Construction All Risks (CAR) and Erection All Risks (EAR) policies provide important protection for inherently hazardous construction work. Although CAR and EAR insurance policies are often considered to be interchangeable, there are significant distinctions between them. In this article, we will discuss the particulars of the CAR and EAR insurance coverages and then explain their notable differences.
Construction All Risks (CAR)
Construction work is complex and risky and naturally exposes management to so many risks that can unexpectedly force expensive project delays and costly liabilities, potentially cutting down on profits. As a manager, whether you are a contractor, principal, or developer, you cultivate challenging business relationships with different parties, you deal with new laws and standards, you endure unpredictable weather conditions, and work through other unexpected circumstances because construction projects can be nuanced.
Consequently, it is not always easy to identify the exact cause or liable party or parties in the event of damage, which often leads to lengthy and costly legal proceedings. If the building is not yet completed, the situation is often made even more difficult because the construction site is not progressing and additional costs are incurred.
Construction All Risk (CAR) Insurance is available to prevent a disruption to your business and a delay in a project moving forward. CAR offers the ever-important flexibility for lengthy construction projects. It is also possible to add a single-risk project policy or add on a CAR policy with other liabilities for further coverage.
CAR insurance provides coverage for contract materials and works, as well as contractors’ plant and equipment, project delays, non-negligent liabilities and public liabilities.
In many circumstances, both employers and contractors cooperatively take out CAR insurance policies, with other parties such as financing companies having the option of being named to the policy. Because multiple parties are included in the policy, they each retain the right to file a claim against the insurer, although all parties have the duty of informing the insurer of any injuries and damages that may result in a claim.
At Red Asia Insurance, our CAR policy provides insurance protection for:
- Delay in start-up
- Third-party liability
- Maintenance coverage
- Professional fees
- Expediting expenses
The key features of our CAR policy include:
- Coverage for all costs and expenses incurred with our consent for defending claims against your company
- Coverage for material damage to works and legal liability towards third parties
- Coverage for your legal liability for bodily injury to any other person or damage to property caused by an accident
Erection All Risks (EAR) insurance provides coverage for the erection and installation of electrical or mechanical plant and machinery. The erection and installation stage provides a large amount of exposure and risk that often may lead to potential loss or damage. This liability falls on the contractor or employer. EAR insurance provides coverages for such situations. EAR policies are designed to cover the risk of loss arising out of the erection and installation of machinery, plant and steel structures, including physical damage to the contract works, equipment, and machinery, and liability for third-party bodily injury or property damage arising out these operations. Coverage for the delay in a start-up can be added as optional coverage.
Covered parties include the general contractor, subcontractors, and in some cases, suppliers and manufacturers of equipment. Examples of the types of projects for which EAR coverage is typically purchased include power plants, manufacturing and fabrication facilities, water and wastewater treatment facilities, and telecommunications centres (particularly where the erection of signal towers is involved). Some insurers combine EAR and CAR coverages into one form. Machinery installation and refurbishment are two very important aspects of a construction project – EAR covers both. Similar to CAR, an EAR policy gives protection from liability for contractors, principals, and developers.
At Red Asia Insurance, our EAR policy provides insurance protection for:
- Erection and installation of plant machinery during the construction period
- Machinery from the commencement of loading for dispatch to the site (including transit and incidental storage)
- Defective design and machinery breakdown during testing and commissioning
- Free issue materials where they are included in the declared values.
The key features of our EAR policy include:
- Comprehensive insurance coverage for the erection of projects and provides cover during storage, erection, and testing of property at the insured site
- Coverage for the entire period of the project
- Other coverage, including various add-ons as per customers’ needs
Additionally, your EAR policy can be extended to include advanced loss of profits, owned contractors’ plant and hired-in plant.
Differences between CAR & EAR
Some insurers combine CAR and EAR coverages into one form. Although these terms are sometimes used interchangeably, there are some substantive differences. Obviously, one applies to construction and the other applies to an erection.
Traditionally, CAR coverage provides protection for construction or contractor all risks and is used mainly for the movement of dirt and concrete building work. CAR is more suitable for civil works such as buildings, roads, bridges and docks.
Meanwhile, EAR coverage is applied to the use of installing machinery and equipment. EAR is more suitable for engineering facilities and other construction projects involving erections and installations. For example, EAR insurance policies provide coverage for the construction of power plants, gas processing facilities and others.
Contact Red Asia Insurance today to learn more about our Construction All Risks and Erection All Risks insurance policies. We are here to help protect your business and livelihood.