As a building developer or contractor, it is necessary for you to safeguard your capital investments and work in progress or material which are bought for use in the project against various types of losses or damages. Here you will get a better idea about the 50:50 Clause in the construction of all-risk insurance policies.
In addition, the policy would also help you by safeguarding your liability against third-party claims which may arise from the construction activities. It also includes a fire insurance policy that covers losses or damages due to fire.
Key Takeaways
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Solving the “Invisible Damage” Dilemma: Often, a precision machine or turbine looks fine on the outside, but internal components break due to vibrations during a sea voyage or rough handling at the site. If it’s impossible to prove where it broke, the 50:50 clause ensures the claim isn’t stuck in a legal deadlock.
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The Duty to Inspect: This clause does not excuse laziness. You must inspect the exterior of every box upon arrival. If a box is visibly crushed and you don’t report it immediately to the Marine insurer, you may lose the right to use the 50:50 clause later.
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The “Concealed Damage” Window: Most 50:50 clauses have a time limit (e.g., 30 to 90 days). If you open a box 6 months after arrival and find damage, the insurers might argue the damage happened due to poor storage at the site, not transit.
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Best Practice—Same Insurer: While the 50:50 clause is a lifesaver, the most seamless way to handle project risks is to have the same insurance company provide both the Marine and the CAR cover. This eliminates the conflict of interest entirely.
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Investigation is Still Required: Insurers won’t jump to a 50:50 split immediately. Surveyors from both sides will first try to find “proximate cause” (e.g., salt-water corrosion indicates a marine loss, while fresh rust or dust might indicate a site loss).
In case a loss arises when you have bought a marine insurance policy as well. If and is difficult to hold any person responsible, the insurer will apply a 50:50 clause in the construction all-risk insurance policy.
Upon the arrival of the goods at the contract site, the policyholder should thoroughly inspect all the goods to find any possible damage incurred during transit. All the packed goods need to be visually inspected to find any sign of possible damage. In case any sign of damage is visible, should unpack goods immediately and inspect for any damage.
In those cases, where the packing of goods shows no sign of damage to the goods and even after careful inspection, it is difficult to find any loss or damage; it is daunting to hold any one party responsible in case of loss. Where it is difficult to establish whether the losses or damages were caused before or after the arrival of the goods at the construction site. However, agreed that loss settlement would divide 50:50 between the marine cover and the contractor’s all-risk cover.
Case: 50:50 Clause in construction all-risk
Established in 2011, K.N Construction achieved a big name for itself in the industry in a short span of time. A few months ago, the company got a contract for constructing a flyover in the Middle East. After completing all the formalities, the company sent a consignment of construction equipment and machinery to the Middle East via water.
Considering the risks which prevailed in water transport, the company purchased a marine insurance policy. Before the ship started its journey, the company carefully inspected all the packets to find any loss or damage.
When the consignment reached the Middle East after ten days, the overseas staff of K.N Construction carefully inspected the boxes. Once they were satisfied with the quality of the boxes, they were sent to the construction site.
Read More: What is Construction All Risk Insurance?
Once the consignment arrived at the site, found some boxes damaged. Now it was difficult to ascertain whether the damages happened during transit or when they arrived at the construction site.
K.N Construction had purchased both a marine insurance policy and a construction all-risk insurance policy. In this case, the company informed both insurance companies. Now both insurers had to decide who had to pay the claim.
Both the insurers asked K.N Construction to fill out the claim form with a complete account of the loss. The surveyors were appointed by both insurers who investigated the matter to find the exact cause of the loss. However, through the initial investigation reports, they found out that K.N Construction did the proper checks of the consignment to find any damage. Also, it was a safe transit as no natural or man-made perils affected the journey.
Even when goods reached the destination, the overseas team of K.N Construction carefully inspected them and found no discrepancy. Just after the goods reached the construction site, found some boxes to be defective.
Now, it was difficult to ascertain whether losses happened before or after the arrival of goods at the construction site. And decided that both insurers will settle the claim 50:50.
Summary: The 50:50 Clause
It means the 50:50 clause will be applicable, and both the insurance companies—marine insurance and construction all-risk insurance policies will divide the claim.
Here the total loss was Rs 5 lakh. Both insurers carefully reviewed the claim form along with the other policy documents and agreed to divide the claim amount equally. Divided the total claim of Rs 5 lakh between both the insurers as 2.5 lakh each.
Frequently Asked Questions (FAQs)
Q1: Does the 50:50 clause apply if the box was clearly dropped at the construction site?
A) No. If there is clear evidence (like a forklift puncture that happened in the yard), the CAR insurer must pay 100% of the claim. The 50:50 clause is only used when the cause and timing of the loss are genuinely unascertainable after a proper investigation.
Q2: What happens if the Marine and CAR policies have different deductibles?
A) If a claim is split 50:50, each insurer applies their own rules to their half. For example, if the Marine deductible is ₹10,000 and the CAR deductible is ₹20,000, the Marine insurer will deduct ₹5,000 (50%) from their portion, and the CAR insurer will deduct ₹10,000 (50%) from theirs.
Q3: Is this clause part of the standard policy wording?
A) In many Indian project policies (CAR/EAR), the 50:50 clause is an Add-on or Endorsement. It is not always “automatic.” You must check your policy schedule to ensure it has been explicitly included and that the same clause exists in your Marine Cargo policy.
Q4: Can this clause be used for domestic transport by truck?
A) Yes. While often called a “Marine” clause, it applies to any transit-to-site scenario, including road, rail, or air. It is technically a “Marine/Non-Marine Loss Sharing” agreement.
Q5: If I am using the 50:50 clause, do I need to file two separate claims?
A) Yes. You must formally intimate the loss to both insurance companies. They will usually appoint a Joint Surveyor to represent both interests, which helps speed up the investigation and ensures both parties agree on the final 50:50 split.
About The Author
Shivani
MBA Insurance and Risk
She has a passion for property insurance and a wealth of experience in the field, Shivani has been a valuable contributor to SecureNow for the past six years. As a seasoned writer, they specialize in crafting insightful articles and engaging blogs that educate and inform readers about the intricacies of property insurance. She brings a unique blend of expertise and practical knowledge to their writing, drawing from her extensive background in the insurance industry. Having worked in various capacities within the sector, she deeply understands the challenges and opportunities facing property owners and insurers alike.
