Four type of Design Defect Covers are available in market to cover the Engineering Risks requiring coverage for Civil construction risks.
(1) The DE-1 is outright defect exclusion cover. It is exclusion in basic policy and in-fact it covers nothing. Since there is no additional coverage there is no additional charge for this clause.
(2) The DE-2 is extended defective condition exclusion. This extension of coverage is for Floor however roof and columns are not covered in this extension. Generally this cover is available on 2 to 5% of basic storage cum erection rate with about 5 times of Act of God excess.
(3) The DE-3 is Limited Defective Condition Exclusion. It covers floor and roof. Columns are not covered. If you analyse this is basically a standard EAR cover. This also explains the difference between EAR and CAR policy that the General Insurers provide to cover the risks associated with the engineering risks.
(4) The DE-4 is Defective Part Exclusion cover and it covers Floor, it covers Roof and it also covers the column but it excludes supporting rod within the column.
(5) The DE-5 is Design Improvement Exclusion cover and as the name suggests it covers everything including the supporting rod within the column but cost of supporting rod is not covered.
Vinay Verma, M.Com; Fellow member of Institute of Cost & Works Accountants of India, Fellow member of Insurance Institute of India, Associate Member of Institute of Company Secretaries of India, Gold Medalist in PG Diploma in Marketing Management & PG Diploma in Management
(1) The DE-1 is outright defect exclusion cover. It is exclusion in basic policy and in-fact it covers nothing. Since there is no additional coverage there is no additional charge for this clause.
(2) The DE-2 is extended defective condition exclusion. This extension of coverage is for Floor however roof and columns are not covered in this extension. Generally this cover is available on 2 to 5% of basic storage cum erection rate with about 5 times of Act of God excess.
(3) The DE-3 is Limited Defective Condition Exclusion. It covers floor and roof. Columns are not covered. If you analyse this is basically a standard EAR cover. This also explains the difference between EAR and CAR policy that the General Insurers provide to cover the risks associated with the engineering risks.
(4) The DE-4 is Defective Part Exclusion cover and it covers Floor, it covers Roof and it also covers the column but it excludes supporting rod within the column.
(5) The DE-5 is Design Improvement Exclusion cover and as the name suggests it covers everything including the supporting rod within the column but cost of supporting rod is not covered.
Vinay Verma, M.Com; Fellow member of Institute of Cost & Works Accountants of India, Fellow member of Insurance Institute of India, Associate Member of Institute of Company Secretaries of India, Gold Medalist in PG Diploma in Marketing Management & PG Diploma in Management
For Civil Engineering Risks one should always be sure of what kind of risks one is going to venture in and whether proper protection has been availed.
ReplyDeleteDesign defects are not covered in the basic risk though EAR provides some basic coverage as DE-3 mentioned above.
It is prudent to look the minute details of the cover provided by the insurers to avoid issues at the time of claim.
Swati
GOOD ADDITIONAL INFORMATION
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