Understanding Maintenance period under project insurance policies


As we know, wherever Contractor is contractually liable to maintain the project in efficient working condition, after successful completion of Testing, Commissioning and provisional handing over to the Principals, there, EAR / CAR policies can be extended to include Maintenance visit/ Extended Maintenance cover to indemnify loss occurring  to the  completed works arising out of  maintenance activity being carried out at the project site by the contractor or his employee during  the maintenance period.


It is important to understand  that  all claims under this extension would go to the Contractor because till the end of maintenance period, Contractor has insurable interest in property as he is liable to make good  the loss arising out of maintenance activity during this period. 


It must be noted by all that during the maintenance period, Principal must take operational policies like Fire, MBD, EEI or IAR to cover the operational plant because they have taken over from Contractor after successful completion of testing and commissioning of project and they should not be under the impression that all operational losses shall be paid under CAR/EAR policies during the maintenance period.
At the same time if the Principal have taken ALOP cover then all claims would go to Principal and not to the Contractor because after provisional handing over of project to Principals, Contractor has no insurable interest in property beyond making good the loss which occur during the maintenance period while carrying out the maintenance activity as per contract terms and conditions. 

Comments

  1. sunilAugust 16, 2020 at 1:10 PM

    what is actual difference between maintance and extended maintaince

    ReplyDelete
    Replies
    1. V.P SharmaAugust 17, 2020 at 7:29 PM

      Please check this video https://youtu.be/DXw08lr8YuA

      Delete

Post a Comment

Popular posts from this blog

Understanding difference between "Put to Use" cover and "Continuity cover" under project insurance policies

Project insurance policies exclude part of project which is completed and put into use for intended purpose. By virtue of taking "Put into use" add on cover, insured buys back this exclusion with certain loss limits and period as defined in add on cover by the insurance company. Say for example, it can be given for a loss limit of rupees 10 crores for a period of 6 months. That means, any loss or damage to insured property which is put into use up to  rupees 10 crores shall remain covered under the policy up to a maximum period of 6 months or the expiry of policy, whichever is earlier. Continuity cover is granted in projects where integral testing is required after erection of all plant and machineries before final commissioning of plant. As per this addon cover, any machinery which is tested and commissioned but is required  to wait for completion of remaining portion of plant, shall be allowed to remain covered under the policy till successful completion of integral testing...
Read more

BI claim due to RSMD peril

We all know that a BI claim is payable only if the loss is admissible under material damage policy and the damage to insured property causes interruption in  production causing loss of turnover during the interruption period. Now if there is a strike called by workers who do not allow anyone to enter the plant premises causing production loss, BI claim would not be admissible unless there is a physical loss or damage to insured property leading to production loss. Few years back Maruti Manesar plant suffered production loss for nearly six months due to Rite and Strike by company workers who unfortunately killed one of the senior officials of the company and damaged security gate and cabin etc. Maruti could not lodge BI claim because they did not have BI policy at that time. There was  big debate on the point that had they taken BI policy, whether they would have claimed the loss of production under BI policy. IN MY OPINION EVEN IF THEY HAD B I POLICY, NO BI CLAIM WOULD HAVE BE...
Read more

What is Margin Clause?

Nowadays, it is commonly seen in market that Clients are asking for 'Margin clause' as well as 'Waiver of Under insurance' in many property policies.  At the same time they are demanding Underwriter's confirmation for clubbing of these two clauses in the event of claim so as to enjoy higher 'Waiver of Under insurance'.  Unfortunately, some Companies are agreeing to this unknowingly.  This understanding is wrong and should not be accepted because these two can not be clubbed in the event of claim. At the same time it is also to be understood that margin clause and escalation clause are two different covers and while  applying Underinsurance, the benefit of increased sum insured would be allowed only if insured has taken escalation clause by payment of additional premium. Margin clause says that in case of sum insured variation up to 10%, whether up or down, no adjustment of premium is required to be done. T his should not be confused with esc...
Read more