In construction all risk insurance policy, 72-hour clause signifies any losses or damages which occur during any period of 72 consecutive hours and which arises due to=

  • Earthquake, subterranean fire, volcanic eruption,
  • Earth movement or collapse
  • Bushfire
  • Wind, storm, hurricane, cyclone, typhoon, hail, rainwater, etc.
  • Flood, it means the inundation of normally dry land by escaping of water or released from the normal confines of any natural water activity or lake (whether or not modified or of any canal or dam), tsunami, action of the sea, tidal wave or high water; shall be counted as occurring from one event

The clause in construction all risk insurance policy shall apply with respect to any of the combination of any of the perils as stated above. Here no such 72-hour clause may be extended beyond the lapse of the insurance policy unless the policyholder shall first sustain any direct loss or damage before the expiry of the construction all risk insurance policy and that too within the tenure of 72 hours of consecutive hours.

For foregoing the commencement of any 72-hour clause, it will depend on the discretion of the policyholder and the insurer as agreed upon. However, in any case, there should be no overlapping of any two or more such 72-hour clause in case of loss or damage happens over the extended period of time.

Case: 1

L.S Engineering hired T.K Construction to construct a warehouse for their company in Pune. When the project was still underway, it started raining heavily, and some portions of the under constructed pillar went down. Luckily, no casualties were reported.

The rain went for three days, and on the third day, it damaged the other pillar. After a while, both the pillars came down, and the under-construction warehouse suffered major losses or damages.

In this case, T.K Construction had a construction all risk insurance policy and the company approached the insurer for the claim settlement. In this case, T. K Construction filed for two claims-

  • Damage to a pillar when it first started raining
  • Damage to the other pillar due to continuous rain

In this case, as the damages happened due to one single peril, i.e., rain, the insurer considered both the events under one single claim and settled the claim accordingly.

Note, though both the damages happened at the different time slot, they occurred due to a single peril and that too within 72 hours. The insurer looked for the same peril and found rain to be same in both. Here the construction all risk insurance company applied 72-hour clause and settled the claim.

 Case: 2

Established in 2012, Jeevan IT Associate has made a name for itself in the IT world in a very short span of time. Having its offices already in Delhi and Mumbai, the company has a plan to open one office in Chennai along with a warehouse where it will stock its computers and accessories.

The company hired M.J Construction to construct an office and two warehouses in Chennai. The construction company soon started its work, and when it was looking that it would complete its work much before the time, nature showed its colours and the city was hit by a cyclone.

As Jeevan IT Associate’s warehouses were near the sea to facilitate the export of goods, the company had to suffer major losses due to the cyclone. On the first day of the cyclone, the gate of the under- constructed warehouse fell. After three days, the roof of the warehouse also got damaged.

In this case, M.J Construction had a construction all risk insurance policy. Once the cyclone settled, the company approached the insurer for the claim settlement. In this case, the company reported for two losses=

  • Damage to the under-constructed gate of the warehouse
  • Damage to the roof

In this case, though, both the damages were caused by the single peril, i.e., cyclone, and within 72 hours, the insurer considered them separately. As both the losses were independent of each other, the construction all risk insurance company considered them individually.

Here the insurer asked M.J Construction to file both the claims separately and the insurer also settled accordingly.

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