What is Contractor All Risks Insurance (CAR Insurance)?

Contractors' all risks insurance is a type of engineering insurance that covers the risks of civil engineering work such as the project construction for hotel or a shopping center, mall, office building, flyover or toll road construction project, which are usually carried out by contractors and/or sub-contractors.

The parties who can be insured under this insurance product are those who have an insurable interest related in to the project, such as contractors, sub-contractors or project owners.

This insurance product provides protection against all risks that can disrupt the construction process or the insured work. All-risks coverage will provide compensation for physical loss or damage to objects or any other goods that happen in sudden and unforeseen state within the period of coverage caused by hazards such as fire, lightning, explosion, aircraft accident, fire fighting, flood, rain, hurricane, theft, earthquake, volcanic eruption, tsunami, and the other risks as long as it is not being excepted as expressly stated in the CAR insurance policy.

For the cost of clearance of debris, CAR policy usually covers the cost of cleaning/removing that debris as long as the costs incurr in connection with the event that gives rise to claim on the policy and provided that a specific sum insured for the cost of clearance of debris has been included in the policy summary.

CAR policy also covers amounts which are according to the law that have be to be paid by the insured as a compensation for bodily injury or illness from a third party (whether causing death or not) and/or loss or damage to property belonging to a third party that occurs in direct connection with the payment or installation of the object or item insured under section 1 (Material Damage) of the policy and occurs on or around the project site within the period of cover.

In Indonesian insurance market, a kind of policy form or standard CAR policy that is currently using a standard CAR policy from Munich Re. Basically, Munich Re standard CAR policy is designed to accommodate two types of coverages, like Material Damage Cover and Third Party Liability Cover.

Material Damage (MD) that is covered in the CAR insurance policy are for objects or items that are commonly insured, including:

1.      Permanent/main works and temporary works, including materials used in these works.

2.      Materials or goods supplied by the project owner for use in the works.

3.      Construction plant and equipment, that are large tools used to assist the implementation of these jobs.

4.      Cost of clearance of debris (cost of cleaning/removing debris) if this object or item is also to be insured.

For the purposes of MD coverage in a CAR policy, each object or item insured is sum insured individually and separately. The sum of all sum insured becomes the total sum insured. The total sum insured, in addition to being the basis for calculating premiums, is also the limit of liability or maximum liability of the insurer in the event of a Material Damage claim.

Meanwhile, for Third Party Liability (TPL) that is covered in the CAR insurance policy is the objects or items insured that include:

1.      TPL relating to bodily injury (including death) or illness from third parties.

2.      TPL relating to property damage or property belonging to third parties.

For the purposes of TPL coverage in the CAR policy for each object or item that have been insured (that is bodily injury and property damage) a limit of indemnity is set, not sum insured. The limit of indemnity is also the limit of liability or the maximum liability of the insurer in the event that a TPL claim..

Like the most other types of general insurance, this type of CAR insurance also has exceptions. In CAR insurance policy there are two kinds of exceptions, that is general exclusions and special exclusions.

General exclusions apply to both Material Damage Cover and Third Party Liability Coverage. Meanwhile, the exceptions that apply specifically to the Material Damage Cover are separated from the exceptions that apply specifically to the Third Party Liability Cover.

The risks that are generally excluded based on general exclusions in the CAR insurance policy are the risks of loss, damage or liability which are directly or indirectly caused by or arising from as following:

a)      Wars, invasions, acts of foreign, hostilities, civil wars, rebellions, revolutions, riots, strikes, barriers to entry into the workplace, civil disturbances, takeover of control, evil deeds by persons in the name of political organizations, conspiracies , confiscation or destruction at the behest of the government or authorities.

b)      Nuclear reactions, nuclear radiation or radioactive contamination.

c)      Deliberate action of the insured or his representative.

d)      Termination of work, in whole or in part.

Meanwhile, determination of the premium rate is usually set in per mile at a time for the entire period all of work. On the other hand, the premium is calculated based on the multiplication of  product of the total sum insured and the premium rate that has been agreed upon by the insurer and the insured.

Furthermore, the things that must be done by the insured when a claim occurs on this CAR insurance policy are:

• a)     Notify the insurer immediately, by indicating the nature and magnitude/wideness of the loss or damage.
• b)  Take steps within its capabilities to minimize the loss or damage.
• c)    Prepare parts of the damaged property to be inspected by a representative or surveyor appointed by the insurer.
• d)  Provide information and evidence documents required by the insurer.
• e)   In case of loss or damage due to theft or burglary, report to the police.