policy expiry date if earlier to
above .

Hence , date of end of Co’s liability

depending on 5 things viz. Test operation
or Test loading
or date of Trial Run
or readiness of work
or expiry date.

Hence, Co.’s liability may end before policy

expiry date.

NOTES :-
a) Above period of 4 weeks of trial run
can be extended by extra premium .

b) in case of IInd hand M/C ,insurance

ceases soon on start of Test
( i.e. before testing )
( Testing period for IInd hand M/C not
automatically covered but can be
covered by extra premium )

c) In cases where if , some machines or

part of a plant ( & not all ) are tested
& put into operation – liability for
these M/Cs ceases while liability
continues for remaining ones.

RATING Depends on : Depends on :

 SCE ( EAR ) / CAR 10

a) Type of project aType of Work / project

b) Period bPeriod

c) Length of Testing period ( if more ( No testing period in CAR )

than 1 month since 1 month testing is
automatically covered )

PROVISIONS TO SEC. – I ( M.D .)

SUM INSURED :- S.I. to be-Completely Erected Value. S.I. to be-Completely Erected Value.

To include :- To include :-
a) Cost of Material & Machinery a) Cost of Material & Machinery
( including : Freight , Insurance ( including : Freight , Insurance
Custom duty Custom duty
Handling charges) Handling charges)

b) Cost of Erection b) Cost of Erection

d) Civil Engg. Works & c) Civil Engg. Works

d) Pre-operative expenses d) Pre-operative expenses

- Insured to increase / decrease S.I. - Insured to increase / decrease S.I.

during currency of policy ( in case during currency of policy ( in case
of fluctuation n wages, prices etc.) of fluctuation n wages, prices etc.)

- If Underinsurance – pro-rata - If Underinsurance – pro-rata

Average Average

CIVIL
ENGG.WORK :
( permanent & - to be necessarily covered ( i.e. its N.A.
temporary ) value to be taken in S.I. for SCE ).

- covered vide ‘Endorsement A’ of

policy

- covers damage to Property / material

brought on site for erection of –
 SCE ( EAR ) / CAR 11

a) all Permanent civil Engg.

Works( e.g. buildings , foundations
etc.)

b) all Temporary works ( e.g. sheds

etc. )

1 Special condition under this is :

Insured is required ;-
- to take precaution in selection of
Labour

& to maintain tools / Equips.

in efficient condition .

PREMIUM
- At completion of project .
ADJUSTMENT
- On basis of Actual Completely
Erected Value (Vs. S.I. )
- At completion of project .
- On basis of Actual Completely
Erected Value (Vs. S.I. )

- Difference . in premium to be - Difference . in premium to be paid

paid to or by Insured to or by Insured

NOTE :- Prime Cost of Materials

Prime Cost of Plant & Equipments
not subject matter of premium
adjustment .
(i.e. increase / decrease in prime cost
is not considered )
not subject matter of premium
adjustment.
(i.e. increase / decrease in prime cost
is not considered )

& premium adjustment only if differ.
in actual value & S.I. is due to
factors like – Erection cost
Freight, Handling Chrgs
Custom dues .
& premium adjustment only if differ. in
actual value & S.I. is due to
factors like – construction cost
Freight, Handling Chrgs
Custom dues .

COVER FOR - ( Same as for EAR ) :-

- Can be covered in this policy ,
CPM
- Can be covered in this policy ,
( Construction Plant
- But only under separate heading
& Machinery )
- But only under separate heading
- Rate , coverage, excess as per
CPM Policy - Rate , coverage, excess as per CPM
 SCE ( EAR ) / CAR 12

- & excluding – own explosion , Policy

own breakdown - & excluding – own explosion ,
or derangement . own breakdown
One Condition for or derangement .
covering CPM
Equipments in this S.I. of CPM equipmts. to be –
policy :- Not more than 5 % of S.I. of SCE S.I. of CPM equipmts. to be –
(Sec-I ) Not more than 5 % of S.I. of CAR
or Max. 25 lacs (Sec-I )
( otherwise to be covered under or Max. 25 lacs
separate CPM policy ) ( otherwise to be covered under separate
CPM policy )

MEMO -
( Same as for EAR ) :-

- Can be covered in this policy , - Can be covered in this policy ,

OWN - & only under separate heading
- & only under separate heading
SURROUNDING - Additional premium chargeable , - Additional premium chargeable ,
PROPERTY

Loss to Loss to
Property Property
COVERS:-
- belonging to / in custody - belonging to / in custody
of Principals or Contractors of Principals or Contractors

& While & While

located on or adjacent to site. located on or adjacent to site.

occuring due to erection , occuring due to erection ,

construction or construction or
testing of items . testing of items .

BUT loss to contruction / erection BUT loss to contruction / erection m/c

m/c items themselves not covered items themselves not covered under this
under this head. head.
( & these can be covered under CPM ( & these can be covered under CPM
head ) head )

TERM USED IS :- ‘AOG Claims’ mean :- ‘Major Perils’ Claims mean :-

AOG Claims - in - Earthquake ( Fire & Shock ) - Earthquake ( Fire & Shock )
Ear
- Landslide / Rockslide / Subsidence - Landslide / Rockslide / Subsidence
& Major Perils
 SCE ( EAR ) / CAR 13

Claims - in - Flood / Inundation - Flood / Inundation

CAR
- Storm / Tempest / Hurricane / - Storm / Tempest / Hurricane /
Typhoon / Cyclone Typhoon / Cyclone

- Collapse

- Water damage for Wet risks

(i.e. works in river ,
sea , canal etc. )

NOTE : - Collapse & Water damage NOTE : - Collapse & Water damage
for Wet risks for Wet risks
not included under this head included under this head
of AOG claims ( in EAR ) of major peril claims
( in CAR )

NOTE:- These Claims have higher NOTE:- These Claims have higher
Excess Excess

VARIOUS EXTENSIONS ( OPTIONAL ) : -

SURROUNDING Already explained Already explained above.

PROPERTY

TPL COVER Already explained Already explained above.

- Addl. Premium @ SCE rate on its

S.I. selected for TPL.

- If project is mix of old & new

machinery EAR rate for new
M/C applicable on this extn.

- Policy Excess ( Normal / Testing

period / AOG claims ) applicable
 SCE ( EAR ) / CAR 14

CROSS – ( Same as in EAR ) :-

LIABILITY TPL
Means : -
COVER
Treating various insured parties
mentioned in policy as if separate
policy issued to each party.
Means : -
Treating various insured parties
mentioned in policy as if separate
policy issued to each party.

- This cover by extra premium - This cover by extra premium

CPM COVER Already explained above Already explained above.

SOME OTHER a)Express Freight(excluding Air frt. ) a)Express Freight(excluding Air frt. )
EXTENSIONS
b) Air freight only b) Air freight only
ARE :-
( by extra c)Work on Holidays & Overtime rates c)Work on Holidays & Overtime rates
premium ) of wages of wages

d)Additional Custom Duty ( is on First d)Additional Custom Duty ( is on First

loss basis ) loss basis )

e) Storage of property at Fabricator’s e) Storage of property at Fabricator’s

premises premises

( In both EAR &

CAR ) ( For both EAR & CAR ) :-

A ) MAINTENANCE VISIT ( or LIMITED MAINTEN. VISIT COVER ) -

A) MAINTENANCE a) This Cover is w.e.f date of completion or handing over of project.

VISIT & upto expiry of maintenance period

b) Covering solely -
& loss to property
caused by contractor ( i.e. contractor doing maintenance work )
in course of
carrying operations for complying maintenance provisions .
 SCE ( EAR ) / CAR 15

B ) EXTENDED
MAINTENANCE
B ) EXTENDED MAINTENANCE :-

a) This Cover is also w.e.f date of completion or handing over of project .

& upto expiry of maintenance period

B) Covering -
loss to property (which may arise in 2 ways ) –

i) either caused by contractor ( i.e. contractor doing maintenance work )

in course of
carrying operations for complying maintenance provisions .

ii) or occurring during maintenance period

but
was caused during erection period.

( Sometimes a loss may have been caused during erection period but it
manifests ( i.e. occurs ) sometimes later during maintenance period . Such loss is
covered only under EXTENDED MAINTENANCE extension.

Hence EXTENDED MAINTENANCE gives wider cover ( i & ii types as above )

than MAINTENNANCE VISIT EXTENSION ( only cover no. i )

i.e. MAINTENNANCE VISIT cover is Limited ( compared to Extnd. Maint. Cover ).

- Therefore, premium for EXTENDED MAINTENANCE is higher than for

MAINTENNANCE VISIT cover .

NOTE : This Extension can be opted only at inception of policy .

DEBRIS - Cover for removal & clearance of Cover for removal & clearance of
Debris - Addl. Premium @ SCE rate Debris - Addl. Premium @ CAR rate
REMOVAL
on its selected S.I. on its selected S.I.

- If project is mix of old & new - If project is mix of old & new
machinery EAR rate for new machinery EAR rate for new M/C
M/C applicable on this extn. applicable on this extn.

- Policy Excess ( /normal / Testing - Policy Excess applicable

period ) applicable
 SCE ( EAR ) / CAR 16

ESCALATION - Max. 50 % of SCE S.I. - Max. 50 % of SCE S.I.

- Permitted only once at inception - Permitted only once at inception
- SCE rate chargeable on 50 % of - SCE rate chargeable on 50 % of
escalation S.I. escalation S.I.

TERRORISM - Pool rate to be charged - Pool rate to be charged

CLAIM RELATED POINTS : -

BASIS OF LOSS - Repair or Replacement of damaged property.

SETTLEMENT :-
- Provisional Repairs are also payable, provided it constitutes part of final
repairs & do not increase overall repair expenses.

Sequence of For all Claims ( any Deptt. ) ;-

Assessment :-
Ist Depreciation
then Salvage
next Under insurance ( Average )
last Excess

To remember – D S U E or D S A E

EXCESS EAR has 2 periods : – CAR has no such 2 periods .

(PER CLAIM )
Normal ( i.e. storage & erection )
& Testing periods
- Different excesses for Claims :-
- Different excesses for Claims :-
a) other than AOG / Collapse claims
a) other than AOG claims ( i.e. Normal claims )
during Normal period ,

b) other than AOG claims

during Testing period ,

c) for AOG claims b) for AOG / Collapse claims

- excess is Lower for Normal period - Higher Excess for AOG / collapse
 SCE ( EAR ) / CAR
- excess is Higher for Testing period
( as Testing is a hazardous period )
- Still Higher Excess for
- AOG / Major perils claims
- Also different excess for
Maintenance period , if opted.
Excess mentioned in Rate schedule
for each type of project is :
one for Normal period claims
& one for Testing period claims
It is 5 % of claim with minimum
amounts for normal & testing periods
mentioned project-wise in rate
schedule.
EXCESS FOR AOG
CLAIMS :
Excess for AOG claims : -
Different criteria in
EAR & CAR policies ( Excess per incident )
as explained here :-
10 % of claim amount with minimum
Testing period excess & Maximum
Rs. 5 Crore
17
claims than for normal claims
NOTE : - IN CAR – “ COLLAPSE’risk
also has higher excess ( as of AOG
claims, ( not so in EAR )
- Also different excess for
Maintenance period , if opted.
Excess mentioned in Rate schedule) for
each type of project is :
one for Normal Claims(in Column 6)
& one for AOG / collapse claims( in
Column 7 )
It is 5 % of claim with minimum
amounts for Normal claims &
AOG/collapse/Major peril claims
mentioned project-wise in rate
schedule.
IMP.: Excess for AOG claims : -
a) If risk in Zone III or IV – excess of
rate schedule ( Column 7 ) applies.
b) if risk in Zone I or II – & Earthq.
not opted - excess of rate schedule
( Column 7 ) applies.
c) c) if risk in Zone I or II – &
Earthq. also opted –
Minimum excess for Zone I = 25,000
Minimum excess for Zone II = 50,000
( Hence, in EAR , AOG excess
not depends on Eq. Zones
 SCE ( EAR ) / CAR 18

( Hence, in EAR , AOG excess

not depends on Eq. Zones while in CAR - AOG excess
depends on Eq.Zones .
while in CAR - AOG excess
depends on Eq.Zones .

DEFINITION OF
‘ONE INCIDENT’
FOR PURPOSE OF AOG Excess is per incident
EXCESS FOR
AOG / MAJOR - Single incident not terminated
PERILS : until 7 consecutive days freedom
from such peril .
- i.e. only if incident is repeated
after 7 consecutive free days, it
will be new incident & fresh
excess will apply.

REINSTATEMENT - By paying pro-rata premium on - By paying pro-rata premium on

OF S.I. AFTER A claim amount from date of loss to claim amount from date of loss to
CLAIM expiry period expiry period

- Reinstatement of S.I. – in case of - Reinstatement of S.I. – in case of

Sec I ( MD ) Sec I ( MD )
& for various extensions & for various extensions

- But not allowed for Sec II ( TPL) - But not allowed for Sec II ( TPL)
 SCE ( EAR ) / CAR 19

TESTING - EAR/SCE POLICY ONLY ( & NOT CAR ):-

Testing period - is V. hazardous period for Plant & M/C.

- Increased risk for insurers.
- Hence higher rate & higher Excess for testing period.

NOTE : - No Fire policy can be issued during ‘Testing period’ for items covered under EAR policy.

2 Types of testing : Cold & Hot Testing.

COLD TESTING HOT TESTING

e.g. In electric power stations , Hot testing is done..
Also called Functional testing .
2 types –
a) Operational testing & b) Commissioning testing

a) Operational testing :-

i) Checking parts under ‘NO LOAD’ condition. i) Checking of parts under ‘LOAD’ condition.
( i.e under Operating condition )
ii) Without involving –
operation of Furnances, ii) It involves –
use of Heat , operation of Furnances,
use of Feedstock use of Heat ,
or use of Processing material use of Feedstock
or use of Processing material

j) Commissioning testing :-

Operation under Production conditions for attaining

specific requirements ( like quality , quantity etc. )

In Hot testing :-
plant is exposed to “ Full Load Conditions” for the
first time & hence there is uncertainty & hence more
risk for insurers.
 SCE ( EAR ) / CAR 20

FIRE - Certain rules have been prescribed

PROTECTION for fire protection measures at
RULES : site.- Rules are in 2 parts viz.
Minimum requirements &
Additional requirements

a)If even minimum fire protection

rules are not complied –
Higher Excess becomes
applicable

b) If both minimum & additional

rules are complied & S.I. is not less
than 50 Cr.:-

Discount in SCE rate

& also reduced excess for fire /
explosion claims

REFUND OF PREMIUM – FOR EARLY COMPLETION OF PROJECT:-

Allowed subj. to certain conditions like :

a) Period of insurance above 18 months

b) Minimum period for which refund claimed - 3 months

c) Claim experience being less than 60 %

d) Notice for early completion – in advance & in any case not later than 7 days from
start of testing .

e) Refund would be after reworking of premium on reduced policy period.

 SCE ( EAR ) / CAR 21

For THERMAL POWER PLANTS – Different definition of ‘Test

Run’ :-

First Test operation or test loading is deemed to have started -

From - date of synchronization of Turbo-Gen. set with Grid system / bus bar
provided date of synchronization within 72 Hrs. from introduction of Steam
into Turbine
or from date of introduction of Steam into Turbine, in case above date of
synchronization is after 72 hrs.

Till - T.G set operates at full load capacity for continuous 72 Hrs.
Or expiry of testing period under policy whichever earlier.

e.g date of introduction of Steam into Turbine - 10.05.09

a) if date of above synchronization is - 12.05.09.

i.e. 48 Hrs (i.e. within 72 Hrs )

Test operation is deemed to have started from 12.05.09 ( i.e. dt. of synchronization )

But
b) if date of above synchronization is - 15.05.09.
i.e. 5 Days (i.e. not within 72 Hrs )

Test operation is deemed to have started from 10.05.09 ( i.e. dt. of introduction of
Steam )

COMBINED CYCLE POWER PLANTS : –

are those plant where both GTs & STs ( Gas turbines & Steam turbines ) are

covered under same EAR policy.