ENGINEERING INSURANCE :
The rapid industrialization of our country has led to increasing use of machines in industry. Though use of machinery results in increased production capacities, in the event of accident and breakdowns, they can be potential sources of financial loss and could even result in the closure of business.
In spite of proper care and maintenance of machinery, mishap may yet occur. Sometimes the extent of damage may be quite high and may also lead to fatal or non‐fatal injuries to human beings nearby. The remedy for such losses is offered by means of the pecuniary protection given under Oriental’s engineering insurance policies. The various engineering policies offered by us may be divided under the following three major heads:
1. Project Insurance
2. Operational Machineries Insurance
3. Business Interruption Insurance
Project Insurance:
Before an industry is set up, it involves project planning, financing, procurement of land, land levelling and earthwork, excavation of land, placing orders and procurement of machineries from various places, storing these machineries and other equipments connected with the project in safe conditions, erecting the equipments as per a planned schedule and finally testing and commissioning the erected plant and machinery for their rated capacity.
The engineering policies, recommended at the project stage can be any one of the following three covers:
1. Erection All Risks (also know as Storage Cum Erection Insurance)
2. Contractors (Construction) All Risks Insurance
3. Contractor’s Plant and Machinery Insurance
Operational Machineries Insurance
After the completion of testing and commissioning and commencement of commercial production, the machineries that are installed and working in a specified premises can be covered under any of the following policies (depending upon the nature and type of plant and machinery):
1. Machinery Breakdown Insurance
2. Boiler And Pressure Plant Insurance
3. Electronic Equipment Insurance
4. Civil Engineering Completed Risks Insurance
5. Deterioration Of Stocks Insurance ‐ Refrigeration Plant (Stock) Policy
Business Interruption Insurance (Consequential Loss Insurance)
Following property damage, due to break down of the machinery/electronic equipment or explosion of a boiler covered under the respective material damage policies, there may be an interruption in the operations and leading to loss of gross profits during such interruption periods. Such loss of gross profit is covered under business interruption policies:
This insurance covers additional cost of working also, to resume production.
MARINE INSURANCE
A contract of marine insurance is an agreement whereby the insurer undertakes to indemnify the insured, in the manner and to the extent thereby agreed, against transit losses, that is to say losses incidental to transit. A contract of marine insurance may by its express terms or by usage of trade be extended so as to protect the insured against losses on inland waters or any land risk which may be incidental to any sea voyage.
In simple words the marine insurance includes
(A) Hull insurance which is concerned with the insurance of ships (hull, machinery, etc
(B) Cargo insurance which provides insurance cover in respect of loss of or damage to goods during transit by rail, road, sea or air.
Hull Insurance
There are various types of policies issued to cover different types of ships/boats depending on their function and usage of the vessel.
Sundry vessels
There are separate policies designed for fishing vessels, Sailing vessels, inland vessels (barges, pontoons, flats, floating cranes, tugs , ferries, passenger vessels etc Other types of insurance include covers for jetties, wharves etc and vessels plying in inland waters such as lakes, rivers canals etc.
Liners/Tankers/Bulk carriers/Dredgers -There are many types of vessels and policies have been designed to cover all these types of vessels- but primarily depend on the function and area of operation for the premium rating etc. They may be known as sundry vessels and rating of premium and cover is contained in a separate tariff. These policies are issued based on the areas of operation, the season and are annual policies insuring the hull( ship bottom) and machinery ( ships engine etc). Insurance cover is for the actual vessel and contents, as well as for third party liability for property and lives and pollution hazards associated with the perils encountered in the areas of operation.
Marine Insurance Clauses are designed for hulls and cargo insurance and because of the very nature of the trade – (travelling across the globe) have spread across the world and are universally accepted.
The main clauses are developed by a number of organizations around the world but primarily the institute of London Underwriters and American Institute of Marine Underwriters. These clauses are universally used in marine insurance the world over, though they may be translated into various languages.
Hulls are usually protected by the
1. Institute Time Clauses Hull – for ships and machinery and liability for a period of one year usually.
2. Institute Voyage Clauses – for ships, machinery and liability for a specific voyage.
These are named perils policies – that is loss or damage to the property insured caused by any of the perils named are covered. e.g. Fire, explosion, violent theft, jettison, piracy, breakdown or accident , contact with airplanes or similar objects, bursting of boilers, accidents in loading , unloading, shifting or discharging cargo, caused due to negligence of the master of the ship or his crew, collision liability etc
War and Strike Risks
All marine policies exclude damage arising from war or warlike conditions and strikes. For this a separate cover has to be taken and is applicable to all vessels covered under the Indian Merchants Shipping Act, 1958.
Freight Cover
Freight is the primary reason for the shipping industry- plying all over the world conveying garangutan shiploads of goods to various countries around the world. Therefore, the ship owner has an insurable ineterst in the freignt and is enabled to insure the same through the Institute Time /Voyage Clauses (Freight).
There are numerous other polcies and operations whichmay be insured under marine hull insurance – Ship Repairers liability, ship breaking insurance, Off shore Oil and Gas units policies – even the transport of oil through pipe lines is covered under hull policies.
Cargo Policies
Cargo policies insure goods in transit , whether by air, sea, road/rail or by post or courier.
Specific /Voyage Policies
Cargo in transit may be covered as a specific instance or if there are routine transport of cargo an annual cover may be availed of. Specific voyage policies are, exactly as named, policies insuring a single transit of goods from one place to another.
The usual practice, when seeking to u=insure the consignment, i to bring a copy of the invoice and the bill of affreightment ( by sea – bill of lading; air – airway bill, road, lorry receipt or goods consignment note or by rail railway receipt and post – parcel receipt)
This specifies the value of the goods declared to the transporter and together with invoice forms negotiable instruments which lay claim to ownership.)
Specific voyage policies are generally issued only for the duration of the transit and till the goods reach the final destination given in the policy, in the customary time. The cover would incept from the time the goods leave the warehouse (WH) and continue to the final destination warehouse.
Hence the term WH to WH cover.
It is to be noted that insurance cover should be sought before the voyage/transit actually commences. The transit can be multi modal and be covered in a single policy eg. Goods are moving from Nagpur to Birmingham, UK by sea. The transit from Nagpur to Mumbai, or any other port, by road and thereafter by sea till UK and further from Birmingham by road/rail is all insured under a single policy.
OPEN COVER/OPEN POLICY
These policies are generally issued where there are frequent transits of materials requiring to be insured, sometimes at short notice.
Open Cover
Usually, importers /exporters of goods who have frequent consignments in transit and cannot specify from or to which country the goods are transported and the individual terms of contract may avail this. Generally, when banks finance such transactions they issue a letter of credit and using this as a basis the insured may seek an annual cover.
Each consignment is thereafter separately declared to the insurer, premium paid and a certificate of insurance issued.
Open Policy
Commonly used to insure routine inland transit of goods, open policy requires that a certain sum of premium, based on the annual turnover of goods transported, is paid and monthly or fortnightly declarations, declaring the value of goods transported declared. The premium is replenished at regular intervals, based on the value of the consignments declared, always ensuring that each consignment is adequately insured – that is the value declared should be as per invoice (cost, insurance and freight- CIF + 10%) In the event of a claim, in marine policies as well, which are agreed value policies, proportionate value of the goods insured would be considered while assessing loss.
Earlier, a special declaration policy, for higher annual turnovers , with greater discounts , used to be given but this is not so prevalent nowadays.
| Difference between Open Policy & Open Cover | |||
| Open Cover | Open Policy | Remarks | |
| 1 | Generally for export and import consignments | Primarily used for domestic shipments | |
| 2 | Unstamped-usually a letter. Every consignment is usually insured by means of a certificate of insurance which is stamped | Stamped-legally enforceable | Policy being stamped may be upheld in a court of law in case of disputes. The certificate of insurance issued for covering each consignment is stamped – stamp duty being recovered along with premium, is computed according to the Indian Stamp Act. |
| Premium amount fluctuates from consignment to consignement, hence open cover letter is basically an assurance of cover – similar to a held covered letter. Details of premium, sum insured, incorterms etc are given in the individual certificates. | In open policy the sum insured is fixed and premium is collected in advance. Against this premium for regular consignments are adjusted till premium deposit advance is exhausted or replenished. | ||
Special Storage Risks Insurance
This policy insures the goods lying in railway yard or carriers godown pending final delivery to destination, usually pending clearance by the consignee. These policies are usually given in conjunction with open policies/special declaration policies. They are specialized niche policies and usually given to insureds who have been customers of the company for some time. The cover would terminate with the delivery of goods to consignee/payment for the consignment being made to the consignor which ever is earlier.
Duty Insurance
Transit polices also ensure the duty component separately. In certain cases, especially when goods are being transported by sea, the duty may not have been assessed or arrangement made for payment. In the event that the imported wants that the value of duty to be incurred when the cargo lands, is top be insured, he would arrange to take a duty policy. All terms and conditions as per cargo policy would apply – the only condition being that premium should be computed on the assessable duty value and paid before the goods land.
CARGO CLAUSES
The actual details of the covers which are used are governed by the Institute Cargo Clauses (sending by sea)
1. Institute Cargo Clauses – A/B/C –
BOTH ICC – B & C are named perils polices whereas ICC(A)- is all risks.
In named perils policies only loss or damage to the property insured due to named perils is covered and the onus of proof lies on the insured that the loss occurred due to the occurrence of an insured peril.
ICC (C) covers the following risks/ perils-
(i) Fire or explosion
(ii) Vessel or craft being overturned, capsized stranded grounded or sunk,
(iii) Overturning or derailment of the land conveyance
(iv) Collision with an external object other than water
(v) Discharge of cargo at a port of distress
(vi) General average sacrifice,
(vii) Jettison of cargo
ICC(B) also covers , in addition to the above-
(i) Earthquake, lightening, or volcanic eruption
(ii) Washing of cargo overboard
(iii) Entry of sea, lake or river water into vessel, hold, container etc etc
(iv) Total loss of any package lost overboard whilst loading or unloading from vessel or craft.
ICC (B) covers additionally on the payment of extra premium the following-
(i) Theft pilferage non delivery(TPND)
(ii) Fresh and rainwater damage
(iii) Hook damage, oil damage, heating and sweating etc
(iv) Breakage and leakage and bursting and tearing of bags etc.
ICC (A) covers all accidental loss or damage to property other than losses caused by excepted perils/occurrences.
The onus of proof lies on the insurer to prove that loss occurred as per the excepted peril, in the event of dispute.