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
WILL REFER TO THE PRINCIPAL.
I
• 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.
MINOR WORKS INSURANCE
• 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.
MINOR WORKS INSURANCE
• 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 SUBCONTRACTOR 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.
MINOR WORKS INSURANCE
• 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
MINOR WORKS INSURANCE
– 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
MINOR WORKS INSURANCE
• 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.
MINOR WORKS INSURANCE
– 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.
MINOR WORKS INSURANCE
– 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.
MINOR WORKS INSURANCE
– 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
MINOR WORKS INSURANCE
• 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.
MINOR WORKS INSURANCE
– 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.
MINOR WORKS INSURANCE
• 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.
MINOR WORKS INSURANCE
• 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
MINOR WORKS INSURANCE
• 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
MINOR WORKS INSURANCE
• 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
MINOR WORKS INSURANCE
• 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).
MINOR WORKS INSURANCE
• 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
MINOR WORKS INSURANCE
• 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
MINOR WORKS INSURANCE
• 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.
MINOR WORKS INSURANCE
• 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
MINOR WORKS INSURANCE
• 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
MINOR WORKS INSURANCE
• 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 INSURANCE
CASE 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 INSURANCE
CASE 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.
MINOR WORKS INSURANCE
• 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.
MINOR WORKS INSURANCE
• 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
MINOR WORKS INSURANCE
• 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
MINOR WORKS INSURANCE
• 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
MINOR WORKS INSURANCE
• 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
MINOR WORKS INSURANCE
• 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
MINOR WORKS 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
MINOR WORKS INSURANCE
• 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