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 apply to the construction, plant, equipment, and erection machinery. So, Does the Construction All Risk Policy covers damage to surrounding structures?
Further, it is necessary to note that most of the construction all risk insurance policy covers surrounding structures 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 cover the surrounding structure under the policy, the excess clause would apply to the policy as well. It means, that if the excess limit is, say, Rs 30,000, then the losses up to Rs 30,000 would have to be borne by the insured, and the insurer would pay the rest of the claim.
Also, a separate principle for surrounding property has to be defined in the policy document.
Case of Construction All Risk Policy cover
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 a construction all-risk insurance policy to get coverage in case of any mishappening at its construction site.
Last year, R.S Construction got a big contract for 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 safety at the site. A fire erupted there due to short-circuit. Soon, the fire spread and caught the warehouse as well. Workers at the site immediately called the police and fire brigade. However, by the time they reached the spot, it damaged a major part of the construction site and warehouse.
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.
Read More: What does the 72-hour clause signify in the construction all-risk policy?
In this case, R.S Construction bought a construction all-risk insurance policy. In order 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 items, insured under Section 1 of the construction all-risk insurance policy, the insurer would also settle it.
In the above case, though, the damage happened at the construction site where R.S Construction was building a school. Its warehouse, situated adjacent, also caught fire due to the construction, covered under the policy. Also, it happened due to fire, the peril insured under construction all-risk insurance policy.
Read More: What is 50:50 Clause in Construction All Risk Insurance Policy?
For the surrounding structure, a separate sum insured as defined in the construction all-risk insurance 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 the 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 the surrounding structure itself.
