Process

1. Insuring process

2. Claim settlement process

CONTRACTORS PLANT & MACHINERY (CPM)

Whilst it is possible to have the Contractors plant and machinery covered under an
EAR or CAR policy at specific project sites, CPM policy has been designed to
provide a cover on an annual basis to a contractor who may be using his plant and
machinery at different projects during the course of the year. The cover under a
CPM policy is not limited to a specific project site and is operative at all sites
wherever the plant and machinery is in use and even while the same is lying at the

contractors own premises. We therefore have to ensure that all the sites where the
insured items are being used are mentioned on the face of the policy.
SCOPE AVAILABLE UNDER CPM POLICY
The Contractor's plant and machinery insurance comes under the policies available
under the Project Insurance and like the EAR / CAR Policy offers a comprehensive
cover as given below:
Fire,

lightning,

external

explosion,

earthquake,

flood,

inundation,

subsidence, landslide and rockslide.

Storm, tempest, hurricane, typhoon and tornado.
Burglary, theft, riot and strike and malicious damage.
Accidental damage while at work due to faulty man - handling, dropping or
falling, collapse, collision and impact.
EXCLUSIONS
The insurer will not indemnify in respect of loss or damage given below:
Excess as stated in the policy schedule, which has to be borne by the insured
in any one occurrence. If more than one item is lost or damaged in one the
occurrence insured has to bear the highest single excess applicable to such
items.
Loss or damage due to electrical or mechanical breakdown, failure breakage
or derangement freezing of coolant or other fluid, defective lubrication or

lack of oil or coolant, but if as a consequence of such breakdown or

derangement

an

accident

occurs

causing

external

damage,

such

consequential damage will be indemnifiable.

Loss of or damage to replaceable parts and attachments such as bits, drills,
knives or other cutting edges, saw blades, dies, moulds, patterns, pulverizing
and crushing surfaces, screens and sieves, ropes, belts, chains, elevator, and
conveyor bands, batteries, tyres, connecting wires and cables, flexible pipes,
joining and packing material.
Loss or damage due to explosion of any boiler or pressure vessel subject to
internal steam or fluid pressure or of any internal combustion engine.
Loss of or damage to vehicles designed and licensed for general road use
unless these vehicles are exclusively used on construction sites.
Loss or damage to the hull and machinery of water borne vessels.
Loss or damage while in transit from one location to another location.
Loss or damage due to wear and tear corrosion, rust etc.
Loss occurring while an insured item is undergoing any test.
Loss to any plant or machinery working underground.
Losses arising out of war and war like perils and due to nuclear radiation or
radio active contamination.

 Damage due to faults or defects existing at the time of commencement of the

policy with the knowledge of the insured.
Any willful act or gross negligence of the insured resulting in a loss.
Loss for which the supplier or the manufacturer is responsible.
Loss discovered only at the time of taking the inventory or during routine
servicing.
Loss to plant and machinery mounted or operated on a floating vessel /
barge.
CLAIM PROCEDURE
Claims under this policy may arise due to many causes, e.g. fire, riot, flood, storm,
earthquake, theft, accidental damage to contractors plant and machinery. Proper
claims forms should be used when processing the claims. The insurer is not liable
for additional cost incurred for alteration or improvement carried out at the time of
repairs.
Insurers generally insist upon immediate notification of any claim for this class of
insurance in order that the cause and circumstances of the loss may be ascertained
and repair / replacement costs checked.
All theft claims require careful investigation conjunction with the local police
authority. Losses discovered only at the time of taking inventory are not covered
under this policy. Salvage materials should be disposed off, preferably on 'as is

where is' basis at best available prices and this will minimize the loss to a certain
extent.

MACHINERY BREAKDOWN (MB)

Machinery Breakdown insurance was developed to grant industry effective
insurance cover for expensive plant, machinery and mechanical equipment. This
insurance is important for everyone who operates the machines. This policy should
support our property insurance and hence this insurance must not be granted on a
stand - alone basis.
SUBJECT MATTER INSURED
All types of machinery, plant, mechanical equipment and apparatus may be
covered under MBD insurance, such as for example power generating units, power
distributing plant as well as production machinery and auxiliary equipment, etc.
SCOPE OF COVER
By its nature, Machinery Breakdown Insurance is an accident insurance on
machinery. Thus,
It covers unforeseen and sudden physical loss of or damage to the insured
items.

 Faulty design faults at workshop or in erection, defects in casting and

material.
Faulty operations, failure of safety system / lubrication system / control
system, lack of skill, negligence.
EXTENSION AVAILABLE UNDER THIS POLICY
Third party liability.
Expediting costs.
Additional customs duty.
CLAIM PROCEDURE
The policy condition clearly lays down the procedure to be followed by an insured
in the event of damage to the insured machinery.
It would be desirable to obtain a claim from duly completed and signed and to
check that both the item and the risk involved are insured under the policy. It is
also essential at the outset to check whether there is any machinery Loss of Profits
insurance in force covering the damaged machinery. If so, immediate action is
necessary for minimizing the loss under the Machinery Breakdown policy.
A qualified engineer surveyor is generally deputed to assess the loss who will then
scrutinize claims estimates, determine the cause of the accident and certify that the
charges claimed for repairs are reasonable. An up - to - date copy of the policy
should be made available to the Independent Surveyor, if engaged in the initial

stage so that he is fully acquainted with the terms, conditions and excess under the
policy.
LOSS SETTLEMENT PROCEDURE
Partial Loss Basis
In cases where the damage can be repaired, the basis of indemnification is the cost
of restoration to working order based on the customary daily rates of wages
together with normal freight and erection costs and other duties. Customs duties
and dues, if any have been included in the sum insured. In such cases of repairable
damage, no deduction is made for wear and tear, depreciation, etc.
For parts with limited life, depreciation factor has to be taken into consideration.
Total Loss Basis
If the cost of the repair as mentioned above equals or exceeds the actual value of
the machinery insured immediately before the occurrence of the damage the
settlement shall be made on Total Loss Basis.
Under total loss basis, the basis of indemnification is the market value of the item
immediately before the accident plus the cost of removing the damaged machinery
less the value of the salvage.
Any extra charges incurred towards repairs, such as Express Delivery, Overtime
and holiday rates and wages, are payable only if special provision for these items
has been made in the Policy in consideration of which an additional premium is
charged.

All costs of alterations, additions, improvements and overhauls carried out on the
occasion of a repair are to be borne by the insured. The Cost of provisional repairs
will be borne by the insure if such repairs constitute part of the final repairs and do
not increase total repair expenses. The insurer will make payments only after being
satisfied by production of the necessary bills and documents, that the repairs have
been effected or replacement have taken place as the case may be.
POSITION AFTER A CLAIM
The insured is not entitled to abandon any property to the insured whether
taken possession of by the insurer or not.
From the day of the loss the sum insured for the remainder period of
insurance is reduced by the amount of compensation. To prevent under
insurance during the remaining period of insurance the sum insured must be
reinstated. The premium will be calculated pro - rata from the day the
repaired item is again put to work up to the date of expiry of the policy.

BOILER AND PRESSURE PLANT (BPP)

This policy covers explosion of boilers and pressure plants but does not cover
rupture of tubes inside the boilers. Both these perils can be covered under MB
policy and hence we should wherever possible include this in our MB portfolio
since it would practically mean granting extra cover within the scope of tariff
provisions.
TYPES OF EXPLOSIONS

It can be broadly classified under two categories for the purpose of insurance
cover.
Chemical Explosions
It is a matter of common knowledge that gun powder, similar explosive compound
could cause explosion under the influence of mechanical or thermal shocks. Highly
inflammable fluids and dusts can cause explosions if their concentration in the
atmosphere exceeds the explosive limits. From the insurance concept, these
explosions are considered as very rapid form of combustion.
Physical Explosions
In respect of pressure vessels handling inert fluids such as steam, explosion can
occur due to variation in fluid pressure. The variation being only in physical form
and there no chemical reaction or changes responsible for such explosions as such
these are classified as Physical Explosions.
SCOPE OF COVER
The policy covers pressure vessels both fired & unfired against the risk of
explosion and collapse and indemnified the insured against:
Damage to the boilers & / or other pressure plant.
Damage to surrounding property of the insured or the property held by the
insured in trust for which he is responsible.
Death or bodily injury to any person.

 Damage to property not belonging to the insured or held in trust or on

commission for which he is responsible.
EXCEPTIONS OF POLICY
Loss or damage raising from fire and allied perils which can be covered
separately.
Damage by chemical explosion except in recovery boilers and waste heat
boiler.
Contractual liability, manufacturers suppliers liability.
Loss arising from an existing defect.
War group of perils, social group of perils.
Nuclear perils.
Loss due to gross negligence.
Failure of individual tubes.
WARRANTIES
Under the BPP insurance the following warranties will be incorporated during the
currency of the policy:
The Boilers and Pressure Plants described in the schedule are annually
inspected by inspectors appointed by the Government except where there is

no statutory requirement for Government inspection; the inspections are to

be carried out by independent competent persons.
The Boilers and pressure plant described in the schedule shall only be
operated by attendants holding a valid certificate of competency issued
under the appropriate Boiler Act.
The insured shall be in possession of the unqualified permission in writing
of the competent inspecting authority to operate the said boilers and pressure
plant. If the maximum pressure of load upon safety valve immediately prior
to any explosion or collapse was in excess of that stipulated by the said
authority the insured shall not be entitled to any compensation or indemnity
under this policy in respect of such explosion or collapse.
OTHER EXTENSIONS AVAILABLE UNDER THIS POLICY
Steam Pipes
The portion of the steam pipe up to the safety valve alone is deemed to form
integral part with boiler. The remaining portions of the steam pipes can be included
under this extension.
Expediting Costs
Expenses towards overtime, night work, work on public holidays, express freight
can be included under this extension. The same will be indemnified after a loss
provided these expenses are incurred following a loss due to an insured peril under
this policy.
Air Freight

Expenses towards air - lifting parts of the boiler following a loss can be included
under this extension.
Policy Period
This policy is issued on annual basis.
CLAIM PROCEDURE
In the event of a loss the insured should comply with the following:
Immediately notify the insurer giving an indication as to the nature and
extent of loss.
Take all reasonable loss minimization steps.
Preserve the salvage.
Furnish all information and documentary evidence as required by the insurer.
The insured may proceed with the repair of any minor damage not exceeding
Rs.2500/-.
Claim form duly completed and signed should be sent to the insurer.
Generally, claims are for substantial amounts and require great care during
investigation and negotiations. It is necessary to investigate the cause of the
damage and ascertain whether the claim falls under the policy definition of
'Explosion' or 'Collapse'. The certificate issued by the Government Inspector of
Boiler must be checked to ensure that the accident occurred within its validity
period and that all its terms and conditions have been complied with. It is

preferable to have assessments of Boiler Explosion claims carried out by qualified

engineer surveyor who can determine the exact cause of the loss and arrive at a fair
assessment as to the quantum of claim payable.

Deterioration of Stock
The insurance by this policy is in respect of loss of or damage to
the goods in the cold storage spaces
of the insured property described in the schedule by deterioration
or putrefaction caused by
1. A change in temperature due to:
a) sudden and unforeseen damage to the refrigerating plant
b) non operation of the controlling devices of the refrigerating
plant
c) the accidental failure of the public electricity supply at the
terminal points of the Supply
Authoritys feed to the premises
2. The action of escaping refrigerant fumes.
Limit of liability
The amount of liability hereunder shall not exceed in any one
Period of Insurance the amounts
specified in the schedule.
Claims conditions
1. Other insurance
The Company shall not be liable for any loss damage or liability
which at the time of the happening
of such loss damage or liability is insured by or would but for the
existence of this policy be insured
by any other policy or policies except in respect of any excess
beyond the amount which would
have been payable under the policy or policies had this insurance
not been effected.
2. Claims procedure
In the event of any occurrence which may give rise to a claim
under this policy the Insured shall:
a) give as soon as reasonably practicable notice by telephone and
in writing to the Company

supplying such proofs of claim as may reasonably be required by

the Company
b) preserve any damaged or defective property which might
prove necessary as evidence for
examination by the Companys representatives
c) in the case of property lost stolen or maliciously damaged take
all practicable steps (including
the giving of immediate notice to the Police) to discover any guilty
person and to trace and
recover the missing property
d) in the case of any claim made upon the Insured by any third
party forward to the Company
immediately and unacknowledged every written communication
or information as to any verbal
notice of claim and all proceedings.
5. Options for claims settlement
The Company may at its option repair, reinstate or replace any
property lost or damaged or pay the
amount of the loss or damage in money. The Company shall not
be responsible for temporary
repairs carried out without the consent of the Company and any
consequences thereof nor for the
cost of any alterations, additions, improvements or overhauls
carried out on the occasion of a
repair. Where loss or damage is confined to a part of a machine or
structure the Company shall be
liable for only the value of that part plus the cost of any necessary
dismantling and erection for
which the Insured is responsible. The Insured shall not be entitled
to abandon any property to the
Company whether taken into possession by the Company or not.
6. Supplementary claims charges
In connection with any claim for loss or damage the Insured is
entitled to recover supplementary
charges such as custom dues packing freight profit and the like
only if and so far as such charges
have been provided for in the sum insured.

Exclusions
The Company shall not be liable in respect of:
1. Excess
the amount stated in the schedule as the excess in respect of the
cost of each and every occurrence
for which the Insured is indemnified by this policy.
2. Fire and perils
Loss of or damage caused by or in consequence of fire, lightning,
flood, explosion, aircraft or other
aerial devices or articles dropped therefrom occurring at the
premises specified in the schedule.
3. Deliberate act of the supply authority
Failure of the public supply of electricity arising from the
deliberate act of the supply authority or
the exercise by such authority of its power to withhold or restrict
supply.
4. Wilful act
Damage caused by the wilful act or wilful neglect of the Insured.
5. Water table level
Damage attributable solely to a change in the water table level.
6. Pollution
Damage caused by pollution or contamination other than damage
to the Insured property caused
by pollution or contamination.
7. Consequential loss
Consequential loss, damage or liability due to or arising from
deterioration or putrefaction of
the goods.
8. Sonic waves
Damage occasioned by pressure waves caused by aircraft and
other aerial devices travelling at sonic
or supersonic speeds.
9. Nuclear risks
Damage to any property whatsoever or any loss or expense
whatsoever resulting or arising
therefrom or any consequential loss or any legal liability of
whatsoever nature directly or indirectly
caused by or contributed to by or arising from:

a) ionising radiations or contamination by radioactivity from any

nuclear fuel or from any nuclear
waste from the combustion of nuclear fuel
b) the radioactive toxic explosive or other hazardous or
contaminating properties of any nuclear
installation, nuclear reactor, explosive nuclear assembly or
nuclear component thereof
c) any weapon or device employing atomic or nuclear fission
and/or fusion or other like reaction
or radioactive force or matter
d) the radioactive, toxic, explosive or other hazardous or
contaminating properties of any
radioactive matter but this exclusion d) will not apply to
radioactive isotopes other than nuclear
fuel when such isotopes are being prepared, carried, stored or
used for commercial,
agricultural, medical, scientific or other peaceful purposes.