Get to know EAR (Erection All Risks) Insurance
In every job
there must be risks that can interfere process of completing a project. Such risks can be in the
form of failure, damage, loss or accidents resulting in injury to workers. All
of these risks certainly have consequence of financial loss.
Therefore, in general
insurance it is known products that provide protection or cover
against the risks of erection works in civil engineering projects such as
structural work, installation of machines, assembling steel components into
frames and other similar works. Not only that, the Erection All Risks (EAR)
insurance policy also covers the risk of liability for third party bodily
injury or property damage incurred. By having an EAR, the
contractor/sub-contractor/project owner as the party in charge of the project
can transfer the risks of damage or loss to the insurance company.
In Indonesia,
standard policy of EAR policy
commonly used is the Munich Re standard EAR policy. The cover provided in an
EAR policy is usually divided into two sections, namely section I: cover for Material Damage and section II: cover for Third Party Liability (legal liability to
third parties).
For Material
Damage (MD) Cover, the insured objects or items include:
1.
Erection
work (installation work) which usually includes the objects to be installed,
freight (transportation costs), custom duties (import duties), and cost of
erection (installation costs).
2.
Civil
engineering work: part of the
overall work, such as making the foundation work for machine to be installed.
3.
Cost
of clearance of debris (cost of cleaning/removing debris).
4.
Surrounding
property: objects or items on the project that are the
property of the project owner or that are stored and under the supervision of
the project owner.
Meanwhile for Third Party Liability
(TPL) Cover, the objects or items that are usually insured are:
1.
TPL
relating to bodily injury, including death or illness from a third party.
2.
TPL
relating to property damage/property belonging to third parties.
3.
TPL
relating to law costs and expenses, namely all costs and costs of litigation
obtained by the claimant from the insured, and all costs and expenses incurred
with the written approval of the insurer.
The EAR policy in general
covers all risks of physical loss or damage that occurs suddenly and
unexpectedly (sudden and unforseen), as well as any cause (from any cause) as long
as it is not excluded from the policy on the objects or items insured.
The affirmation "from any
cause" is an indication that with respect to the objects or items insured
under Material Damage Cover, the coverage provided by the EAR Policy is very
wide or also termed as all risks, even
though in reality there are exceptions.
Thus, the risks covered by the EAR
Policy are fire, lightning strike, explosion, aircraft impact, fire fighting
measures, flood, rain, hurricane, theft, earthquake, volcanic eruption, and so
on as long as they are not excluded from the police.
There are two types of excluded risks in
the EAR Policy namely general exclusions and special exclusions. General exclutions apply to both Material Damage Cover and Third
Party Liability Cover. Meanwhile, special exclusions are divided into 2 (two) groups, namely special exclusions which only apply
to Material Damage Covers and special exclusions which only apply to Third
Party Liability Covers.
The risks excluded based on general
exclusions are risks of loss, damage or liability which are directly or
indirectly caused by or arising from war, invasion, acts of foreign enemies,
hostilities, civil wars, rebellions, revolutions, riots, strikes, barriers to
work entry, civil disturbances, takeover of power, malicious acts committed by
persons on behalf of or in connection with political organizations, conspiracy,
confiscation or destruction at the behest of the government or the orders of
the authorities. In addition, there are also
risks such as nuclear reactions, nuclear radiation or radioactive
contamination, intentional act of the insured, and termination of employment,
whole or part.
The EAR insurance premium rate is
usually determined as a lump sum premium for the entire period of service, while
the premium is calculated based on the product of the total sum insured of the
insured objects and the premium rate that has been agreed upon by the insurer
and the insured. The premium rate ranges from 0.12% to 0.20% depending on
underwriting factors such as the type of development project, risk location,
contract value, contractor experience, work schedule, and terms and conditions.
For the purposes of Material Damage
Cover in an EAR policy, each object or item insured is sum insured individually
and separately; the sum of all the sum insured becomes the total sum insured. The
total sum insured in addition to being the basis for calculating the premium,
the total sum insured is also the limit of liability or maximum liability of
the insurer in the event of a loss that results in a claim (in this case, a
claim on a Material Damage policy).
Meanwhile, for the purposes of Third
Party Liability Cover in the EAR policy for each object or item insured limit
of indemnity is not maximum responsibility or liability of the insurer in terms
of TPL claims.
The EAR policy has a coverage period
that is from the start of work and ends on the part of the work contract that
has been handed over or after the first trial or load test (testing and
commissioning) plus a maintenance period.
When an event occurs that can give rise
to a claim under the policy, the insured must do the following:
1.
The
Insured must immediately notify (by telephone, telegram or in writing) to
Insurer regarding incident that has occurred, indicating
the nature and magnitude of loss or damage.
2.
The
Insured shall take steps within his ability to minimize loss or damage.
3.
The
insured must maintain and prepare the damaged parts to be inspected by representative
or surveyor of the insurer.
4.
The
Insured must submit to the insurer about information or
evidence documents if required by the insurer.
5.
In
the event of loss or damage due to theft or burglary, the insured must report
the matter to the police.