Engineering Insurance

Engineering Insurance:

Civil Engineering Completed Risks

Some completed civil engineering structures are only exposed to a negligible fire hazard, and therefore a typical fire policy would be inappropriate. However, these structures can still be exposed to elemental perils, geological conditions, or hazards from operation and use of the structure.

• Cover
It is a named peril policy, issued on an annually renewable basis, and is for material damage only. Following a loss or damage, the policy indemnifies to repair/reinstate the structure to the condition prior to the loss event. The main exclusions are: Political risks; Nuclear reactions, nuclear radiation or radioactive contamination; Wilful act or wilful negligence; Wear and tear, inherent defects; Lack of maintenance; Consequential loss

• The perils covered are:
Fire, lightning, explosions, impact of land-borne or waterborne vehicles, impact of aircraft and other aerial devices or articles dropped therefrom. Earthquakes, volcanism, tsunamis and storms with (air movements stronger than grade 8 on the Beaufort scale). Floods or inundation, wave action or water subsidence, landslides, rockslides or any other earth movement. Frost, avalanches, ice storms and vandalism by individuals.

Contractors’ Plant and Equipment

Construction and erection works often call for the use of heavy, specialised machinery such as tunnel boring machines, earthmoving equipment, cranes, pumps, air compressors etc.

It is possible to cover such plant and equipment by way of an appropriate endorsement under Contractors All Risk (CAR), Erection all Risk (EAR) or Engineering Project Insurance Cover (EPIC) policies. However, specific items of plant are usually only on one construction/erection site until the particular job for which they are designed for is completed. Obviously, such jobs do not last for the whole construction/erection period and the plant is moved on to the next site as soon as its job is finished. Therefore, in most cases, cover granted by means of an endorsement to the Contractors All Risk (CAR), Erection all Risk (EAR) or Engineering Project Insurance Cover (EPIC) policy would not be suitable, because such policies are limited to loss or damage caused at one particular construction/erection site only. It is preferable to issue an annually renewable Contractors’ Plant and Equipment policy because it caters for plant and equipment used at different locations.

• Cover
Cover is on an “all risks” basis, and is basically for unforeseen and accidental physical loss or damage due to external causes.

• Main Hazards
The main hazards are: fortuitous working accidents, fire, burglary, theft, faulty operation, natural perils such as earthquake, storm and flood, collision and overturning.

Contractors' All Risks

Insurance policies cover all types of building and civil engineering construction – from residential (housing) to commercial (shopping centers and office blocks) to infrastructure (roads, bridges, dams, water and sewage reticulation pipelines) etc and offer protection against the hazards which may threaten works under construction. Most construction projects include certain elements of machinery erection (e.g. installation of air conditioning and lifts in buildings). If such erection works are of an ancillary nature (not over roughly 10 – 20% of the total project value) they can be insured under the Contractors All Risk (CAR) policy, thereby making it unnecessary to issue an additional Erection all Risk (EAR) or an Engineering Project Insurance Cover (EPIC) policy.

• Cover
The policy provides cover on an all risks basis for physical loss or damage to the insured property.

• Main hazards
The main hazards covered are: fire and explosion, theft, burglary, collapse, earthquake, seaquake, landslides, storm, and flood. Certain perils (especially forces of nature) obviously vary from location to location, and the likelihood of loss or damage is also influenced by the actual type and method of construction.

• Third party liability
This section protects the insured against third party claims for any bodily injury or property damage caused by construction activities.

Engineering Project

In some projects the sums insured for the construction part of a project and the erection part can be roughly equal. An example would be a hydroelectric power plant including the construction of a dam, river diversion and powerhouse buildings, and the erection of turbine generators with coolers, exciters and all auxiliary equipment. This normally entails issuing two separate policies – one for the construction works and one for the erection of the machinery.

However, there is another possibility: In order to close any possible gaps in cover and to reduce administration policy which is a combination of the Contractors’ All Risks and Erection All Risks policies. The insurance protection offered is as described under Contractors’ All Risks and Erection All Risks policies.

Advance Loss of Profits

This type of insurance may also be encountered under the name Contractors All Risk (CAR)/Erection all Risk (EAR) Loss of Profits, Delayed Earnings Insurance, Delayed Opening of Business, Delay in Start-up, Loss of Rent, and Loss of Interest. It is a business income protection cover with the aim of covering the principal’s loss of gross profit resulting from a delay in completion of the construction and/or erection works. A prerequisite for granting Advance Loss of Profits (ALOP) is for an underlying Contractors All Risk (CAR), Erection all Risk (EAR) or Engineering Project Insurance Cover (EPIC) policy to be in force. Normal working delays are not covered under Advance Loss of Profits (ALOP).

• Cover
Cover is limited to the actual loss of gross profit sustained resulting from a delay in the completion of the project; the delay itself must be caused by a loss covered under a  Contractors All Risk (CAR), Erection all Risk (EAR) or Engineering Project Insurance Cover (EPIC) policy.

Plant All Risks

Construction and erection works often call for the use of heavy, specialised machinery such as tunnel boring machines, earthmoving equipment, cranes, pumps, air compressors etc.

It is possible to cover such plant and equipment by way of an appropriate endorsement under  Contractors All Risk (CAR), Erection all Risk (EAR) or Engineering Project Insurance Cover (EPIC) policies. However, specific items of plant are usually only on one construction/erection site until the particular job for which they are designed for is completed. Obviously, such jobs do not last for the whole construction/erection period and the plant is moved on to the next site as soon as its job is finished. Therefore, in most cases, cover granted by means of an endorsement to the  Contractors All Risk (CAR), Erection all Risk (EAR) or Engineering Project Insurance Cover (EPIC) policy would not be suitable as such policies are limited to loss or damage caused at one particular construction/erection site only. It is preferable to issue an annually renewable Contractors’ Plant and Equipment policy, because it caters for plant and equipment used at different locations.

• Cover
Cover is on an “all risks” basis, and is basically for unforeseen and accidental physical loss or damage due to external causes.

• Main Hazards
The main hazards are: fortuitous working accidents, fire, burglary, theft, faulty operation, natural perils such as earthquake, storm and flood, collision and overturning.

Machinery Breakdown

Machinery Breakdown (MB) insurance offers protection against sudden and unforeseen physical loss or damage to machinery which has been erected and is operational or at rest. It is basically an accident insurance and cannot be construed as a “life insurance” for machines. This is because machines have only a limited life span due to wear and tear: therefore, machinery owners must depreciate their machines annually and establish reserves for replacement.

• Cover
Following an insured event, the policy pays for all repair costs, provided the cost of repair does not exceed the actual value of the machinery at the time of the loss. In the case of a total loss (i.e. whenever the repair costs exceed the actual value of the machinery), the actual value is indemnified.

• Main Hazards
The main causes of damage covered under MB policies include: fortuitous working accidents; a machine’s tearing apart due to centrifugal force; short circuits; defects or faults in design, material or manufacturing; and incorrect operation.

Loss of Profits following Machinery Breakdown

Similar to Loss of Profits following Fire, Machinery Loss of Profits (MLOP) covers the financial consequences of a machinery breakdown.

• Cover
The cover is limited to the actual loss of gross profit sustained due to a loss covered under an MB policy and also insures costs incurred in reducing the amount of a claim.

Deterioration of Stock

Deterioration of Stock (DOS) is special insurance for the protection of perishable goods stored in warehouse- type cold stores or rooms. The policy is not intended for goods stored in retail shops/stores.

• Cover
Cover is for perishable goods (e.g. meat, fish, vegetables, and fruit) stored in cold stores which suffer damage as a consequence of an insured machinery breakdown accident. Such damage occurs as a result of rise or fall in temperature, a change in the concentration of gases or the action of refrigeration media escaping from the equipment in cold stores, due to a breakdown of the refrigeration system or by the loss of cooling me.

Electronic Equipment

The Electronic Equipment insurance policy offers complete protection for all types of electronic equipment such as entire Information Technology (IT) installations, telephone exchanges, cell phone networks, specialised electronic medical equipment, electronic measuring equipment etc.

• Cover
The policy is of an all risks nature, covering unforeseen accidental loss or damage. The covers include material damage, business interruption, increased cost of working, comprehensive software and software BI.

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