Engineering Insurance Claims
Definition
Engineering insurance claims involve reporting, documenting, and settling losses under CAR, EAR, CPM, and Boiler policies. These claims are typically complex due to the technical nature of engineering projects, involvement of multiple parties, high claim values, and the need for specialized engineering surveyors to assess losses.
Explanation in Simple Language
The engineering claims process follows a structured path: immediate notification to insurer (within 24-48 hours), appointment of a specialized engineering surveyor, site inspection and damage assessment, documentation review, and settlement. Engineering claims differ from other general insurance claims because they require technical expertise — surveyors are typically qualified engineers who understand construction, machinery, and metallurgical analysis.
Documentation is critical in engineering claims. The insured must provide: project contract and policy schedule, daily construction/erection logs, material purchase invoices and delivery records, photographs/video of damage, cause-of-loss analysis (often requiring independent engineering reports), repair estimates from manufacturers or contractors, and FIR if theft is involved.
Common claim disputes arise from: design defect exclusions (LEG endorsement interpretation), the distinction between covered accidental damage and excluded gradual deterioration, quantum disagreements between insurer and insured surveyors, and whether the maintenance period covers the specific defect. Most high-value engineering disputes go to arbitration under the Arbitration and Conciliation Act, 1996.
Real-Life Indian Example
A Rs 500 Crore flyover project in Mumbai suffered a partial structural collapse during construction due to unexpected soil liquefaction after heavy rains. The contractor immediately notified the insurer, secured the site, and documented everything with drone photography. The insurer appointed a panel of surveyors including a structural engineer and geotechnical expert. After 3 months of investigation, the claim of Rs 28 Crore was settled — covering reconstruction cost, debris removal, and third-party property damage to vehicles on the road below.
Claim Scenario
An EAR-insured turbine installation at a power plant suffered damage during commissioning tests. The contractor claimed Rs 8 Crore. The insurer argued the damage was due to a design defect (excluded under LEG 3/96 in the policy). The contractor contended it was a manufacturing defect in the bearings, not a design issue. After a 6-month dispute involving metallurgical analysis, the matter went to arbitration. The arbitrator found it was a manufacturing defect (covered), and directed the insurer to pay Rs 7.2 Crore.
Learning for POSP / Advisor
- Advise clients to notify the insurer within 24 hours of any incident — delay weakens the claim
- Stress documentation: daily logs, photographs, material records, and cause-of-loss reports
- Do not disturb or clean up the damage site until the surveyor has inspected it
- For large claims, recommend the client appoint their own independent surveyor
- Understand LEG endorsement versions — they are the most common source of claim disputes
- Arbitration is common for engineering claims above Rs 1 Crore — set client expectations
- Help clients maintain proper project records throughout, not just after an incident
Summary Notes
1. Notify insurer within 24 hours — immediate telephonic intimation followed by written notice.
2. Do not disturb the damage site until the surveyor completes inspection.
3. Engineering surveyors are IRDAI-licensed engineers with relevant technical qualifications.
4. Critical documents: daily logs, material records, photographs, cause-of-loss reports, repair estimates.
5. Design defect exclusions (LEG endorsements) are the most common source of claim disputes.
6. Simple claims settle in 30-60 days; complex disputes may take 6-12 months or go to arbitration.
7. For claims above Rs 1 Crore, consider appointing an independent surveyor to protect the insured's interest.