SECTION WARRANTY

In yesterday blog, I mentioned about the Section Warranty. I had mentioned one of the many wordings used by the insurers. It read as:

“It is agreed and understood that otherwise subject to the terms, exclusions, provisions and conditions contained in the Policy or endorsed thereon, the Insurers shall only indemnify the Insured for loss, damage or liability directly or indirectly caused to or by road works if these road works are constructed in sections not exceeding in total the length stated below, irrespective of the state of completion of the insured works, and the indemnification for any one loss event shall be limited to the cost of repair of such sections. Maximum length of section: 1000 meters, Maximum Number of Sections: 3 “

Let’s look at another wording:

” In respect of road construction, the combine maximum length of excavation work, subgrade and subbase courses not covered by a waterproof wearing course shall not exceed anyone of the following at anyone time.
A road portion is not deemed to be completed until the asaphalt or concrete course has been laid.
Maximum length of section: 1000 meters, Maximum Number of Sections: 3 “

Which of these two wordings is a better wording? You may ask for whom-Insured or Insurer? My answer is Insured – Since what is good for insured is good for insurer.

The second wording gives a greater clarity of what we mean by completion of road work. It clearly mentions it is only related to flooding risk. Hence. looks better.

However, the second wording is silent on impact of a breach. This gives the insurer the right to even void the contract in case of a breach by insured.

Whereas the first wording is clearly mentioning the indemnification is limited to the cost of repair of such sections. Hence, insurer cannot void the contract, just can limit his liability.

A combination of both wordings could be a better wording.

Blog by Atmaram Cheruvu