INDUSTRIAL ALL RISK

POLICY
DOYEL TRIPATHI
SOWJANYA S.
V.V. RAVIKIRAN
BALMEEK TIWARI
AMIT SUNKARWAR
MAYANK VERMA

Industrial All Risks Policy

Industrial all risk policy is a comprehensive policy to
cover damage to assets from all unforeseen
circumstances except defined exclusions .
Policy form consists of
Section I : Material Damage
Section II : Business Interruption
Overall Sum insured of Rs. 1 billion (100 Crores) and
above in one or more locations in India

Scope of Cover
Industrial all risk policy is a comprehensive policy to cover
damage to assets from all unforeseen circumstances
except defined exclusions .
Policy form consists of
Section I : Material Damage
Section II : Business Interruption

Section I : MATERIAL DAMAGE

SECTION
The Policy will pay if Insured Property be accidentally,
physically lost, destroyed or damaged other than by
excluded causes.
In widest form IAR cover all perils/covers under 1.

Standard Fire & Special Perils Policy

2.

Machinery Insurance Policy

3.

Boiler & Pressure Plant Insurance Policy

4.

Electronic Equipment Insurance Policy

5.

Burglary (other than larceny)

6.

Transit Risk inside Insureds premises

EXCLUSIONS :

Excluded causes :

1.

Faulty designed material or workmanship, inherent vice, gradual

deterioration or wear and tear.

Interruption of water supply, gas electricity or fuel system or

failure of affluent disposal system to and from the premises.

Collapse or cracking of building

Corrosion, rust, contamination or scratching etc.

Larceny, acts of fraud or dishonesty, unexplained or inventory

shortage.

Coastal or River erosion

Exclusions (contd.) :

Any willful act or negligence of Insured or his representatives

Cessation of work, delay or loss of market or any other

consequential or indirect loss

War and Kindred risk

Dispossession resulting from nationalisation or requisition by

authority or due to unlawful occupation of such building by any
person

Destruction of property by order of any public authority

Exclusions (contd.) :

2.

Excluded property :

Money, Cheques, Stamps, Securities, Works of art, Documents,

Manuscript, Computer system records, Plans, Explosives

Goods held in trust or Commission

(unless specifically mentioned as insured by the Policy)

Vehicles licenses for Road use, Locomotives, Aircraft, Watercraft

or like

Property in transit other than within the premises specified in

Schedule.

Exclusions (contd.) :

Property /structures in course of construction / demolition /

erection and materials connected therewith.

Land, Railway lines, Dams, Pipelines, Bridges, Docks,

Underground, offshore property unless specified.

Livestock, Growing crops or trees

Property damaged as a result of its undergoing any process

Property removed from the premises except machinery for

temporary repairs for 60 days

General Conditions
1.

Misrepresentation, Non-disclosure of any material fact

Policy voidable

2.

The Policy ceases on expiry of 7 days from date of fall or

displacement of building or part thereof

3.

Insurance ceases unless sanction of company obtained : (a)

alteration of trade (b) building unoccupied for more than 30
days Insured interest passes not by will or operation of
law

4.

Cancellation Clause

5.

Insureds duty : (a) intimation of loss (b) submission of all

documents.
Limitation of 12 months

General Conditions (contd.)

6.

Insurers right on happening of loss

7.

Fraudulent claims

8.

Option of company for mode of settlement of claims

9.

Average clause not applicable if less than 15%

10.

Contribution clause

11.

Reinstatement of Sum Insured Clause

Special Conditions to Sec.I

1.

Sum Insured :

Building, Plant & Machinery- Reinstatement value

and other fixed assets Stocks - Market value

Special Conditions to Sec.I

2.

Basis of Loss Settlement :

If property lost or destroyed Rebuilding of building or Replacement of property by similar property
If property damaged Repair of the damage or Restoration of damaged portion
To a condition equal to but not better or more extensive than its
condition when new.
Special Provisions of Reinstatement

3.

Debris Removal Expenses Of Insured Property limited to the amount entered in the
Schedule

Section II : BUSINESS
INTERRUPTION
1.

Loss of Gross Profit following loss and / or Damage

indemnifiable under Standard Fire & Special Perils
Policy and Burglary

2.

Loss of Gross Profit following loss and / or Damage

indemnifiable under Machinery Insurance, Boiler &
Pressure Plant Insurance or Electronic Equipment
(optional cover)

Section II : BUSINESS
INTERRUPTION
Exclusions :

Any restriction on reconstruction or operation imposed by any

public authority

Lack of sufficient capital for timely restoration or replacement of

lost property

Suspension, Lapse or Cancellation of a lease licence or order

Damage to Boiler, Economizers, Turbine or other vessels resulting

from their explosion / implosion

Damage to Electronic equipment, computer

Mechanical or Electrical breakdown or derangement of machinery

Deductibles as stated in the schedule

Section II : BUSINESS
INTERRUPTION
Basis of Settlement

: The amount payable as indemnity will be

(a) Reduction in Turnover and

(b) Increase in cost of working
Less : any saving in Insured standing charges
subject to adequacy of sum insured

Section II : BUSINESS
INTERRUPTION
Definitions :
1.

Gross Profit : (Turnover + Closing stock and WIP) (Opening stock

+ WIP + Uninsured working expenses)

2.

Uninsured Working Expenses : (a) Turnover and purchase tax

(b) Purchase (less discounts received) & (c ) carriage, packing and
freight

3.

Turnover :

4.

Indemnity Period : (Net of time excess)

Section II : BUSINESS INTERRUPTION

Definitions (contd.):
5.

Rate of Gross Profit

6.

Annual Turnover Over

7.

Standard Turnover (adjustment for trend or business and for

variation and for variation)

IMPORTANT PROVISIONS :

Memo I Benefits from Other Premises

Memo II Return of Premium

Add on Clauses :1) Growing crops, plants & trees :- This add-on covers accidental physical
loss destruction and damage to plants crops and trees being grown within
the premises for non-commercial purposes.

Though it is exclusion under the IAR policy but certain private companies
are covering it as an add-on.

2) Vehicles :- licensed for road vehicles can be covered in the own damage &
property damage part by charging additional premium and desirable excess.
3) Account receivable clause :- Individual, firm, corporation or joint
ventures will be named as additional insured with the insured in the
schedule when required by the contract. In the event if there is any violation
of the terms and conditions of one insured, it shall not affect the rights of
the other insured.

Add on clauses (continued).

4) Costs of rewriting records clause :- Here the insured will indemnify
the insured cost, charges and expenses incurring in replacing or
restoring documents at value of the materials.
5) Additional insured :- Individual, firm, corporation or joint ventures
will be named as additional insured with the insured in the schedule
when required by the contract.
6) De-contamination and cost of cleanup :- The policy covers the
cost of decontamination or cleanup cost of insured property
contaminated. This coverage is applicable to only that part of insured
property contaminated as a direct result of insured physical damage.

Add on clauses (continued)..

7) Employee and personal property cover :- Damages of employees
personal property at the insured premises is covered for which insured
is responsible provided that the insurer is not responsible to pay more
than what limit per employee per event set by the insured.
8) Non-vitiation clause:- Under this policy interests of various parties is
covered without additional rate of excess. Breach of conditions by any
one party will not affect the interest of other parties.
9) Incompatibility expenses:- The cost of replacement to mitigate the
incompatibility between the replaced equipment and undamaged
ancillary equipment or computer records.

Add on clauses (continued)..

10) Shut down-Start up clause: It covers the actual shutdown or startup
costs for power and other utilities namely water, electricity, steam ,gas and
necessary as well as fuels and combustibles to reestablish the plant it was at
the time of damage subject to limit specified.
11) Pair or set clause: Provisions found in commercial property forms like
hotels dealing with losses involving part of a set or one of a pair. In this case,
the insurer can either

Repair or replace any part to restore the pair or set to its value prior to the
loss, (or)

Pay the difference between the actual cash value of the property before and
after the loss.

12) .) Loss-payee clause : Insurer will pay the loss directly to the parties as
directed by the insured. Rate chargeable and excess is NIL

13) .) Property In off-site storage:

This clause covers the property at Manufacturers, fabricators,
distributors or suppliers premises.
15.) Expense for loss-minimization:
This policy includes expenses for loss-minimization necessarily
included by the insured to prevent aggravation of an insured loss
following a loss or damage at any insureds premises specified in the
schedule, including moving/ shifting of property if this contributes to
loss minimization, subject to a limit per loss as per schedule.