Erection All Risks (EAR):
The Material Damage
Framework for Installation

What Is Erection All Risks (EAR) Insurance?

Erection All Risks (EAR) insurance is an engineering insurance for the sudden and unforeseen physical loss that machinery, plant and electro-mechanical systems may meet during erection, within the scope and exclusions of the policy. Under Article 1 of the Erection Insurance General Conditions, the insurance responds where the insured items, while at the erection site within the period of cover, suffer loss or damage from a sudden cause not known in advance and not excluded by the policy.

"All Risks" does not mean unlimited cover. Cover is limited to sudden causes not known in advance, and the General Conditions list exclusions, some applying unless otherwise agreed and others always (see the sections below).

Typical Erection Works and Insured Items

Erection insurance typically arises for installation works such as:

• Installation of industrial machinery and production lines
• Electro-mechanical erection works at energy, production and infrastructure facilities
• The machinery and plant that are the subject of the policy

Risks are assessed according to the project, the insured items, the deductibles and the General and Special Conditions. Under Article 11 of the General Conditions, the sum insured stated in the policy may not be lower than the value of the machinery, installations and materials to be erected (including customs, taxes and duties, and freight and erection costs, where applicable).

Period of Cover and the Move from Transit to Erection (Art. 4)

• Start: Cover starts, on the basis of the start date stated in the policy, when the items on the attached schedule are unloaded at the erection site, and ends on the end date stated in the policy.
• Early handover: If the erection is completed in whole or in part and handed over to the employer before that date, cover ends for those parts.
• Where transit insurance exists: For machinery and materials unloaded at the erection site, where transit insurance exists, erection cover starts from the end of the transit cover.
• Extension: If the erection works are not completed by the date stated in the policy, the period of cover is extended on terms set by the competent Tariff Committee and for an additional premium.

Testing and Commissioning: the Trial Period (Art. 4)

The Erection General Conditions regulate testing and commissioning as the trial period (tecrübe devresi). They draw no distinction between cold and hot testing; the test plan and the start and end dates of the trial period should be defined clearly in the policy.

• Four weeks included: Unless the policy states otherwise, the period of cover includes a four-week trial period.
• Used machinery and plant: Where the erection of used machinery and plant is insured, no trial-period cover can be given for them.
• 8 days' prior notice: The insured must notify the insurer in writing at least 8 days before the trial run of all or any part of the plant starts. If the erection cover period will end earlier than stated in the policy, this too must be notified in writing at least 8 days in advance.
• Beyond four weeks: Loss or damage in a trial period exceeding four weeks is excluded unless otherwise agreed (art. 2(f)). If the trial activities cannot be completed within four weeks, the period of cover may be extended on terms set by the competent Tariff Committee and for an additional premium.
• After the trial period: Loss in parts that are completed, whose trial period has ended, or that have been handed over to or used by the employer is excluded (art. 3(i)).

Exclusions and Extensions Subject to Agreement

The General Conditions contain two groups of exclusions. The first applies unless otherwise agreed and can be brought into cover by agreement; the second is excluded.

Excluded unless otherwise agreed (art. 2)

• Machinery, tools and equipment used for the erection, and temporary huts and auxiliary installations
• The insured's legal liability for losses suffered by third parties
• Costs of removal of debris following a loss
• Costs of express freight (other than by air) and overtime necessitated by loss within the cover
• Loss caused by strikes, lockouts, civil commotion and popular movements, and the military and police action they necessitate
• Loss or damage during a trial period longer than four weeks
• Loss resulting from terrorist acts under Law No. 3713, associated sabotage and measures by competent authorities to prevent them (biological and chemical contamination is separately excluded by art. 3(m))
• Pollution loss of any kind arising directly or indirectly from the realisation of insured perils

Excluded (art. 3)

• War, invasion, civil war, revolution, insurrection and uprising; nuclear fuel and radioactivity
• Acts of the public authority on the insured property
• The repair and replacement cost of defective parts (art. 3(d); see the next section)
• Wear and tear, rust and decay
• Mechanical or electrical breakdown of the machinery and equipment used for erection (loss to other insured items caused by it is covered)
• Inventory shortages
• The wilful act of the insured or the responsible person acting for it and, where the contract so provides, gross negligence
• Loss in parts that are completed, whose trial period has ended, or that have been handed over to or used by the employer
• Consequential loss of every kind, including loss of profit, arising from delay (art. 3(j))
• Aircraft, land vehicles and floating craft used in connection with the erection
• Cash, valuable papers, invoices, books and records, and construction and installation plans and designs
• Biological and/or chemical contamination, infection or poisoning resulting from terrorist acts

Extensions: only under the policy and agreed terms

Extensions within art. 2, such as third-party liability, erection equipment and debris removal, apply only where otherwise agreed, that is, under the terms of the policy or an endorsement; scope and limits are stated in the policy. The Erection General Conditions contain no separate provision on existing property; cover for existing property or neighbouring property depends on express wording in the policy.

Defective Part and Resulting Damage (Art. 3(d))

Article 3(d) of the General Conditions excludes construction, casting, material, calculation, workshop and assembly defects inherent in the items to be erected. The same article limits the exclusion: it relates only to the repair and replacement cost of the defective parts and does not extend to loss or damage that these causes bring about in other insured items.

This section does not mean unconditional cover, or an unconditional general exclusion, for defective manufacture or design; the outcome depends on the cause of loss and the policy wording. For the CAR counterpart, see Construction & Erection Insurance.

Maintenance Period

The Erection Insurance General Conditions contain no express maintenance-period provision. By contrast, loss in parts that are completed, whose trial period has ended, or that have been handed over to or used by the employer is excluded (art. 3(i)).

An erection policy therefore carries no automatic maintenance cover. Where maintenance-period cover is to be given, it depends on a special clause and the policy terms and must be stated expressly in the policy. Under the Construction Insurance General Conditions, by contrast, maintenance-period cover is arranged by additional agreement (A.3(f)); see Construction & Erection Insurance.

Delay in Start-Up (DSU/ALOP) and the Standard Material Damage Cover

A financial loss tied to delay in the start of the project differs from the standard material damage cover of an erection policy. Under Article 3(j) of the General Conditions, consequential losses of every kind, including loss of profit and aesthetic defects, arising from delay to or full or partial stoppage of the erection, failure to complete the undertaking, termination of the contract or penalty provisions, are excluded.

DSU/ALOP is arranged separately as a loss that depends on an insured material damage loss under the principal (EAR) policy. This page sets out no verified General Conditions, wording or cover trigger for DSU/ALOP and does not imply that cover will be offered. For the general framework, see Engineering Insurance.

The Technical Distinction between CAR and EAR

CAR deals mainly with construction works and EAR with erection and installation works. The two insurances have separate General Conditions.

Mixed EPC projects: No single definitive classification rule is asserted. The predominant activity, the insured items, the project phases and the underwriter's assessment are considered together. For the CAR structure, see Construction & Erection Insurance.

Sum Insured, Notification of Loss and Limitation

• Increase in value: If the values making up the sum insured increase, the policyholder must notify the insurer in writing within 5 days of becoming aware of it and before any loss. Increases not exceeding 20 per cent of the sum insured are treated as insured; increases above that require the insurer's written consent (art. 11).
• Notification of loss: Loss must be notified to the insurer within 5 days of becoming aware of it, and salvage and protective measures taken. If the insurer does not send its surveyor within 7 days of notification, the insured may begin repairing the damaged part (art. 12).
• Settlement: For partial loss, the cost of restoring the item to its condition the day before the loss is paid; for total loss, its value the day before the loss; salvage and any deductible are deducted. For used items, a deduction for the difference between old and new applies to replaced parts (art. 15).
• Limitation: Claims arising from the insurance contract are time-barred after two years (art. 23).

Technical Information and the Underwriting Information Set

In assessing an erection insurance proposal, an insurer may typically ask for the information below. This is an underwriting information set, not a list of mandatory documents; the information needed varies by insurer and project.

• A detailed description of the project and the works
• The employer, contractor and subcontractors
• The erection location and project timetable
• The machinery and equipment inventory and sums insured
• The split between new and used equipment
• The transit and site delivery plan
• The testing and commissioning procedure and its duration
• Ground, environmental and third-party risks
• Requested extensions and deductibles
• Existing insurance programmes

Frequently Asked Questions

Neolife's Role

Neolife Group can review the relevant information and policy wording, research suitable local insurance solutions, run a placement exercise and compare the quotations received. This does not mean any insurer's capacity, acceptance of cover, price or payment is promised; acceptance and terms remain with the insurer.

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