CAR and EAR policies are Project Insurance Policies. In projects, Contractors Plant and Machinery (CPM) like Cranes, Forklifts, etc are used. CAR/EAR policies have provision for covering CPM if the value is lower than Rs 25 lakhs. If higher, then separate CPM policy has to be bought by the insured.

However, at the time of underwriting no check is being made whether value of CPM equipment is lower than Rs 25 lakhs. Automatically, CPM is being covered under CAR/EAR for Rs 25 lakhs.

The policy says as per attached list, but a list of CPM equipment is rarely attached to the policy.

In such situation, it means that insurers are ready to cover on first loss basis. Hence, no underinsurance should be applied.

Unfortunately, when at the time of loss, insurers are finding that CPM equipment of value greater than Rs 25 lakhs are at site, some insurers are applying underinsurance. Some insurers are even declining the claim saying that since CPM value is greater than Rs 25 lakhs, the insured should have bought a separate CPM policy.

Legally not tenable-however, many claims are struck.

Blog by Atmaram Cheruvu