Erection All Risks (EAR) Insurance

EAR insurance is designed to cover risks associated with the erection and installation of machinery, equipment, and steel structures. It protects against physical damage to construction works, equipment, and machinery, and provides liability coverage for third-party bodily injury (B) or property damage (PD) resulting from these operations. Coverage for delay in start-up (DSU) is typically an optional add-on. Examples of projects covered include power plants, manufacturing facilities, water treatment plants, telecommunications centers, and signal tower installations.

Difference Between Contractors All Risk (CAR) Insurance & Erection All Risk (EAR) Insurance
CAR covers risks related to civil engineering works (construction), while EAR covers risks specifically related to the erection and installation aspects of engineering projects. Some insurers combine both CAR and EAR coverage into one policy, but the terms are often used interchangeably.

Scope

Erection All Risks insurance provides a comprehensive coverage solution for various risks encountered during a project, from the arrival of materials on-site to the successful testing, commissioning, and handover to the principal owner. This policy is beneficial to principal owners, contractors, engineers, architects, and financiers, as it helps reduce overall construction and erection costs and protects against unforeseen accidents that could lead to financial losses.

Key Benefits

Comprehensive coverage for accidental losses during project erection, including storage, erection, and testing.The policy is valid for the entire project duration, not just on an annual basis.Premium payment options are available in installments over the project’s duration.Customizable add-ons based on customer needs.

Coverage

This is an “All Risk” policy covering sudden and unforeseen physical damage to projects under erection due to insured perils, not explicitly excluded. The policy applies during the following stages:

  • Erection/Assembly
  • Storage
  • Testing
  • Commissioning

Covered Risks Include

  • Fire, lightning, explosion, and aircraft damage
  • Riot, strike, and malicious acts
  • Floods, storms, cyclones, and related perils
  • Landslides, subsidence, and rockslides
  • Burglary and theft
  • Faults during erection
  • Human errors or negligence
  • Short-circuiting, arcing, and excess voltage
  • Electrical and mechanical breakdowns
  • Collapse, foreign object damage, and impact damage
  • Any other unforeseen accidental damages not explicitly excluded

Add-on Covers

Third-party liabilityCross liabilityRemoval of debrisExpress freightHoliday and overtime rates and wagesAirfreightAdditional customs dutyEscalation costsCoverage for owner’s surrounding propertyStorage risk at fabricator’s premisesMaintenance coverEarthquake damageTerrorism coverageContractor’s plant and machinery

Exclusions

  • Damage due to faulty design, defective materials, or poor workmanship
  • Manufacturing defects
  • Loss from willful acts or negligence
  • Consequential losses or contractual liabilities
  • Damage due to war or nuclear incidents
  • Normal wear and tear, gradual deterioration
  • Inventory losses
  • Scratching or breakage of glass, or damage to surfaces
  • Costs for rectifying or correcting errors during erection that do not cause physical damage
  • Damage to documents, files, or records
  • Penalties for failure to meet contractual obligations
  • Operational deficiencies
  • Costs of alterations, additions, or improvements after a claim
  • Loss or damage to contractor’s plant and machinery due to breakdowns

Claim Process

  • Immediately inform the insurer about the loss and submit a written statement with details of the loss, its nature, and estimated damage.
  • Take necessary steps to minimize further loss or damage.
  • Identify the cause and assess whether it falls within the scope of the policy.
  • Cooperate fully with the insurer and surveyor during the assessment process.
  • Provide all required documents, such as claim forms, bills, and a copy of the policy.
  • Keep damaged property secure until the surveyor or insurer advises on its disposal.
  • Identify the insured items involved in the claim.