About

With rising industrialization, principals and contractors face increasing financial risks. Often, project assets are used to secure loans, and repayment relies heavily on anticipated earnings. Delays in project completion directly impact expected revenue, making timely project execution critical.

Contracts now commonly include stringent terms to ensure scheduled completion. However, traditional Storage Cum Erection Insurance (SCE) policies do not cover financial losses due to project delays, even when caused by insured perils. This gap necessitates ALOP/DSU insurance.

Key Features of ALOP/DSU Insurance

ALOP/DSU insurance provides financial protection for losses caused by project delays. Coverage is usually purchased alongside:

  • Marine Cargo Insurance (for critical project components)
  • Erection All Risks Insurance (EAR) or Construction All Risks Insurance (CAR)

Even if the delay results from damage under either marine or erection policies, the ALOP/DSU policy ensures consistency by using a single trigger date.

Key Benefits

  • Financial Protection: Covers lost profits and higher costs from project delays.
  • Customizable Coverage: Addresses specific financial risks, such as operational costs or penalties.

Scope

ALOP/DSU Policies are tailored to cover:

  1. Loss of Gross Profit: Calculated as Net Profit + Standing Charges.
  2. Loss of Gross Earnings: Turnover minus Specified Working Expenses.
  3. Fixed Operation and Management Costs.
  4. Debt Service Charges.
  5. Increased Cost of Working (e.g., alternative operations).
  6. Special Expenses: Includes penalties for late completion.

Coverage begins from the scheduled start date of commercial operations and continues until actual commencement, subject to a time excess and selected indemnity period. Losses must result from events covered under related insurance policies (e.g., marine cum erection, storage cum erection, or CAR/EAR).

Recommended Approach

A combined DSU Policy with Marine Cum Erection Insurance ensures comprehensive coverage, including:

  • Insured physical damages.
  • Loss of gross profit due to delays caused by covered incidents.

Exclusions

ALOP/DSU does not cover:

  • Damages to construction equipment, materials, or surrounding property not explicitly included.
  • Operating media or feedstock damage or deterioration.
  • Government restrictions, license cancellations, or regulatory constraints.
  • Fines, penalties, or breaches of contract beyond insured losses.
  • Consequences of war, nuclear incidents, or inventory losses.
  • Delays in supply shipment or normal project schedule slippage.

Claims Process

Steps to follow in case of a loss:

  1. Immediate Intimation: Notify the insurer promptly with a detailed claim statement. Delays in reporting may jeopardize the claim.
  2. Mitigation: Take all reasonable steps to minimize the loss.
  3. Proof of Loss: Assist in determining the proximate cause and ensure the loss falls under policy coverage.
  4. Cooperation with Insurer: Provide full support to the appointed surveyor during assessment.
  5. Submit Required Documents: Include the claim form, claim bill, policy copy, and other records needed for evaluation.
  6. Custody of Damaged Property: Retain the damaged property until advised about its disposal.

By adhering to these steps, claim settlements can proceed efficiently, ensuring financial stability amid unforeseen delays.