Erection All Risk (EAR)
Definition
Erection All Risk (EAR) Insurance covers physical loss or damage during the erection, installation, and testing of machinery, equipment, and steel structures. It protects equipment in transit to site, during storage, erection, and commissioning tests. EAR is essential for power plants, refineries, manufacturing units, and any project involving heavy machinery installation.
Explanation in Simple Language
EAR policies follow a structure similar to CAR but are tailored for mechanical and electrical installation risks. Section I covers the machinery and equipment being erected — from arrival at site through storage, erection, and testing/commissioning. Section II covers Third Party Liability. An optional Section III can cover the principal's existing property near the erection site.
The testing and commissioning phase is particularly important. EAR covers operational testing (hot testing) of installed machinery for a defined period, typically 4-8 weeks. The maintenance period (usually 12 months) covers defects originating during erection that manifest after handover.
Key risks specific to EAR include dropping of heavy equipment during lifting, damage during alignment and calibration, electrical short circuits during testing, and fire during hot commissioning. Exclusions mirror CAR — wear and tear, design defects (without LEG endorsement), consequential losses, and penalties.
Real-Life Indian Example
A 500 MW thermal power plant in Chhattisgarh had an EAR policy for Rs 800 Crore covering turbine, boiler, and generator installation. During crane lifting, a 120-tonne turbine rotor slipped from the sling and fell 8 metres, causing Rs 15 Crore in damage to the rotor and foundation. The EAR policy covered the full repair cost minus the Rs 10 Lakh deductible, and the claim was settled within 90 days after the manufacturer confirmed the damage assessment.
Claim Scenario
At a new cement plant in Rajasthan, a kiln drive motor (insured under EAR for Rs 12 Crore) suffered a major electrical fault during hot commissioning, causing fire damage to the motor windings and control panels. Total loss: Rs 3.5 Crore. The insurer verified that the testing was within the policy-defined commissioning period and the fault was sudden and unforeseen. Claim of Rs 3.4 Crore was settled after deducting Rs 10 Lakh excess.
Learning for POSP / Advisor
- EAR is for machinery installation; CAR is for civil construction — recommend the correct policy
- Sum insured must include full cost of equipment plus erection expenses
- Testing/commissioning cover is critical — many losses occur during hot testing phase
- Ensure transit cover is included if equipment is being shipped to site
- Maintenance period of at least 12 months should be recommended
- For combined civil + erection projects, a combined CAR-EAR policy can be issued
Summary Notes
1. EAR covers erection, installation, and testing of machinery and equipment — distinct from CAR (civil works).
2. Coverage runs from equipment arrival at site through storage, erection, testing, commissioning, and maintenance period.
3. Testing/commissioning is the highest-risk phase — ensure adequate cover for hot testing.
4. Sum insured = equipment cost + erection expenses; under-insurance triggers Average Clause.
5. Combined CAR-EAR policies available for projects with both civil and erection components.
6. Inland transit cover must be added separately; overseas transit needs Marine Cargo policy.
7. Consequential losses (lost production, delay penalties) excluded — need separate DSU cover.