Construction All Risks (CAR) vs Erection All Risks (EAR)

Construction All Risks (CAR) and Erection All Risks (EAR) policies provide essential protection for inherently hazardous construction work. Although CAR and EAR insurance policies are often considered interchangeable, significant distinctions exist. 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, naturally exposing management to numerous risks that can unexpectedly lead to expensive project delays and costly liabilities, potentially eroding profits. As a manager, whether a contractor, principal, or developer, you cultivate challenging business relationships with different parties, deal with new laws and standards, 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 usually 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. Adding a single-risk project or a CAR policy with other liabilities for further coverage is also possible.

CAR insurance covers contract materials and works, contractors’ plant and equipment, project delays, non-negligent liabilities and public liabilities.

In many circumstances, 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 involved in the policy, each retains the right to file a claim against the insurer. However, all parties must inform 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)

Erection All Risks (EAR) insurance covers the erection and installation of electrical or mechanical plant and machinery. The erection and installation stage provides a significant amount of exposure and risk that often leads to potential loss or damage. This liability falls on the contractor or employer. EAR insurance provides coverage 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 of 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 a single policy. Machinery installation and refurbishment are two essential aspects of a construction project – EAR covers both. Like CAR, an EAR policy protects contractors, principals, and developers from liability.

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 that are included in the declared values.

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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 the customers’ needs

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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. One applies to construction, and the other applies to an erection.

Traditionally, CAR coverage protects construction or contractors from 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 installation of machinery and equipment. EAR is more suitable for engineering facilities and other construction projects involving erections and installations. For example, EAR insurance policies cover the construction of power plants, gas processing facilities, and other similar projects.

Contact Red Asia Insurance today to learn more about our Construction All Risks and Erection All Risks insurance policies.