Construction all risk insurance policy is taken by building contractors or developers to cover against the loss or damage caused to the property at their construction site. This policy also covers for the contractor’s liability for third-party claims arising from the construction activities. There are various clauses present in the policy document of the construction all risk insurance policy. Some of the clauses are mentioned below:
72 hours occurrence clause:
In this clause, the loss or damage caused to the Insured property during any one period of 72 consecutive hours, is considered as a single event. The loss or the damage can be caused by a storm, tempest, flood or earthquake. However, there should not be any overlapping in any two or more such 72 hours periods occurring over a more extended period.
Basis of loss settlement clause:
According to this clause, the basis of loss settlement will be:
When the damage can be repaired: The loss settlement will be based on the cost of repairs necessary to restore the items to their conditions prior to the damage or loss.
In the event of total loss: The loss settlement will be based on the actual value of the items immediately before the occurrence of the damage. The loss here will be covered only to the extent to which it is included in the sum insured.
Claim settlement clause:
According to this clause, the insurer will settle the claim as soon as he is notified by the insured with a written notification and supporting documents. However, the claim is not settled if the insured fails to inform after a stipulated period mentioned in the policy document.
Cross liability clause:
According to this clause, the third-party liability cover of the policy applies to the insured parties named in the policy document as if a separate policy had been issued to each party. However, there are exclusions to this clause, and hence the insured needs to understand them correctly.
Strike, riot and civil commotion damage clause:
According to this clause, the insured is covered against the loss or damage to the property caused by strike, riot and civil commotion.
Automatic reinstatement clause:
According to this clause, the insured will get the full sum insured when he is undertaking to pay an additional premium at the agreed rate on the amount of loss calculated on the pro rata basis. The dates here start from the date of the reinstatement to expiry of the current period of insurance.
Overtime, night work express freight clause:
The insured is covered for the extra charge of overtime, night work, work on public holidays, and express freight caused due to any loss or damage to the items covered under the Policy.
Debris removal clause:
According to this clause, the insured is covered for the cost of removal of debris, propping or shoring up, demolition and any temporary repairs caused due to the fire or any other perils as mentioned in the policy document.
Fire extinguishing costs clause:
According to this clause, the insured is covered for the cost of refilling the fire extinguishing appliances, provided that the cost is directly related to the use of the fire extinguishing appliances for the safety of the insured property.
Insured’s consultant clause:
In the case when the insured has paid the agreed extra premium amount, the party liability cover of the policy also applies to the insured’s consultant as if a separate policy had been issued to each party.
Notice of cancellation clause:
According to this clause, the insurance can be terminated at any time by the Insurer after provision of a written notice to the insured. The termination becomes effective as per the duration provided by the insurers in the insurance policy.
Payment on account clause:
This clause states that the insured will be paid for the loss according to the mutually agreed stages between the insured and the insurer and on the production of an interim report by the Loss Adjuster if any.
Transmission and distribution lines exclusion clause:
This clause states that the policy does not cover for any loss caused to the wire, cables, poles, pylons, standard towers, transmission or distribution of electrical power, telephone or telegraph signal and communication signals which do not fall within the specified radius as mentioned in the policy document. This exclusion applies to above as well as below ground equipment.
Offsite storage and fabrication clause:
This clause states that the construction all risk insurance policy will cover for the loss or damage to materials or goods when they are stored anywhere other than the actual site.
Vibration removal or weakening of support clause:
The construction all risk insurance policy will indemnify the insured for the loss or damage caused by vibration or by the removal or weakening of support. The insured will be covered, provided that he adheres to the instructions given in the policy document.
Waiver of subrogation clause:
According to this clause, the Insurers can waive all rights of subrogation arising out of loss or damage caused by a person using the insured items with the consent of the Insured.
Rajesh, an owner of a construction company, had purchased a construction all risk insurance policy to protect his construction sites against any losses caused due to various perils. While the construction work was going on one of his sites, a fire broke out in one of the electrical circuits. With the prudent efforts of a nearby worker, the fire was immediately extinguished, and no further harm was caused.
Rajesh notified his insurance company about the scenario. Since Rajesh had a fire extinguishing costs clause included in his policy, he was indemnified for the cost of refilling the fire extinguisher as it was used to extinguish the fire. Since the appliance was used to safeguard the insured property, Rajesh was indemnified for the cost of refilling.