Yes, the construction all risk insurance policy covers damage to surrounding structures as well. Loss or damages to property which are located on or adjacent to the construction site, belong or held in custody or control of the policyholder shall be covered if the loss/damage occurs directly due to those construction items which are insured under Section 1 and it happens during the policy tenure. Here, it is important to note that this cover would not be applied to construction, plant, equipment and erection machinery.

Further, it is necessary to note that most of the construction all risk insurance companies cover surrounding structure as an add-on. It means you would have to pay an extra premium to get the coverage for the specified surrounding property. Also, if you are covering surrounding structure under the policy, the excess clause would apply to the policy as well. It means, if the excess limit is, say, Rs 30,000, then the losses up to Rs 30,000 would have to be borne by the insurer, and the insurer would pay the rest of the claim.

Also, a separate principal for surrounding property has to be defined in the policy document.

Case

Since 1999, R.S Construction has become a renowned name in the construction industry. Backed with years of experience and expertise, the company has so far completed various projects both in India and abroad. The company takes every measure in ensuring the safety of its business activities. The company has also purchased construction all risk insurance policy to get coverage in case of any mishappening at its construction site.

Read More: What does 72-hour clause signify in construction all risk policy?

Last year, R.S Construction got a big contract of constructing a school building in Pune. The school site was near the warehouse of R.S Construction, and therefore, the company was hopeful to complete the construction work without any issue.

Though the civil engineers and workers there were taking every step to ensure the safety at the site, a fire erupted there due to short-circuit. Soon, the fire spread and caught warehouse as well. Workers at the site immediately called the police and fire brigade, however, by the time they reached the spot, a major part of the construction site and warehouse got damaged.

Thankfully, no worker was injured, however, the loss/damage to both the construction site and warehouse was substantial enough to approach a construction all risk insurance company.

In this case, R.S Construction had bought a construction all risk insurance policy to get coverage against loss or damage that may arise while discharging construction activities.

Also, R.S Construction had paid an extra premium to get coverage for its surrounding structure as well. It means, if a loss or damage happens to the surrounding site due to any of the construction item which is insured under Section 1 of the construction all risk insurance policy, it will also be settled by the insurer.

In the above case, though, the damage happened at the construction site where R.S Construction was building a school, its warehouse, which was situated adjacent, also caught fire due to the construction which was covered under the policy. Also, it happened due to fire, which was the peril insured under construction all risk insurance policy.

Read More: What is 50:50 Clause in Construction All Risk Insurance Policy?

For surrounding structure, a separate sum insured was defined in the construction all risk insurance policy which was Rs 10 lakh. It means, while the construction all risk insurance policy offered the coverage of Rs 50 lakh, a separate Rs 10 lakh coverage was also available for surrounding structure.

R.S Construction submitted a duly filled insurance claim form along with the details of the complete account of the accident. The insurer reviewed the claim and settled it accordingly.

If R.S Construction did not pay extra to get coverage for the surrounding property, it would have to bear the damages caused to surrounding structure itself.

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