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.
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.
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.