civil engineering completed risks or completed construction insurance

Civil Engineering Completed Risks(CECR) Insurance

Everything you wanted to know !!!!

Lajpat Ray Chandnani

“Owners and Operators of Civil Engineering structures look for comprehensive insurance protection against loss or damage after the construction work has been completed and the facilities have been taken over. In such structures, the fire risk is often negligible, so that the standard fire policy is unsuitable. Of far greater importance are the natural hazards in connection with the operation and use of the facilities.”.

CECR Insurance : Need

What is Insurance

It is a method of sharing Financial Losses of a ‘few’ from a common fund formed out of contribution of ‘many’ who are equally exposed to the same loss. It is a system of spreading the losses of an Individual over a Group of Individuals.

CECR insurance is a relatively new form of insurance and may also be described as ‘Completed Construction Insurance’ (CCI) or simply Property Insurance. CECR. It is an insurance cover for existing structures where fire is not the predominant exposure. The cover can be on an “all risk” or “named perils” basis.

CECR Insurance

CECR is a form of property insurance and predominantly covers operational mass concrete structures rather than manufacturing or residential facilities. The fundamental purpose of the CECR insurance is to protect the property insured against unforeseen and sudden physical damage. Natural catastrophe events are generally considered to be the main risks, rather than fire, but fire can still have high exposure for some risks. It is for operational risks and is normally renewable annually.

What is CECR Insurance

Structures requiring CECR Insurance include the following: • Bridges • Canal systems • Dams of all kinds • Dry docks • Harbours • Irrigation systems • Overhead lines • Pipelines (conveying non- combustible substances)

Roads • Runways • Sewer systems • Transmission & distribution lines • Tunnels • Water reservoirs • Weirs

Typical exposures include the following:

• Earthquake• Windstorm (particularly to transmission & distribution lines) • Flood – severe flood causing erosion of structures • Impact – i.e. motor vehicle (tunnels, bridges) or marine vessel (bridges, portal structures) • Fire – as a result of vehicle impact in tunnels and on bridges, and also fires under structures (arson, human error)

CECR is considered by many to be an insurance coverage mainly for natural catastrophe events. Given that many of the objects covered are generally fire resistant (except for extreme fire loads noted in this paper) it typically takes extreme events to cause damage

Exposures to Risk Requiring CECR Insurance

Customers for this class of business are typically: • Government / state entities • Joint ventures / public private partnership (PPP) at the request of lenders (banks, financiers, etc) • Private parties

Until the advent of the PPP approach, infrastructure was almost exclusively built on a public works basis and transferred to government / publicly owned property upon its completion. Typically government entities did not insure these completed projects and thus there was little if any demand for a suitable insurance product. All of that changed dramatically from the early 1980’s onwards as governments adopted the “Design-Build-Operate-Transfer (DBOT)” model that is these days more generically referred to as “Private-Public-Partnership (PPP)”. Customers for CECR insurance were created in the form of the project companies who signed the contracts with the government and financing agreements with lenders.

CECR Insurance - Customers

CECR Insurance provides annually renewable coverage for existing structures, much in the same way as a traditional property policy.

At each renewal, the sum insured must be reviewed and adjusted to the increase in prices in the meantime. Furthermore, the age and condition of the property insured should be taken into consideration.

There are generally two approaches to providing coverage for CECR which are a ‘Named Perils’ or ‘All Risk’ basis. The basis of which coverage is provided may depend on the market and/or the market cycle.

CECR Insurance

The named perils basis covers the insured against any unforeseen and sudden physical loss or damage necessitating repair or replacement. The normal named perils are:

• Impact by any Rail/Road or water borne vehicle or animal.• Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and

Inundation, Wave action of water.• Subsidence and Landslide (Including Rockslide) damage.• Earthquake Fire and Shock (Including flood due to earthquake),

Tsunami• Frost, avalanche, ice.• Riot, Strike, Malicious Damage and Terrorism as per Riot, Strike and

Malicious damage clause printed hereon.• Fire• Lightning.• Explosion/Implosion.

CECR Insurance: Named Perils Cover

The ‘All Risk’ basis provides coverage for sudden and accidental physical loss or damage to the property insured unless caused by an excluded peril.

The main differences between ‘Named Perils’ or ‘All Risk’ policies is that in an `All Risks’ contract the onus of proof is reversed. In a named perils contract the insured must prove that the loss was caused by one of the perils covered. In ‘All Risk’, the insured needs merely to provide evidence that their property suffered loss or damage; it is then up to the company to prove that the claim did not arise from an excluded peril. The onus of proof is an additional reason for absolute clarity in the exclusions of an ‘All Risk’ policy.

In terms of cover the difference between a broad ‘Named Perils’ wording and a well worded ‘All Risk’ wording is minor. Additional coverage in an ‘All Risk’ policy allows for human error/accidental damage.

CECR Insurance : All Risks Cover Named Perils v/s All Risks Cover

The coverage may be extended to include:

• Debris removal • Expediting costs • Machinery breakdown • Strike, riot and civil commotion • Terrorism • Consequential loss (separate BI section)

CECR Insurance : Extensions

Sum Insured

For risks that are transferring from the project phase to the operational phase, typically the project (CAR policy) sum insured is sufficient. However, in many cases the risk to be insured under a CECR policy is an existing, not a newly built construction, the definition and calculation of the sum insured is vitally important. The sums insured should not be less than the full cost of replacement of the insured items (‘New Replacement Value’).

It is recognized that there are difficulties in calculating this value in the current market place due to the age of some insured properties and the fluctuation of prices depending on areas, technologies, materials and many other components that directly affect the sum insured.

CECR Insurance : Sum Insured

Premium based on Underwriting Considerations

Underwriting assessment is critical to establishing terms and conditions for any risk. Premiums calculated must take into account the long term exposures for infrastructure risks. CECR policy is not a substitute for regular maintenance and overhaul. Further, the underwriter must be convinced that the risk to be insured does not constitute an anti-selection in respect of object and location. In this context, the following factors must be assessed in detail:

CECR Insurance : Premium

• Type of risk and condition. • Geographical and topographical location. • Exposures to natural hazards. • Special construction methods and experience during the construction

period. • Special exposure to fire, explosion, blasting work or other hazards. -

Inspection reports indicating design parameters in respect of natural hazards and use of the risk.

• All previous damage and repair details. • Maintenance schedule. • Has the originally intended purpose and use of the object changed in

any way? • Presence and qualifications of operating personnel Where underwriters

have been involved with the project insurance this will provide a greater understanding of the risk.

CECR Insurance : Premium

Excess

It is common practice to establish a loss limit for the material damage exposure, particularly in locations which have a high natural catastrophe exposure such as earthquake, storm, flood, etc.

CECR Insurance : Excess

Standard exclusions include the following:

•Loss, damage or expenses arising out of inherent vice, wear and tear, gradual deterioration, expansion or contraction due to change of temperature.•Mechanical or electrical breakdown of machinery or electronic installations •Wear and tear, corrosion, erosion, normal settlements •Wilful acts or negligence of the insured or his representative •Loss or damage caused by or aggravated by inadequate maintenance•Consequential Loss or damage of any kind•War and Nuclear Risks•Strike, riot, civil commotions (these hazards can, however, be included by endorsement.

CECR insurance is to provide cover against external hazards for which the original contractor or the operator or owner as the insured is not responsible. The exclusion of inadequate maintenance is to make clear that the CECR policy does not exempt the insured from his responsibility for appropriate maintenance and upkeep. The CECR policy can not replace a suitable maintenance schedule.

CECR Insurance : Standard Exclusions

Cover is granted only for material damage to the property insured; only the repair costs are indemnifiable. The increase in value connected with a repair will not be debited to the insured i.e., in case of a partial losses, there is no deduction new for old.

When determining the current value of a structure at the time of a loss, one must apply the depreciation rates of comparable structures. In this context, the service life of the property must be considered.

The determination of the service life depends upon all on the type and scope of normal maintenance work and on regular overhauls and repairs.

Under insurance is applied if the sum insured on the day of loss does not correspond to the new replacement value of the items insured.

The Insurers remain fully liable even if the third party has caused the loss. In such cases, the insured is reimbursed, but the insurers will try, wherever possible, to recourse against the party that caused the loss, which often proves to be difficult, tedious and costly.

CECR Insurance : Basis of Indemnity

The risk assessment process will determine whether companies are committing to risks and at what terms and conditions. The risk assessment by the underwriter will be based to a large extent on the technical information which the insured must provide and which must include all details which are necessary for the risk assessment.

Apart from the standard information which is required for the understanding of the insurance contract, a survey report and/or underwriting submission is necessary to evaluate the risk. For CECR risks the surveys should be specific to the type of object to be insured.

CECR Insurance :Risk Selection & Criteria for Individual Types of Risk

For single structures the information that the underwriter should gather for theirtechnical file should include (non exhaustive list)

• A proposal form with a description of the risk.• A technical description of the risk including specifications, plans, descriptive notes, etc.• Breakdown of costs.• Information regarding the parties involved in the construction.• Geotechnical report including soil analysis.• Reports of technical inspections.

Following are a number of considerations that should be made by risk type: ……


Bridges : Different types of bridges have different exposures.• Following types of bridges are possible.

• � Arch• Beam�• Cable stayed�• Cantilever�• Floating�• Frame�• Girder�• Suspension�

• Technical info• � Age• Use (i.e. road, rail, pedestrian – including number of lanes, tracks, etc)�• Length, including spans between piers/abutments�• Number of piers�• Height�

• Nat cat exposure• � Earthquake• Wind�• Flood�

• Depending on the different construction types the exposure due to the impact of land borne and waterborne vehicles, impact of aircraft, EQ / tsunami / volcano, storm, flood / inundation / waves is different and has to be assessed case by case


Dams• Type of construction �•Arch dams / concrete dams (are based on the principle that the load is transferred to abutments by the structure).•Gravity dams (rely solely upon their weight for stability like roller compacted �dams and embankment dams).•Additional elements: spillways / diversion works�

• Technical info• Age�• Length�• Height�• Width�

Nat cat exposure�• � Earthquake• Flood�


Harbours• Technical info

• Age�• Quay�• Breakwater�• Building�• Equipment�

• Nat cat exposure• Flood�• Storm �


Pipelines (conveying non-combustible substances)

• Technical info• Age�• Length�• Diameter�• Commodity�• Material of pipe (i.e. concrete, steel, plastic, etc)�• Information on pumping stations, etc., if they are to be �

included• Topography

• Landslide�• Avalanches�

• Nat cat exposure• Earthquake�• Flood�


Railways• Technical info

• Age�• Use – passenger, goods, funicular, etc�• Length�• No of bridges�• No of tunnels�• Information of control/signalling equipment if to be �

included.• Topography

• Landslide�• Avalanches�

• Nat cat exposure• Earthquake�• Flood �


Runways

• Technical info• Age�• Length�• Width�



Roads

• Technical info• Age�• Length�• Use – urban, motorway, etc.�• Number of lanes�• No of bridges�• No of tunnels�

• Topography• Landslide�• Avalanches�



Tunnels

• Technical info• Age�• Number of tunnels (i.e. twin tube, single tube, �

etc)• Type of construction (i.e. bored, cut & cover, etc)�• Length�• Number of lanes�• Diameter�• Use – pedestrian / road / railway�

• Safety measures


Transmission lines• Technical info

• Age�• Above ground or below ground (if �

below ground how deep)

• Type of power lines/voltage�• Length�


• Nat cat exposure• Earthquake�• Flood�• Storm�

• Climate situation• Frost�• Snow�


Water & Sewer systems• Technical info

• Age�• Above ground or below ground (if below ground how deep)�• Length�• Diameter�• Foundation�• Bridges�• Culverts�• Material of pipe (i.e. steel, concrete, plastic, etc)�


• Nat cat exposure• Earthquake�• Flood�

• Climate situation• Frost �


Waterways (Canals)

• Technical info• Length�• Width�• Locking for ships�• Aqueducts�

• Environment• Traffic/use�

• Nat cat exposure• Earthquake�• Flood�• Storm�

• Climate situation• Frost�


PML Assessment : PML assessment is critical so as to assess the exposure for 100% and for the supported share.

•It takes into consideration the most extreme hazards (e.g. net cat event, impact, collision) which can result in maximum damage.•PML is a topic in the industry on a regular basis and has been treated in numerous studies and publications.•Probable maximum loss versus possible maximum loss

• ƒ Probable maximum loss is an estimate of the maximum loss which could be sustained by the insurers as a result of any occurrence considered by the underwriter to be within the realms of probability. This ignores such coincidence and catastrophes that are possibilities, but which remain highly improbable.

• ƒ Possible maximum loss is the largest loss that may be expected equal to any given risk when there is an exceptional combination of the most unfavourable circumstances.

•Based on the events of the recent past, a loss that was considered in the past as a possible maximum loss might become a probable maximum loss in current assessments.•Types of risk, areas and locations can influence the PML scenario and the PML amount

CECR Insurance : PML Assessment

Information required for a proper PML assessment : As for other types of cover, satisfactory underwriting information must be available in order to allow for satisfactory risk assessment and particularly to determine a reliable PML calculation. A large part of the CECR covers are dealing with widespread risks (e.g. roads, railways) with individual exposures and require adequate information.


The following information should be available:• Geographical situation• Overall plan of the object• Plans and sections of key structures of the object• Technical key figures• Construction costs per major elements and in total• Exposure to

• Fire, explosion�• Impact of land borne and waterborne vehicles�• Impact of aircrafts�• EQ / tsunami / volcano• Storm�• Flood / inundation / waves�• Landslide / rockslide / avalanches�• Frost, ice �


The following are a number of considerations for PML assessment that should beconsidered by risk type:Bridges• Scenarios

• Earthquake�• Flood�• Aircraft impact�• Vessel impact�• Motor vehicle impact�• Sabotage (normally excluded)�• Collapse (normally excluded (wear / tear, bad maintenance))�

• PML Range• Depending on the different construction types the exposure due to the impact of land �borne and waterborne vehicles, impact of aircraft, EQ / tsunami / volcanism, storm, flood / inundation / waves is different and has to be assessed case by case.•30% (vessel impact) up to 100% (storm impact) of Total Sum Insured Property Damage Depending on the cover up to 100% of the Total Sum Insured has to be taken in consideration


Dams• Scenarios

• Earthquake / tsunami�• Flood / overtopping�

• PML Range• Gravity dams: 100% due to flood / internal erosion�• Arch dams/ concrete dams: 50% to 100% failure due to earthquake�

Harbours• Scenarios

• EQ / Tsunami (named peril)�• Flood (named peril)�• Vessel impact (named peril)�

• PML Range• 20% (vessel impact) up to 100% (Flood / Tsunami) of Total Sum Insured�


Pipelines• Scenarios

• Flood�• Storm�• Landslide �

•PML Range �• Spread of risk �• PML calculation depends on the topography and as a consequence on the

flood / landslide exposure. (Due to the anti selection process of the insured good local knowledge is an advantage). �

• A loss limit is a must to avoid catastrophic events which have the possibility to exceed calculated PML’s.


Roads• Scenarios

• EQ / Tsunami�• Flood�• Landslide / rock fall�

• PML Range• PML calculation depends on the topography and as a consequence on the flood / �

landslide exposure. (Due to the anti selection process of the insured, good local knowledge is an advantage).

• A loss limit is a must to avoid catastrophic events which have the potential to �exceed calculated PML’s.

• Depending on the cover up to 100% of the Total Sum Insured has to be taken �into consideration


Railways• Scenarios

• EQ / tsunami�• Flood�• Landslide / rock fall�• Sabotage (normally excluded)�• Fire in rail yard (if rolling stock is covered)�

• PML Range• PML calculation depends on the topography and as a consequence on the flood / �

landslide exposure. (Due to the anti selection process of the insured, good local knowledge is an advantage).

• A loss limit is a must to avoid catastrophic events which have the possibility to �exceed calculated PML’s.

• Depending on the cover up to 100% of the Total Sum Insured has to be taken in �consideration


Runways

• Scenarios• EQ / tsunami�• Flood�• Aircraft impact�

• PML Range• PML calculation depends on the situation and as a consequence on the �

tsunami / flood exposure.• Rough assumption 30% to 50%, in non tsunami / flood exposed areas

10% to 20%


Transmission lines• Scenarios

• EQ�• Flood�• Landslide / rockfall / avalanches�• Aircraft impact�• Frost / ice�• Sabotage / burglary (normally excluded)�

• PML Range• PML calculation depends on the topography and as a consequence on the �

landslide / rock fall / avalanche exposure. The destruction of a section of 500 m and some domino effect leads to the destruction of 1000 m. The PML calculation will be done with an average price plus “ROD”.

• In function of the local climate situation frost and ice can lead to a too �heavy load and to a collapse with the consequence of 100% loss.

• A loss limit is a must to avoid catastrophic events which have the possibility �to exceed calculated PML’s.

• Depending on the cover up to 100% of the Total Sum Insured has to be �taken in consideration


Tunnels• Scenarios

• EQ�• Flood�• Motor vehicle impact�• Fire�• Explosion�• Sabotage (normally excluded)�• Collapse (normally excluded)�

• PML Range• The EQ and flood exposure is quite small. The highest exposure comes from the motor

vehicle impact / fire / explosion.• A destruction of roughly 100 m seems practical. The PML calculation will be done with an �

average price per running meter (plus removal of debris, plus increased costs of working etc).

• A limit with a tunnelling clause (analogue to CAR Covers) and a maximum percentage of �the average costs to be indemnified should be part of the cover.

• Depending on the cover up to 100% of the Total Sum Insured has to be taken in �consideration


Sewer & Water

• Scenarios• Earthquake�• Flood�• 19 Storm�• Landslide�

• PML Range• PML calculation depends on the topography and as a �

consequence on the flood / landslide exposure. (Due to the anti selection process of the insured good local knowledge is an advantage).

• A loss limit is a must to avoid catastrophic events �which have the possibility to exceed calculated PML’s.


Waterways

• Scenarios• Earthquake�• Flood / overtopping�• Vessel impact�

• PML Range• Flood: rough assumption up to 30% of the Total Sum �

Insured for flood.• Vessel impact: Small and only local consequences. �


PML conclusions

• Good underwriting information for a proper assessment• Good knowledge of the situation through local representation.• High exposure of geographical spread of risk (roads, railways, waterways,

transmission lines).• Difficult to make a proper PML assessment• Request to have a section limit, a loss limit each and every loss or a loss limit in

the aggregate .


India is one of the ten worst disaster prone countries of the world. India has been vulnerable, in varying degrees, to a large number of natural, as well as, human-made disasters on account of its unique geo-climatic and socio-economic conditions. It is highly vulnerable to floods, droughts, cyclones, earthquakes, landslides, avalanches and forest fires. Out of 35 states and union territories in the country, 27 of them are disaster prone. Almost 58.6 per cent of the landmass is prone to earthquakes of moderate to very high intensity; over 40 million hectares (12 per cent of land) are prone to floods and river erosion; of the 7,516 km long coastline, close to 5,700 km is prone to cyclones and tsunamis; 68 per cent of the cultivable area is vulnerable to drought and hilly areas are at risk from landslides and avalanches

The cyclone which occurred on 25th November, 1839 had a death toll of three lakh people. The Bhuj earthquake of 2001 in Gujarat and the Super Cyclone of Orissa on 29th October, 1999 are still fresh in the memory of most Indians. The most recent natural disaster of a cloud burst resulting in flash floods and mudflow in Leh and surrounding areas in the early hours of 6th August, 2010, caused severe damage in terms of human lives as well as property. There was a reported death toll of 196 persons, 65 missing persons, 3,661 damaged houses and 27,350 hectares of affected crop area.

CECR Insurance : Interesting Claims

Mumbai Flood in 2006- Urban Flooding

Floods in Uttarakhand in September 2010

Landslide at Darjeeling, 2010

Landslide at Darjeeling, 2010Tsunami at Natori, Japan

Landslide at Darjeeling, 2010

Cyclone

Avalanches

Kedarnath Tragedy

A Bailey bridge of Rohtang Tunnel project collapsed today when a truck was passing through it.

Dams

Kodaganar Dam, Tamil Nadu, India

This dam in the India, was constructed in 1977 on a tributary of Cauvery River as an earthen dam. The dam failed due to overtopping by flood waters which flowed over the downstream slopes of the embankment and breached the dam along various reaches. There was an earthquake registered during the period of failure although the foundation was strong.

Machhu II (Irrigation Scheme) Dam, Gujarat, India

This dam was built near Rajkot in Gujarat, India, on River Machhu in August, 1972, as a composite structure. It consisted of a masonry spillway in river section and earthen embankments on both sides. The dam failed on August 1, 1979, because of abnormal floods and inadequate spillway capacity. Consequent overtopping of the embankment caused a loss of 1800 lives. A maximum depth of 6.1 m of water was over the crest and within two hours, the dam failed.


The Earthquake of January 26, 2001 in Gujarat, India – One of the severest……… claiming more than 20,000 lives, injuring + 50,000 people and devastating property of n tude. The communications network and power supply was entirely lost.

Tsunami : On 26th December 2004, the Indian Ocean was hit by tsunamis which are considered to be the most catastrophic in the living memory of the inhabitants of the coastal areas of this ocean. It was caused by a severe earthquake which measured 8.9 on the Richter scale. The tsunamis that hit the Indian Ocean on 26th Dec. 2004 claimed over 1.5 lakh lives in different countries of Asia and Africa. The soaring waves killed people of at least 40 nationalities including tourists from various countries of the world.

Uttarakhand Flood 2013 Due to the floods, damaged several houses and structures, killing those who were trapped. The heavy rains resulted in large flash floods and massive landslides. Entire villages and settlements such as Kedarnath. Over 70,000 people were stuck in various regions because of damaged or blocked roads. Although the Kedarnath Temple itself had not been damaged, its base was inundated with water, mud and boulders from the landslide, damaging its perimeter. Many hotels around the temple were destroyed, resulting in several casualties. Most of the destruction at Kedarnath was caused by a sudden rapid melting of ice and snow on the Kedarnath Mountain, 6 km (3.7 mi) from the temple, which flooded the Charbari lake (upstream) and then Kedarnath. Within the temple, a panic-driven stampede resulted in several deaths.


Bridges

The most common causes of loss for bridges are considered to be wind and water. However, impact has caused numerous losses over the years for water bridges, particularly those that handle freight vessels. Vessel impact is often the PML risk for bridges and assessment of this risk is critical to underwriting.

Mumbai-Goa highway bridge collapse:

In an accident that claimed the lives of dozens of people, the Mumbai-Goa highway that had been built in the British era collapsed in August 2016. The primary reason seems to be the high pressure caused due to flooding of river Savitri due to heavy rains in the catchment area of Mahabaleshwar. “There were two parallel bridges; one is a new bridge and one constructed during the British era. The old one collapsed.”


Bridges

Kadalundi River rail bridge- In 2001, one of the biggest train accidents had claimed the lives of at least 57 people while injuring between 117 and 300. The train was crossing over bridge 924 over the Kadalundi river near Kozhikode in Kerala when one of the rails broke and derailed the train. The heavy monsoons and some flaw in the train itself were some of the factors cited as reasons for the disaster.


Girish Park Kolkata Flyover Collapse

The most recent man-made disaster occurred on 31 March at 12.25 pm when a portion of the under construction Vivekananda Road flyover at Girish Park crossing collapsed, crushing 18 people to death and leaving over 78 injured. At the time of writing, several still remain buried under the debris.


Railways

Railways generally suffer most damage as a result of storm/hurricane/flood. Control cabling (overhead lines) and equipment are generally more susceptible to such events. Sometimes flood can undermine track foundations.

Major Train Accidents in IndiaNovember 20, 2016 – Over 124 people were killed and 260 injured after Indore-Rajendra Nagar Express 19321 derailed.February 5, 2016 – Four coaches of Kanyakumari-Bangalore City Express fell off track and injured a few.May 25, 2015 – Muri Express derailed and killed four people and injured 50.March 20, 2015 – Dehradun-Varanasi Janta Express derailed and killed 58 people and injured 150.February 13, 2015 – Bangalore City-Ernakulam Intercity Express 12677 derailed in which 12 people lost their lives and more than 100 were injured.June 25, 2014 – Dibrugarh-Rajdhani Express 12236 derailed near Chapra town of Bihar, killing four and injuring eight.May 26, 2014 – Gorakhpur bound Gorakhdham Express 12556 hit a stationery goods train near Khalilabad station in Sant Kabir Nagar district of Uttar Pradesh. Around 25 people were killed in the accident and more than 50 were injured.


Uphaar Fire Tragedy — Delhi

The fire occurred on 13 June 1997 at Upahaar Cinema in Green Park, Delhi, during the screening of the movie Border. One of the worst fire tragedies in the history of India, this disaster left 59 dead, mostly due to suffocation because of being trapped inside. In fact, at least 103 people were seriously injured in the resulting stampede. Lack of a functional PA system and emergency lights, foot light and exit lights, blocked gangways, blocked exits with most of the doors locked, and obstruction at available exits due to unauthorised shops were some of the reasons for the even to take such a severe turn. Absence of fire extinguishers and lack of periodic maintenance also contributed towards more casualties.


AMRI Hospital fire, Kolkata

It was early December morning in Kolkata when a fire broke out at the basement of AMRI Hospital in Dhakuria area of Kolkata. It was around 3 am on the morning of 9 December 2011 when most patients and attending staff were asleep.

The fire spread rapidly to the floors above. Patients were trapped inside wards and with no exit possible as all windows were grilled, the rapidly spreading smoke did more damage than the fire itself.

At the end, of the 160 persons inside the hospital at the time, 89 lost their lives, of which 85 were patients and 4 staff members.

This was a classic case of negligence on part of management and operational staff, who did not implement most of the mandatory fire safety norms, as laid down by the government. Adding to this was lack of clear Standard Operating Procedures for such emergencies. Few lessons have been learnt since as several hospitals and public buildings in Kolkata and other cities, continue to remain a potential tinder box.


Probably the most interesting loss ever!

A new mind-set in underwriting analysis might be required after this loss. A road innorthern England was shut after a blockage in a sewer pipe caused it to burst anddamaged a 10 metre section of the road above. The local water authority had to digdown to the damaged sewer pipe and found that the pipe had been blocked by adouble ‘D’ bra. Repairs were estimated to be relatively small at approximately Euro20,000. It is not known whether underwriters are including such items in their list ofexclusions……


Conclusion

CECR is designed to provide the necessary material damage coverage for infrastructure owners/managers, however such coverage should only be provided after sound underwriting assessment and adequate premium consideration. These risks also require a structured risk engineering programme.

CECR Insurance : Conclusion

Completed Operations Liability Coverage: Vital for Contractors

A construction site is a dangerous place. Power tools, scrap wood and metal, heavy equipment - all of these can cause serious injury or property damage. Loss control efforts normally focus on prevention of accidents on job sites. However, the possibility of a loss that could drag a contractor into court does not end when the project is finished. The contractor's work stays behind and can be the source of serious liability claims. Consider the following examples:

• Six months after a roofing contractor finishes work at a bank, melting snow enters through the roof and ruins several network servers.

• A railing installed by a metalworker collapses as a man leans against it. The man falls ten feet and

• suffers severe back injuries.• An overhead door malfunctions and closes on top of a new pickup truck. The

owner seeks recovery from the contractor who installed the door.

Loss prevention and proper insurance are just as important after the job is done as they are while work is in progress.

CECR Liability Insurance :

Standard liability insurance policies cover a contractor's liability for injury or damage arising out of completed operations. The insurance company considers the contractor's work to be complete when one of these firstoccurs:

• All the work required by the contract is complete;• All the work to be done at a job site is complete (when the

contract requires work at multiple job sites); or• When the contractor's work is put to its intended use by

someone other than another contractor working on the same job site.


The company will provide the contractor with legal defence and pay for any settlement or judgment that results from accidents arising out of completed work. Of particular note, it will pay for the restoration, repair or replacement of any property made necessary because the contractor performed his work on it incorrectly. The company will not pay for such a loss while the job is still in progress, but it will pay after the work is completed.

For coverage to apply during a particular policy period, the injury or damage must first occur during that period. For example, assume that a siding contractor installed aluminium siding on a house. While making improvements several years later, the homeowner discovers extensive rotting of the plywood and joists inside the walls. A third party concludes that the interior damage resulted from faulty installation of the siding. Since the damage most likely began at the time of installation, the policy that was in effect at the time of the job will provide coverage. On the other hand, if a contractor builds a deck and it collapses 18 months later, injuring four people, the policy in effect at the time of the collapse will provide coverage, not the one in effect at the time of the job.


The insurance company will not pay for damage to the contractor's own work if the damage arose out of the work. For example, if an electrical contractor's faulty wiring fries a circuit board he installed, the insurance will not cover the damage. The insurance policy should not be confused with a warranty.

One important caveat is that a form covering a third party as an additional insured might not provide completed operations coverage for that party. The form most commonly used to add coverage for an additional insured no longer provides this coverage. A separate form has been created to address this gap in coverage. Since many construction contracts will require subcontractors to provide this coverage, subs should verify with their insurance agents that they have it.

By its nature, construction is dangerous work, and that danger continues to some extent long after the contractor has moved onto the next job. It is vital that contractors have appropriate completed operations insurance in place to protect them if something goes wrong


Any Questions?

Thanks.

civil engineering completed risks or completed construction insurance

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