Understanding Design Defect exclusion under IAR policy

Under IAR policy, one of the excluded cause says that policy does not cover loss or damage to property caused by faulty or defective design unless damage
is caused by peril not excluded in the policy ensues then insurer shall be liable only for such ensuing damage.

To understand this exclusion let us first understand  what does ensue mean?  It means happening afterwards. If there is a loss or damage to property due to faulty or defective design, that will not be paid but any subsequent loss caused by an ensuing peril, not excluded in the policy, shall only be paid.
For example, if the roof of a building collapses due to faulty design and the debris falls on a working machinery inside the building then damage to building structure will not be payable under IAR but subsequent damage to machinery shall be payable as ensuing damage under MBD section of policy. 
Hope it clarifies the concept of ensuing damage.


Comments

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