minor works insurance minor works insurance goes under a variety of names, such as: dismantling,...

MINOR WORKS INSURANCE• MINOR WORKS INSURANCE GOES UNDER A VARIETY OF

NAMES, SUCH AS:– DISMANTLING, TRANSIT AND ERECTION;– ENGINEERING ALL RISKS;– MACHINERY INSURANCE.

• NO MATTER WHAT THE NOMENCLATURE, THE COVER IS ESSENTIALLY THE SAME AND, THE RISKS COVERED ARE IDENTICAL.

• THE MAIN INTENTION OF THIS COVER IS TO PROVIDE THE PERSON CARRYING THE RISK WHEN HANDLING SINGLE OR MINOR MACHINERY INSTALLATIONS OR MINOR CIVIL AND STRUCTURAL RISKS WITH A RELATIVELY SIMPLE INSURANCE POLICY, BUT NEVERTHELESS, COVERING A FAIRLY WIDE SPECTRUM OF PERILS AND RISKS.

• THESE POLICIES IS WHERE CONSTRUCTION INSURANCE ORIGINATED.

MINOR WORKS INSURANCE• IN THESE DISCUSSIONS I, WILL USE THE TERM

“CONTRACTOR” LOOSELY TO INDICATE THE PARTY UNDERTAKING THE WORK OF CONSTRUCTION ETC.

• WHEN REFERRING TO THE FUTURE OWNER OR PURCHASER I WILL REFER TO THE PRINCIPAL.

• WHERE THE INSTALLATION REQUIRES AN ELECTRICAL CONNECTION OR SPECIALISED PLUMBING THESE PARTIES WILL BE REFERRED TO AS “SUB-CONTRACTORS”

• THERE SHOULD NOT BE ANY OTHER PARTY INVOLVED IN THESE MINOR WORKS.

• THE PRINCIPAL MAY USE HIS OWN STAFF FOR THE CONSTRUCTION PROJECT, OR HE MAY HIRE A LABOUR FORCE FOR THE CONSTRUCTION OR HE MAY GIVE THE WORK TO A FORMAL CONTRACTOR.

MINOR WORKS INSURANCE

• BY REFERENCE TO THE ANNUAL REPORTS GIVEN BY THE MAJOR CONTRACTORS, IT WILL BE APPRECIATED THAT THEIR ORDER BOOKS FOR MAJOR PROJECTS ARE VIRTUALLY NON EXISTENT. ACCORDINGLY, IT MUST BE EXPECTED THAT THE ONLY CONSTRUCTION RISKS AVAILABLE ON THE MARKET WILL BE MINOR WORKS.

• IN VIEW OF THE ABOVE IT IS MORE IMPORTANT FOR BROKERS AND UNDERWRITERS TO BE FULLY PREPARED FOR THE WRITING OF THE SMALLER TYPE RISK, REMEMBERING THAT THESE ARE ALWAYS THE BREAD AND BUTTER RISKS.

• THERE ARE, UNFORTUNATELY, MANY BROKERS AND UNDERWRITERS WHO DO NOT FULLY APPRECIATE THE VALUE OF MINOR WORKS RISKS.

• WHEN THE MAJOR CONSTRUCTION BOOK DRIES UP, THERE WILL ALWAYS BE MINOR RISKS TO KEEP THE INCOME TICKING OVER.

• THIS COVER CAN EITHER BE WRITTEN AS A ONE-OFF POLICY OR AS AN ANNUAL DECLARATION POLICY

MINOR WORKS INSURANCE• THE INTENTION OF THIS COVER IS TO BE SIMILAR TO

MAJOR CONSTRUCTION, BUT DIRECTED AT LESSER PROJECTS. THESE CAN BE:-– PROJECTS WITH A VALUE OF LESS THAN SAY R1,500,000– INDIVIDUAL MACHINE INSTALLATIONS;– SMALL PRODUCTION PROCESSES, SAY LESS THAN 10

MACHINES;– SHORT SECTIONS, SAY LESS THAN 1KM, OF ROAD;– SMALL COMMERCIAL BUILDINGS, NOT EXCEEDING 2 STORIES,

RESIDENTIAL BUILDINGS SUCH AS HOUSES SMALL FLAT BLDGS– MINOR ELECTRICAL INSTALLATIONS;– SHORT SECTIONS OF PIPELINE, NOT EXCEEDING SAY 500M– THE CONTRACTOR WHO GOES INTO EXISTING WORKS TO

IMPROVE ON EXISTING FACILITIES, SA MACHINE UPGRADES• NOT THE CONTRACTOR WHO UNDERTAKES MAINTENANCE

WORK, HIS ACTIVITIES ARE MORE AKIN TO LIABILITY TYPE RISKS, HE IS USUALLY NOT ADDING ANYTHING NEW.


• THE MINOR RISKS POLICY:-– THE OPERATIVE CLAUSE INCLUDES THE INDEMNITY CLAUSE,

WHEREAS THE CONSTRUCTION POLICY HAS A SEPARATE INDEMNITY CLAUSE BUILT INTO THE SPECIFICATION. THE OPERATIVE CLAUSE MAY READ AS FOLLOWS:• THE INSURER AGREES SUBJECT TO THE PROVISIONS CONTAINED HEREIN OR ENDORSED OR OTHERWISE EXPRESSED HEREIN TO INDEMNIFY THE INSURED FOR LOSS OF OR DAMAGE TO THE INSURED PROPERTY OCCURRING DURING THE PERIOD OF INSURANCE AND ARISING OUT OF THE INSURED OPERATIONS ALL OF WHICH ARE DESCRIBED IN THE SCHEDULE

• THE FOREGOING IS JUST A SUGGESTION AS TO THE WORDING OF THE OPERATIVE CLAUSE, HOWEVER, THERE ARE MANY OTHER VERSIONS THEREOF, MOST INSURERS HAVE THEIR OWN WAY OF DESCRIBING THE INDEMNITY CLAUSE.


• THE INSURED-– THIS TYPE OF POLICY IS USUALLY ISSUED TO THE PARTY

CARRYING THE RISK AND, IN MOST CASES, IT IS THE CONTRACTOR, HE MAY REQUIRE A SPECIALIST SUB-CONTRACTOR FOR THE ELECTRICAL OR PLUMBING CONNECTION, THESE PARTIES MAY ALSO BE INCLUDED AS AN INSURED.

– THE PURCHASER OR FUTURE OWNER MAY ALSO REQUIRE TO BE INCLUDED, IN WHICH CASE, THE PRINCIPAL MAY ALSO BE ADDED AS AN INSURED. THIS MAY BE NECESSARY WHERE THE MINOR WORKS POLICY INCLUDES THIRD PARTY LIABILITY.

• THE OPERATIONS-– IT IS UNDER THIS HEADING WHERE THE BROAD SCOPE OF THE

WORK IS DESCRIBED – CONSTRUCTION, TRANSIT ETC.• THE INSURED PROPERTY-• THIS IS THE PROPERTY UPON WHICH THE OPERATIONS

WILL BE PERFORMED, E.G. AN AIR CONDITIONING UNIT.


• LET US NOW CONSIDER THE OPERATIONS AND THEIR DEFINITIONS AS PROVIDED FOR UNDER A MINOR WORKS POLICY:– DISMANTLING –

• THE PERIOD FROM THE TIME OF COMMENCEMENT OF DISMANTLING OR DISCONNECTING UNTIL THE COMMENCEMENT OF LOADING ONTO TRANSPORT VEHICLES AT THE SITE OF OPERATIONS

– TRANSIT -• CONVEYANCE BY ROAD, RAIL OR AIR INCLUDING LOADING AND UNLOADING AND ANY TRANSHIPMENTS STORAGE OR DEVIATIONS EN ROUTE

– LIFTING OR LOWERING -• THE PERIOD FROM THE COMMENCEMENT OF SLINGING UNTIL SLINGS ARE REMOVED AFTER GROUNDING


– CONSTRUCTION, ERECTION OR INSTALLATION -• THE TIME FROM THE COMPLETION OF OFFLOADING (UNLOADING) FROM THE TRANSPORT VEHICLE AT THE SITE OF OPERATIONS UNTIL TAKEN OVER OR TAKEN INTO USE FOR THE BENEFIT OF THE PURCHASER

– POSITIONING -• BODILY REMOVAL OF THE INSURED PROPERTY OR A MAJOR PART THEREOF FROM THE POINT OF OFFLOADING (UNLOADING) AT THE SITE OF OPERATIONS TO THE ACTUAL WORKING POSITION AND PLACING ON FOUNDATIONS OR BEDPLATE

– RE-SITING -• REMOVAL OF THE INSURED PROPERTY FROM ONE POSITION TO ANOTHER WITHIN THE SITE OF OPERATIONS

– TERRITORIAL LIMITS -• THE REPUBLIC OF SOUTH AFRICA AND TO THE EXTENT PERMITTED BY THE INSURANCE LEGISLATION OF THE APPLICABLE TERRITORY BOTSWANA, LESOTHO NAMIBIA SWAZILAND


• HAVING STATED THE DEFINITIONS, NOW WE WILL EXAMINE THE INTENTIONS THEREOF:-– DISMANTLING-

• THE INTENTION IS THAT THE COVER WILL COMMENCE THE MOMENT THE ARTISAN STARTS TO DISCONNECT THE MACHINE OR ANY PART THEREOF FROM ITS POWER SOURCE OR OTHER DISCONNECTION AND IS CONTINUOUS UNTIL THE COMMENCEMENT OF LOADING ONTO A TRANSPORT VEHICLE.

• WHILST THIS OPERATION WOULD ALLOW FOR THE MACHINE OR PART THEREOF TO BE MOVED FROM ITS POSITION ADJACENT TO WHERE IT WAS DISMANTLED TO A POSITION WITHIN THE PREMISES MORE CONVENIENT FOR LOADING ONTO TRANSPORT VEHICLES, IT WOULD NOT ALLOW FOR THE MACHINE TO BE LOWERED BY CRANE FROM AN UPPER FLOOR TO THE GROUND FLOOR, SUCH LIFTING OR LOWERING WOULD BE COVERED BY THE APPROPRIATE DEFINITION.

• ANOTHER POINT IS THAT IF THE MACHINE IS TO BE RESITED WITHIN THE PREMISES THE MOVEMENT FROM THE POINT OF DISMANTLING TO WHERE IT IS TO BE RE-ERECTED MUST BE COVERED SEPERATELY AS RE-SITING.


– TRANSIT-• THIS CAN BE A CAN OF WORMS IF THE PARTIES DO NOT PROPERLY COVER THE QUESTION OF RESPONSIBILITY FOR DAMAGE THAT MAY OCCUR DURING TRANSIT, IT IS SUGGESTED THAT CARE, CUSTODY AND CONTROL SHOULD DETERMINE RESPONSIBILITY. THERE IS ALSO THE QUESTION OF CARRIERS LIABILITY AND THE LIMITATION OF RISK. AGREEMENT MUST ALSO BE ACHIEVED REGARDING POST TRANSIT INSPECTION AND WHO WILL BE PRESENT AT SUCH INSPECTION. THERE IS THE QUESTION OF INSURANCE, THERE MUST BE CLEAR UNDERSTANDING AS TO WHO SHOULD ARRANGE COVER, THIS SHOULD FALL IN LINE WITH THE RESPONSIBILITY CLAUSE EXCEPT THE OWNER HAS THE RIGHT TO TAKE OUT ‘CONTINGENT COVER’JUST IN CASE THE CARRIER OMITS TO TAKE OUT COVER OR TAKES OUT INADEQUATE COVER.

• SOME OF OUR MOST HEAVILY CONTESTED CLAIMS HAVE HAD THEIR ORIGIN IN TRANSIT.


– LIFTING OR LOWERING-• THESE OPERATIONS ARE MUCH THE SAME EXCEPT THE ONE INVOLVES THE ELEVATING OF THE PROPERTY AND THE OTHER INVOLVES LOWERING THE PROPERTY. BOTH OPERATIONS INVOLVE THE USE OF A CRANE OR OTHER HOISTING DEVICE.

• THIS OPERATION, LOWERING, CAN ONLY TAKE PLACE ONCE THE MACHINERY HAS BEEN DISMANTLED AND MOVED TO THE PLATFORM WHERE LOWERING IS TO TAKE PLACE,

• THE OPERATION OF LIFTING OCCURS ONCE THE PROPERTY IS PLACED BELOW THE LIFTING PLATFORM. THERE CAN BE SOME CONFUSION WHERE THE TRANSPORT VEHICLE IS PARKED IMMEDIATELY BELOW THE LIFTING PLATFORM, THE QUESTION THEN ARISES, IS THE REMOVAL OF THE MACHINE FROM THE TRUCK UNLOADING AS PART OF TRANSIT COVER OR IS IT LIFTING. THIS ANOMALY CAN LEAD TO DISAGREEMENT AS TO WHETHER COVER EXISTS. CLEARLY, THE CORRECT WAY TO HANDLE THE MATTER IS FOR THE MACHINE TO BE OFF-LOADED UNDER THE HOISTING PLATFORM THEN SLINGS RE-ATTACHED AFTER INSPECTION FOR THE HOISTING TO AN UPPER FLOOR.


– CONSTRUCTION, ERECTION, INSTALLATION-• THIS OPERATION MUST BE CONSIDERED BY TWO SEPARATE MEANS

– NEW MACHINERY WHERE THE COVER INCLUDES TESTING WHICH IS USUALLY LIMITED TO 28 DAYS, OR IF THE OWNER IS INSTALLING THE MACHINERY ON HIS OWN BEHALF, IT IS NOT UNUSUAL TO LIMIT THE TESTING TO 7 DAYS. THE REASON FOR THIS IS THAT THE OWNER CAN THEN ADD THE MACHINERY TO HIS MACHINERY BREAKDOWN POLICY.

– SECOND HAND OR USED MACHINERY, WHERE THE INSURERS ARE RELUCTANT TO GIVE TESTING COVER BECAUSE OF THE UNKNOWN CONDITION OF THE MACHINE, WHICH MAY HAVE DEFECTS DUE TO ITS PAST OPERATING CONDITIONS OR OTHER INHERENT DEFECTS. USED ELECTRICAL APPARATUS IS MORE SUSCEPTIBLE TO DAMAGE DURING TESTING BEARING IN MIND THAT THE MOMENT IT IS FIRST ENERGISED AS NEW, THE INSULATION COMMENCES TO DETERIORATE AND THIS RESULTS IN HAIRLINE CRACKS. THE MACHINE MAY RUN FOR DECADES IN THIS CONDITION, BUT AS SOON AS IT IS MOVED THESE HAIRLINE CRACKSCAN RESULT IN FLAKING OF THE INSULATION WHICH RESULT IN FLASHOVERS WHEN ENERGISED AFTER REERECTION.

• IN THE NEXT SLIDE WE WILL CONSIDER THE FULL SPECTRUM OF COVER AFFORDED BY THIS OPERATION


• THIS OPERATION COMMENCES AFTER THE PROPERTY IS OFFLOADED AT THE SITE, DURING THE PERIOD OF CONSTRUCTION, ERECTION OR INSTALLATION. ONCE ERECTION IS COMPLETE SOME NON ENERGISED TESTS ARE CARRIED OUT TO ENSURE THE CORRECT ROTATION OF ELECTRICAL CONNECTIONS, HAVING CONFIRMED THE CORRECT CONNECTIONS AND ROTATION OF THE MACHINE THEN RUNNING OR ENERGISED TESTS ARE COMMENCED – IF THE MACHINE IS NEW THEN THE ERECTION COVER EXTENDS TO INCLUDE RUNNING TESTS THUS GIVING ELECTRICAL OR MECHANICAL BREAQKDOWN AS WELL AS FIRE AND PERILS COVER.

• IF, HOWEVER, THE PROPERTY BEING ERECTED IS A STRUCTURAL STEEL FACILITY, THEN THE QUESTION OF TESTING DOES NOT ARISE. ON THE OTHER HAND, IF THE PROPERTY IS A SHORT PIPELINE THEN THERE MUST BE TESTING, ASSUMING NEW PIPES, THIS ENTAILS FILLING THE PIPES WITH WATER AND THEN PUMPING THE WATER PRESSURE TO 1.5 TIMES ITS WORKING PRESSURE, WHICH IS THEN HELD FOR A PRESCRIBED PERIOD OF TIME TO ENSURE THAT THERE ARE NO LEAKS.

– WE WILL DISCUSS THIS SUBJECT FURTHER IN LATER NOTES.

MINOR WORKS INSURANCE– POSITIONING-

• THIS OPERATION DOES NOT INCLUDE ANY DISMANTLING OR ERECTION COVER. THE SOLE PURPOSE OF THIS OPERATION IS TO BODILY REMOVE PROPERTY FROM THE POSITION OF OFFLOADING FROM TRANSPORT VEHICLES IN THE PREMISES TO ANOTHER POSITION WITHIN THE PREMISES WHERE IT IS TO BE INSTALLED. THIS OPERATION OFTEN INVOLVES THE USE OF FORKLIFT TRUCKS OR CARRY CRANES. IT MAY EVEN BE THAT THE PROPERTY IS PLACED ON A DOLLY AND TRUNDLED ACROSS TO ITS NEW POSITION.

– RESITING-• THIS OPERATION IS MUCH THE SAME AS POSITIONING, HOWEVER, THIS OPERATION IS DESIGNED FOR RESITING PROPERTY WITHIN THE PREMISES WITHOUT THE USE OF TRANSPORT VEHICLES. IT CAN BE LIFTED OFF ITS ORIGINAL FOUNDATION MOVED TO ANOTHER POSITION WITHIN THE SAME PREMISES AND PLACED ON ITS NEW FOUNDATION OR BEDPLATE. THIS OPERATION OFTEN INVOLVES THE USE OF FORKLIFT TRUCKS OR CARRY CRANES. IT MAY EVEN BE THAT THE PROPERTY IS PLACED ON A DOLLY AND TRUNDLED ACROSS TO ITS NEW POSITION.


– TERRITORIAL LIMITS-• FEW UNDERWRITERS OR BROKERS GIVE ADEQUATE ATTENTION TO THIS ASPECT OF THE INSURANCE. MANY BELIEVE THAT THEY CAN CROSS OUR BORDERS INTO ADJACENT TERRITORIES AND PROCURE BUSINESS WHICH THEY WRITE IN SOUTH AFRICA. THE INSURANCE LAWS OF THESE STATES IS VERY CLEAR ON THE WRITING OF INSURANCE BUSINESS LOCALLY, UNLESS, THE REGISTRAR OF INSURANCE HAS GIVEN WRITTEN APPROVAL FOR THE RISK TO BE PLACED OUTSIDE OF THE TERRITORY.

• ANOTHER CAUTIONARY MEASURE LIES IN THE UNDERWRITING COMPANY’S REINSURANCE TREATIES. IT MAY WELL BE THAT THE TREATY EXCLUDES ANY RISK WRITTEN OUTSIDE OF SOUTH AFRICA.

• WHERE THE UNDERWRITING COMPANY IS LICENSED TO WRITE BUSINESS IN THAT TERRITORY, ALTHOUGH, THE RISK IS WRITTEN IN SOUTH AFRICA, SEPARATE RECORDS MUST BE KEPT FOR TAX ETC. PURPOSES.


• WHERE MACHINERY RISKS ARE UNDERWRITTEN IT IS NOT UNUSUAL FOR THE FOLLOWING CLAUSES TO BE INCLUDED-– THE INSURED WILL ESTABLISH THAT THE INSURED PROPERTY

IS IN A SOUND CONDITION AT THE TIME OF ATTACHMENT OF THIS INSURANCE AND IN THE EVENT OF A CLAIM HEREUNDER THE ONUS IS UPON THE INSURED TO ESTABLISH THAT THE LOSS OR DAMAGE OCCURRED DURING THE PERIOD OF INSURANCE AND THE INSURED OPERATIONS COVERED BY THIS POLICY.

– IF THE DISCOVERY OF A DEFECT IN ANY PART OF THE INSURED PROPERTY SUGGESTS THAT A SIMILAR DEFECT EXISTS IN ANY OTHER PART OR PARTS OF THE INSURED PROPERTY THE INSURED SHALL FORTHWITH INVESTIGATE AND IF NECESSARY RECTIFY THE DEFECT IN SUCH OTHER PART OR PARTS AT HIS OWN EXPENSE OR ALTERNATIVELY BEAR ALL LOSSES ARISING OUT OF THE SAID DEFECT OR DEFECTS.


• THE EXCEPTIONS TO COVER-• THE INSURER SHALL NOT BE LIABLE TO INDEMNIFY THE

INSURED IN RESPECT OF:– THE EXCESS DEFINED IN THE SCHEDULE– DEFECTS OF MATERIAL WORKMANSHIP DESIGN PLAN OR

SPECIFICATION– CONDITIONS NORMAL TO THE ENVIRONMENT NORMAL WEAR AND

TEAR GRADUAL DETERIORATION NORMAL MAKING GOOD RUST EROSION CORROSION OR OXIDISATION SCRATCHING OF PAINTED OR POLISHED SURFACES

– ANY PROPERTY DUE TO ITS OWN ELECTRICAL OR MECHANICAL BREAKDOWN OR EXPLOSION OCCURRING AFTER ………DAYS

– ELECTRICAL OR MECHANICAL BREAKDOWN OF SECONDHAND OR USED MACHINERY

– PENALTIES FOR DELAY OR DETENTION GUARANTEES OF PERFORMANCE OR EFFICIENCY AND CONSEQUENTIAL LOSS


• THE EXCEPTIONS TO COVER (CONTINUED)-– DEEDS BONDS BILLS OF EXCHANGE PROMISSORY NOTES CASH BANK NOTES CHEQUES SECURITIES FOR MONEY OR STAMPS

– LOSS BY DISAPOPEARANCE OR BY SHORTAGE IF SUCH DISAPPEARANCE OR SHORTAGE IS REVEALED ONLY BY THE MAKING OF A ROUTINE INVENTORY

• THIS LAST EXCEPTION – THEFT HAS BEEN SUPERCEDED BY THE FOLLOWING-– LOSS BY THEFT OR DISAPPEARANCE UNLESS SUCH LOSS IS IDENTIFIABLE BY THE INSURED WITH A SPECIFIC INCIDENT OF THEFT WHICH HAS BEEN REPORTED TO THE POLICE AND THE INSURERS

– THE SAIA WAR, RIOT AND ELECTRONIC DEVICES EXCEPTION


• THE DEFECTS EXCEPTION- – THE COST OF:

• REPAIRING REPLACING REINSTATING OR MAKING GOOD ANY PART OF THE PROPERTY INSURED WHICH IS DEFECTIVE IN MATERIAL WORKMANSHIP DESIGN PLAN OR SPECIFICATION. SHOULD ANY DEFECT IN MATERIAL WORKMANSHIP DESIGN PLAN OR SPECIFICATION GIVE RISE TO LOSS OR DAMAGE WHICH BUT FOR THIS EXCEPTION WOULD BE INSURED BY THIS POLICY THE INSURER SHALL IN RESPECT OF SUCH LOSS OR DAMAGE ONLY BE LIABLE TO COSTS ADDITIONAL TO THE COSTS THAT WOULD HAVE BEEN INCURRED IN REPAIRING REPLACING OR REINSTATING THE DEFECT HAD THE RESULTING DAMAGE NOT OCCURRED

• RE-DESIGN MODIFICATION IMPROVEMENT ALTERATION OR OVERHAUL ON THE OCCASION OF THE REPAIR REPLACEMENT OR REINSTATEMENT OF LOSS OR DAMAGE


• CONDITIONS NORMAL TO THE ENVIRONMENT EXCEPTION

• THE INSURER SHALL NOT INDEMNIFY THE INSURED IN RESPECT OF:– CONDITIONS NORMAL TO THE ENVIRONMENT NORMAL WEAR AND

TEAR GRADUAL DETERIORATION DUE TO ATMOSPHERIC CONDITIONS OR OTHERWISE NORMAL MAKING GOOD RUST EROSION CORROSION OR OXIDISATION SCRATCHINGT OF PAINTED OR POLISHED SURFACES (UNLESS AS A DIRECT RESULT OF CAUSES OTHERWISE INSURED BY THE POLICY).


• BASIS OF INDEMNIFICATION –– THE INSURER RETAINS THE OPTION TO REPAIR OR REPLACE

THE LOST OR DAMAGED PROPERTY OR PAY THE AMOUNT OF LOSS IN MONEY

– NEW PROPERTY-• THE REASONABLE COST OF REPAIR REINSTATEMENT OR REPLACEMENT

– USED OR SECONDHAND PROPERTY-• THE REASONABLE COST OF REPAIR REINSTATEMENT OR REPLACEMENT BUT NOT EXCEEDING THE MARKET VALUE OF THE INSURED PROPERTY IMMEDIATELY BEFORE THE LOSS OR DAMAGE

• INCLUDING COSTS OF DISMANTLING CLEARANCE OF SILT • EXCLUDING COSTS OF ALTERATIONS ADDITIONS OVERHAULS AND TEMPORARY REPAIRS

• INDEMNITY SHALL BE LIMITED TO THE PART OR PARTS OF THE MACHINE LOST OR DAMAGED

• THE INSURED MAY NOT ABANDON ANY PROPERTY TO THE INSURER• LIMITATION ON OPEN TRENCHES


• SCOPE OF COVER• WE MUST BEAR IN MIND THAT THE MINOR WORKS

INSURANCE PROGRAMME PROVIDES FOR ALL TYPES OF PROJECTS, WHETHER ELECTRICAL, MECHANICAL, CIVIL OR STRUCTURAL. ACCORDINGLY, LOSS OR DAMAGE COULD OCCUR DUE TO:– HANDLING– TESTING OF NEW MACHINERY – FIRE OR EXPLOSION– ENVIRONMENTAL CONDITIONS

• CAUSED BY ELEMENTAL PERILS• CAUSED BY PHYSICAL CONDITIONS OR BY MALICIOUS INTENT

– DUE TO DEFECTIVE CONDITIONS• OF WORKMANSHIP• OF MATERIALS• OF DESIGN, PLAN OR SPECIFICATION


• THE HANDLING COMPONENT – FOLLOWING OFFLOADING AT THE CONTRACT SITE THE PROPERTY WILL

USUALLY BE STORED FOR A PERIOD UNTIL REQUIRED FOR CONSTRUCTION. IT WILL THEN BE MOVED TO THE SITE OF CONSTRUCTION. THIS PROCEDURE WILL BE FOLLOWED FOR EACH CONSTITUENT PART THIS WILL BE A ONCE-OFF OPERATION. THE HANDLING ASPECT WILL APPLY TO THE MIXING AND POURING OF CONCRETE, THE DISTRIBUTION, PLACING, GRADING AND ROLLING OF LAYER MATERIALS IN ROAD WORKS AND ANY OTHER HANDLING OF PROJECT PROPERTY WHETHER BY CRANE, TROLLEY FRONT-END LOADER, FORKLIFT TRUCK OR OTHERWISE

• THE TESTING OF NEW MACHINERY– UNLESS THE POLICY SPECIFICALLY EXCLUDES TESTING, THE

COVER FOR ERECTION ETC., AUTOMATICALLY PROVIDES FOR TESTING.

– TESTING TAKES TWO FORMS, NAMELY – STATIC TESTING– ENERGISED OR RUNNING TESTS

MINOR WORKS INSURANCE• STATIC TESTS

– THESE TESTS ARE USUALLY UNDERTAKEN ONLY ONCE BEFORE THE PLANT IS ENERGISED. THIS IS TO ENSURE THAT ALL IS WELL BEFORE APPLYING ENERGY. THE STATIC TESTS CONSIST OF THE FOLLOWING:• HYDRAULIC TESTS – BOILERS, PRESSURE VESSELS AND PIPING• CONTINUITY AND INSULATION TESTS BY MEGGER• ELECTRONIC CONTINUITY TESTS BY SIGNAL TESTER• ROTATION DIRECTION TESTS BY APPLYING POWER FOR A SHORT SPELL

• TESTS INVOLVING THE INDIVIDUAL OPERATION OF AUXILIARIES• ENERGISED OR RUNNING TESTS

• HAVING ESTABLISHED THE PRESSURE, ELECTRIC/ELECTRONIC AND MECHANICAL INTEGRITY THE MACHINERY IS BROUGHT INTO OPERATION UNDER ITS OWN POWER FOR THE PURPOSE OF LOAD TESTING. THESE LOAD TESTS OFTEN COMMENCE PRIOR TO THE INTRODUCTION OF FEEDSTOCK OR RAW MATERIALS. MUCH OF THIS APPLIES TO MORE SOPHISTICATED MACHINERY THAN TO THE NORMAL RUN OF THE MILL MACHINERY USUALLY ENCOUNTERED AS MINOR WORKS PROJECT PROPERTY.


• ENERGISED OR RUNNING TESTS CONTINUED• THE USUAL PRACTICE IS THAT ONCE FULL LOAD CONDITIONS HAVE BEEN ACHIEVED THE PLANT IS KEPT OPERATING UNDER THESE LOAD CONDITIONS FOR A PRESCRIBED PERIOD OF TIME SO AS TO PROVE THE ABILITY OF THE MACHINE TO CONTINUE TO OPERATE CONTINUOUSLY UNDER FULL LOAD CONDITIONS.

• WHERE MACHINERY HAS BEEN INSTALLED BY THE INSURED ON HIS OWN BEHALF, THE USUAL PRACTICE IS TO LIMIT THE PERIOD OF ENERGISED TESTING TO 7 DAYS.

• THE HIGHEST RISK PERIOD IN THE CONSTRUCTION PROGRAMME IS DURING ENERGISED TESTING. THIS IS WHEN DEFECTIVE CONDITIONS COME TO THE FORE OFTEN CAUSING DAMAGE TO OTHER SOUND AND DEFECT FREE PROPERTY

• IT IS NOT UNCOMMON FOR A MINOR FAULT TO RESULT IN BREAKDOWN, EXPLOSION OR FIRE

• BEFORE PROCEEDING BEYOND TESTING LET US CONSIDER A CASE STUDY


• WHY NOT GIVE TESTING COVER ON USED PROPERTY?– IN THE CASE OF SECONDHAND OR USED MACHINERY, INSURERS

DO NOT INTEND TO PROVIDE ANY FORM OF ELECTRICAL OR MECHANICAL BREAKDOWN OR EXPLOSION COVER AS THE FAILURE, MAY WELL HAVE ITS ORIGINS IN THE MACHINES PREVIOUS OPERATING HISTORY.

– THE WORK INVOLVED IN THE DISMANTLING AND RE-ERECTION MAY WELL HAVE HAD NOTHING TO DO WITH THE CAUSE OF THE FAILURE

– THIS IS PARTICULARLY SO IN THE CASE OF ELECTRICAL AND ELECTRONIC APPARATUS WHERE THE INSULATIONS BEGINS TO DETERIORATE THE MOMENT IT IS FIRST ENERGISED AND, BY MOVING THE APPARATUS CRACKS APPEAR IN THE HARDENED (DETERIORATED) INSULATION MATERIAL AND, WHEN POWER IS AGAIN APPLIED A FLASHOVER OCCURS


• WHY NOT GIVE TESTING COVER ON USED PROPERTY?– IN THE CASE OF MECHANICAL PLANT, WEAR AND TEAR IS A

MAJOR FACTOR AS WELL AS THE OPERATING CONDITIONS PRIOR TO BEING PURCHASED BY THIS PRINCIPAL. THESE OPERATING CONDITIONS MAY WELL HAVE LEFT MUCH TO BE DESIRED RESULTING IN DAMAGE DUE TO VIBRATION, OVERSTRESSING, INADEQUACIES OF LUBRICATION MAINTENANCE AND SIMILAR CONDITIONS. DAMAGE AS A RESULT OF THESE CONDITIONS MAY NOT YET HAVE MANIFEST ITSELF IN FAILURE OR DAMAGE. ONCE RECOMMISSIONED SUCH CONDITION MAY RESULT IN FAILURE OR DAMAGE.

MINOR WORKS INSURANCECASE STUDY

• JANNIE ELKEMAN IS AN AIR CONDITIONING CONTRACTOR, LET US SAY HE INSTALLS ROOM TYPE AIR CONDITIONING UNITS. THROUGH HIS BROKER HE APPLIES TO COVERALL INSURANCE COMPANY FOR MINOR WORKS CONSTRUCTION COVER. HE EXPECTS THE COVER TO BE VIRTUALLY ALL RISKS INCLUDING ELECTRICAL AND MECHANICAL BREAKDOWN AND ON RECEIPT OF HIS POLICY HE CHECKS TO SEE THAT THERE IS NO BREAKDOWN EXCLUSION.

• SOME TIME LATER WHEN HE HAS JUST COMPLETED THE INSTALLATION OF A UNIT FOR ONE OF HIS CLIENTS. HAVING COMPLETED THE STATIC TESTS HE ENERGISES THE UNIT, NOT LONG AFTER THE UNIT CEASES TO OPERATE. HE IS CALLED BACK TO ATTEND TO THE PROBLEM AND FINDS THAT THERE HAS BEEN A SHORT CIRCUIT IN THE MOTOR WHICH HAS BURNED OUT. DOES HE HAVE A CLAIM UNDER HIS CONSTRUCTION POLICY?

MINOR WORKS INSURANCECASE STUDY SOLUTION

• THE EVENT IS AN ELECTRICAL BREAKDOWN OF NEW PROPERTY ALBEIT AS A RESULT OF A SHORT CIRCUIT WHICH MAY HAVE BEEN A MANUFACTURING FAULT. HIS POLICY COVERS BREAKDOWN AND DOES NOT EXCLUDE MANUFACTURING FAULTS AS AN ORIGINAL CAUSE OF BREAKDOWN. THERE IS AN EXCLUSION RELATIVE TO DEFECTS OF MATERIAL DESIGN AND WORKMANSHIP. THE BREAKDOWN MAY WELL BE THE RESULT OF A DEFECT, HOWEVER, THE INDEMNITY SOUGHT IS NOT FOR DEFECTS RECTIFICATION, BUT FOR CONSEQUENT DAMAGE – THE BURN OUT OF THE MOTOR. HAVING INDEMNIFIED THE INSURED, THE INSURER, IF HE CAN SHOW THAT THE SHORT CIRCUIT WAS AS A RESULT OF A MANUFACTURING DEFECT, CAN PROCEED AGAINST THE MANUFACTURER FOR REIMBURSEMENT.


• LET US NOW DISCUSS SOME OF THE FACTS SURROUNDING THE DEFECTS EXCEPTION.– LET US ASSUME THAT A DEFECTIVE WORKMANSHIP CONDITION

CAUSED A FAILURE IN THE MACHINE INSTALLED.– WHEN INDEMNIFYING THE INSURED FOR THE DAMAGE, THE

INDEMNITY WOULD EXCLUDE THE COSTS THAT THE INSURED WOULD HAVE HAD TO INCUR HAD THE DEFECTIVE CONDITION BEEN FOUND IMMEDIATELY BEFORE THE CONSEQUENT DAMAGE OCCURRED AND THE MACHINE WAS STOPPED TO RECTIFY THE DAMAGE.

– AT THIS POINT THE INSURED WOULD HAVE CARRIED ALL COSTS OF GAINING ACCESS TO THE DEFECTIVE CONDITION AND REPLACING THE PART AND THEN REASSEMBLY, NOW THAT DAMAGE TO OTHER SOUND PARTS HAS OCCURRED WHY SHOULD THE INSURED NOT CARRY THE COSTS AS DESCRIBED ABOVE AND THE INSURERS THE ADDITIONAL COSTS OF REPLACING THE PART DAMAGED IN CONSEQUENCE OF THE DEFECT.


• FIRE –– FIRE MUST BE SEEN AS A PARTICULAR HAZARD DURING

CONSTRUCTION. CONSTRUCTION PERSONNEL SEEM TO BE OBLIVIOUS TO ELEMENTARY FIRE PREVENTION PRECAUTIONS AND FURTHER BECAUSE OF THE INADEQUACIES OF FIRE FIGHTING APPARATUS. SOME OF THE MORE FREQUENT CAUSES OF FIRE ON CONSTRUCTION SITES WHETHER MAJOR OR MINOR ARE:• SPONTANEOUS COMBUSTION• WELDING PROCEDURES• OILS, COMBUSTIBLE FUELS AND PAINT• SECURITY GUARDS• ELECTRIC HEATERS, URNS AND KETTLES• EXPLOSION OF OIL FILLED ELECTRICAL APPARATUS • ACID DAMAGE TO CONCRETE• DISCARDED PACKING MATERIALS


• EXPLOSION-– EXPLOSION CAN BE AS A RESULT OF CHEMICAL OR PHYSICAL

CONDITIONS.– CHEMICAL EXPLOSION HAS THREE MAIN SOURCES OF ORIGIN

DURING CONSTRUCTION:• THE CARELESS OR INCORRECT STORAGE OF FUELS, OILS, PAINTS AND THE LIKE

• THE INCORRECT STORAGE OF ACETYLENE/OXYGEN GAS BOTTLES• INCORRECT STORAGE OF RAW MATERIALS AWAITING INTRODUCTION INTO PROCESS PLANT

• OPERATING DEFICIENCIES ONCE RAW MATERIALS HAVE BEEN INTRODUCED FOR TESTING PURPOSES

– PHYSICAL EXPLOSION OFTEN RESULTS FROM DEFICIENCIES IN MATERIALS DESIGN OR WORKMANSHIP, SOME EXAMPLES ARE:• INCORRECT MATERIAL SPECIFICATION• INADEQUATE DESIGN PARAMETERS• INADEQUATE FILLING OF ELECTRICAL APPARATUS WITH OIL


• ENVIRONMENTAL CONDITIONS-– THE RELEVANCE OF THE ENVIRONMENT IS OF EQUAL

IMPORTANCE TO CIVIL, STRUCTURAL, ELECTRICAL AND MECHANICAL PROJECTS. THE APPRAISAL OF ENVIRONMENTAL CONDITIONS MUST NOT BE TREATED LIGHTLY AND EACH MUST BE CONSIDERED ON ITS MERITS DEPENDING ON THE NATURE OF THE CONSTRUCTION PROJECT.

– MANY OF THE HAZARDS WHICH AFFECT A CONSTRUCTION PROJECT ARE FORESEEABLE, INEVITABLE OR TO BE EXPECTED AND CONSEQUENTLY WOULD NOT CONSTITUTE FORTUITOUS EVENTS, THESE MUST BE SEEN TO BE COSTS OF THE PROJECT

– INSURANCE INDEMNITY SHOULD ONLY EXTEND TO THE FORTUITOUS, UNEXPECTED UNFORESEEABLE OR ACCIDENTAL EVENTS

• WE WILL NOW EXAMINE SOME OF THE MORE IMPORTANT ENVIRONMENTAL CONDITIONS APPLICABLE TO BOTH MAJOR AND MINOR WORKS


• ELEMENTAL PERILS- THESE CONDITIONS REVOLVE AROUND THE FOUR ELEMENTS OF THE POWER OF NATURE – EARTH, WATER, AIR AND FIRE, WE WILL EXAMINE EACH:– EARTH-

• THESE RISKS FALL BASICALLY INTO THE CATEGORY OF GEOLOGY, SUBDIVIDED TO SUBSIDENCE, LANDSLIDE, COLLAPSE, ROCKSLIDE OR AVALANCHE

– WATER-• THIS IS ONE OF NATURE’S MOST POWERFUL ELEMENTS. DAMAGE USUALLY OCCURS DUE TO STORM, FLOOD, CYCLONE, HURRICANE AND NATURALLY OCCURRING UNDERGROUND WATER

– AIR-• THE ELEMENTS TO CONSIDER ARE FROST, SNOW, LIGHTNING AND ATMOSPHERIC ELECTRICITY

– FIRE-• HERE WE ARE CONSIDERING VELD FIRE AND CONSEQUENCES OF LIGHTNING STRIKES


• IT IS ENCUMBENT UPON THE INSURED TO ENSURE THE SAFETY OF THE PROPERTY AS INSURED BY THE POLICY AND, THIS EMBRACES WITHIN ITS REQUIREMENT:

– TO ADOPT WORK TECHNIQUES THAT AVOID EXPOSURE TO LOSS OR DAMAGE

– TO CREATE, INSTALL AND MAINTAIN TEMPORARY WORKS AND MEASURES APPROPRIATE TO THE NATURE OF THE OPERATIONS AND ENVIRONMENTAL CONDITIONS

• FAILURE TO PERFORM IN ACCORDANCE WITH THE EXPRESS AND IMPLIED CONDITIONS AS GENERALLY OUTLINED ABOVE, NULLIFIES ANY RIGHT OF RECOVERY BY THE INSURED IN TERMS OF THE POLICY OF INSURANCE


• POLICY CONDITIONS-– OBLIGATIONS OF THE INBSURED

• NOTIFY OF ANY CHANGES IN THE RISK OR OF ANY DEFECTS OR CONDITIONS THAT RENDER THE RISK MORE THAN USUALLY HAZARDOUS

• AFFORD FACILITIES FOR INSURERS TO EXAMINE INSURED PROPERTY

– DUTIES FOLLOWING AN ACCIDENT• NOTIFY INSURERS AS SOON AS POSSIBLE• PRESERVE DAMAGED OR DEFECTIVE PROPERTY FOR INSPECTION• FURNISH ALL INFORMATION AND PROOF OF CLAIM• ANY FRAUDULENT CLAIM ALL BENEFIT WILL BE FORFEITED• FORWARD EVERY WRIT OR SUMMONS

– UNDER INSURANCE• AVERAGE TO APPLY IN THE PROPORTION OF THE SUM INSURED TO THE NEW REPLACEMENT VALUE


• POLICY CONDITIONS CONTINUED-– RECOURSE

• THE INSURER IS ENTITLED IN NAME OF INSURED TO HAVE THE ABSOLUTE CONDUCT AND CONTROL OF ALL PROCEEDINGS FOR RECOVERY OF PROPERTY OR SECURING REIMBURSEMENT

– ARBITRATION• ANY DIFFERENCE IN QUANTUM LIABILITY OTHERWISE ADMITTED SUCH DIFFERENCE MAY BE REFERRED TO ARBITRAQTION

– PRESCRIPTION• IF INSURER DISCLAIMS LIABILITY AND SUCH CLAIM SHALL NOT WITHIN 12 MONTHS FROM THE DATE OF THE DISCLAIMER BE THE SUBJECT OF PENDING LEGAL ACTION THE CLAIM SHALL BE REGARDED AS ABANDONED AND SHALL NOT THEREAFTER BE REOVERABLE

• ANY DISPUTE AS TO QUANTUM MUST BE REFERRED TO ARBITRATION WITHIN 12 MONTHS FROM DATE OF DISPUTE OTHERWISE CLAIM SHALL BE REGARDED AS ABANDONED AND NOT RECOVERABLE THEREAFTER

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