What Is Erection (EAR) Insurance?

What Does Erection Insurance Protect?

Erection All Risks (EAR) insurance — montaj sigortası in Turkish — covers the installation phase of a machine or plant. Article 1 of the erection insurance general conditions defines it in one sentence: loss of or damage to the insured values while at the erection site during the cover term, from any sudden cause not previously known and not excluded by the policy.

The construction of that sentence is the point. The policy does not enumerate the perils it covers; it enumerates the exclusions and treats everything else as covered. That all-risks basis has a statutory footing: Article 11 of Insurance Law No. 5684 requires excluded risks to be stated expressly and deems any risk not stated to be within cover.

So the events inside cover include crane accidents, dropping and impact, storm and flood on site, theft, short circuit, damage during test running and errors by the erection crew — none named in the wording.

When Does Cover Start and End?

Article 4 ties the cover term to what happens on site, not to the policy date. Cover begins when the scheduled values are unloaded at the erection site and ends on the stated expiry date; if erection is completed early and handed over, cover ends early for those parts. Where transit insurance exists, erection cover starts as that cover ends.

The testing period is the most misread part. Unless the policy states otherwise, a four-week testing period is included in the cover term. But where the erection of used machinery is insured, no testing period cover is granted at all — for a business recommissioning a second-hand line, the most critical line in the policy.

• The start date of test running must be notified in writing at least 8 days in advance.
• An earlier-than-planned end to the cover term must also be notified in writing at least 8 days in advance.
• A testing period beyond four weeks may be extended for additional premium on the competent tariff terms.
• If the erection overruns the date shown in the policy, the cover term is likewise extended against additional premium.

Erection All Risks Compared With Contractors' All Risks

The two branches come from the same family and their insuring clauses read almost identically. The difference is the subject matter: Contractors' All Risks (CAR) covers the building of a structure, erection insurance the installation and commissioning of a machine — which is why one has a testing period and the other a maintenance period.

Buy-Back Options and Absolute Exclusions

Article 2 covers situations excluded "unless otherwise agreed", which can be endorsed on for additional premium: the plant and equipment used for the erection with temporary huts; third-party liabilities; debris removal; express freight and overtime; strike and riot; a testing period beyond four weeks; terrorism; and pollution. So cranes, scaffolding and generators are not part of the base cover — see our liability insurance page.

Article 3 exclusions cannot be bought back: war, nuclear risks and acts of public authority; wear, tear, rust and decay; inventory shortages; the wilful act of the insured; vehicles and floating craft; and cash, negotiable instruments, books and drawings.

Two exclusions are only partial, and that nuance decides claim files. Construction, casting, material and erection faults inherent in the items erected are excluded only as to the repair cost of the defective parts, so damage they cause to other insured property remains covered; the same applies to breakdown of the erection plant. Consequential loss is wholly outside — delay, stoppage, rescission or penalty clauses, loss of profit included.

Sum Insured and Settlement Basis

Under Article 11 the sum insured is the value of the machinery and materials to be erected, including duty, taxes, freight and erection costs. Value grows as work progresses, so the wording allows a margin: increases up to 20% of the sum insured are treated as insured. Beyond 20% the insurer's written consent is required, and if refused the policy applies on a first-loss basis.

The settlement basis differs from machinery breakdown and electronic equipment policies. Article 15 builds the indemnity on the value one day before the loss: for partial damage, the cost of restoring the property to that condition, capped at its value that day; for a total loss, that value. Salvage, any deductible and — for used property — a betterment deduction are applied. Once the risk passes to a machinery breakdown policy, the basis returns to new replacement value.

What to Do When a Loss Occurs

Article 12 sets out the claims duties with a flexibility suited to a site. A loss must be notified within 5 days; the insured must take salvage and protection measures as though uninsured and supply the documents showing cause and amount without delay.

Two provisions keep the site moving. After giving notice of repair, minor repairs may proceed without waiting. Beyond that, if the insurer has not sent its loss adjuster within 7 days of notification, the insured may begin repairing the damaged section. Where the amount cannot be agreed it is fixed by hakem-bilirkişi — expert-arbitrators chosen from among engineers.

Where We Come In as an Agency

Mistakes in erection insurance are rarely made in the wording; they are made in the calendar and in the sum insured. Issue the policy after the shipment reaches site and the start of cover is left hanging. Fail to size the testing period and four weeks will not stretch. Move second-hand equipment and the withdrawal of testing period cover goes unnoticed.

RYL Sigorta Aracılık Hizmetleri is an insurance agency. We prepare quotations from the insurance companies we act for and follow through on how the erection schedule, the testing period and the third-party limit reach the policy. Article 1423 of the Turkish Commercial Code places the duty to inform on the agency alongside the insurer. The policy is issued by the insurance company, and the indemnity is paid by the insurance company. See our engineering insurance page or the quotation form.

Frequently Asked Questions

Sources

• Erection Insurance General Conditions — Montaj Sigortaları Genel Şartları (TSB)
• Construction (All Risks) Insurance General Conditions, in force since 01.02.2009 (TSB)
• SEDDK — index of insurance general conditions
• Insurance Law No. 5684 (mevzuat.gov.tr)

This article is for information only; the scope of cover is set by the policy’s specific and general terms.