HiteshKhristy,MSW,CIIA

LicensedGeneral&ReinsuranceBroker

ChancesforPotentialLoss&CriticalInsuranceCoversforRoadProjects
(ThingstobeconsideredwhiledesigningtheInsuranceProgramforRoadProjects)

Historynoticesthatthefirstroadwasconstructednearly4000yearsagoandsincethentherehavebeen continuous development in methods, techniques and types of roads. The Romans built stone paved roadsinNorthAfricaandEuropetosupporttheirmilitaryoperations.LatertheArabsbuiltroadsthat werecoveredwithtar.Theroadswereconstructedbypreparingearthworksandliftingroadfoundation atthecenterforthewaterdrainage.Theroadconstructiontechniquesgraduallyimprovedbythestudy of road traffic, stone thickness, road alignment, and the slope gradients. The initial road construction materialswerestonesthatwerelaidinaregular,compactdesign,andcoveredwithsmallerstonesto produceasolidlayer. Dependingonthemainfunction,trafficloadanddesignspeedroadscanbecategoriesasunder Motorways:Motorwaysaregenerallyroutesforfastmovingandlongdistancetraffic. StrategicRoutes:Aretrunkroadsbetweenprimarydestinationsandshortdistanced. Distributor Roads: They form the urban networks and are primary links for local traffic with variousjunctions. Link Roads: Link road are the Linking distributor networks with frontage access and frequent junctions. AccessRoads:Theyareservinglimitednumbersofpropertiesandcarryonlyaccesstraffic Development of road project would generally comprise of following subsections and activities. Site clearance,Drainageworks,Earthworks,Subbase,Roadbase,Flexiblesurfacing,Footways,Trafficsigns and road markings, Concrete for structures, water works, Electricity, Light works, Telecommunication works, Traffic signal works, Landscaping, Irrigation, Pedestrian crossings, under pass, overpass, roads, bridges, culverts,Fencingsetc.Inadditionitwouldhaveaspect ofDesigning worksaswell.Eachitem hasdifferentareaofcivilengineeringandcarriesdifferentrisks. StagesofConstructions Wewouldalsohavetoexaminethevariousstagesinvolvedinthedevelopmentofsuchproject.There would be two types of projects mainly, 1) Development of a new road 2) Redevelopment of the road which we would classified as strengthening and widening of the road. The project can comprise of maintenance of the road as well. The various stages under the construction & development of road workswouldbeasfollows. ClearingandExcavation:areaonwhichtheroadisgoingtobebuiltonmustbeclearedofall vegetation,whichrequirestheremovaloftrees,shrubsandbushes.Excavationvehicleswillalso dig up and remove rocks and stones from the future road's pathway. To prevent the cleared landfromerosion,controldevices,includingfences,ditchesandbasinsareinstalled. Mounting:Theroadtakesshapeasdiggers,excavationplantmachineryandbulldozersmount dirtandsoilovertheareawherethe futurepathwaywillrun.Thesurfaceisthenleveled and smoothedbygraders.Culvertsanddrains,consistingoflargeconcretepipes,arelaidtoprevent theroadfromfloodingbyleadingawaygroundwater,sewageorstormwater. Fine Grading: Fine grading requires construction workers to prepare the surface by leveling it according to plans provided by structural engineers. Fine grading requires manual labor and
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HiteshKhristy,MSW,CIIA
LicensedGeneral&ReinsuranceBroker

digging as well as grading plant machinery, also called graders. To make the grading last, it is stabilizedwithlimestoneorconcrete. Aggregate Base: After another grading of the surface, the aggregate base course is laid. Aggregatebaseismadeofcrushedstoneorgravel,anditisplacedevenlyontheroadsurface.If theroadisinatownorcity,acurbforthepavementandthegutterwillbeconstructedstraight afterthegravelisplacedonthesurface.Theroadisthenfinegradedagain. AsphaltPaving:Oncethegravelhasbeendistributedevenly,theasphaltcanbepoured.Asphalt is a mixture of a petroleum byproduct, an aggregate base material and a sticky, gluelike substancecalledbitumen.Dependingontheexpectedtrafficontheroad,uptofourlayersof asphaltcanbeplacedontopofeachother.Theasphaltusuallyisproducedandmixedinlarge plantsaftertheengineer'sspecifications.Thehotasphaltisfilledintotrucksthattransportthe material to the construction site where it will be poured immediately. Before the last layer of asphalt is poured, the sidewalks and gutters have to be finished. The construction work is concluded by placing the appropriate road signs at the places specified by planners and the applicationofroadmarkings. InsuranceProgram Designinganyinsuranceprogramrequirestounderstandthenatureofworktobecarriedout.Whenit comes to specialized programs, in addition it is also important to understand the role of connected parties, the side of the project, responsibilities of contractor, subcontractor, designer, work to be out sourced,historicalandexperienceofpartiesinvolved,Designaspectofwork,timeschedule,materialto beused,ContractConditions,worksattachedtothemainproject,pastlossesinsuchprojectetc. Variousunderwritingmethodsareunderusebuttheobjectiveamongallistoassesstheriskandcharge the premium accordingly. We would try to examine some areas of potential losses and some of the coversthatcanbeincorporatedininsurancepoliciesthatcanprotecttheContractor,Principalsinterest atalargerextend. PotentialChangesofLoss Belowmatrixwouldshowtheriskstoroadprojectsandtheintensityoflossitcancause. CauseofLoss Flood&Inundation Earthquake Windstorm Landslide Rockslide Subsidence ImpactDamagebyTPV RSMD Fire/Explosion AircraftDamage Terrorism
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SeverityofLoss High High Depends on Geography / Moderate TopographyofLocation ModeratetoHigh ModeratetoHigh LowtoModerate Moderate High LowtoModerate Low LowtoModerate Low LowtoModerate Low High Low High

ChancesofLoss

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HiteshKhristy,MSW,CIIA
LicensedGeneral&ReinsuranceBroker

FurthermoreFlood&Inundation,Earthquake,Windstorm,Landslide,Rockslide,Subsidenceriskswould be classified as Natural Catastrophes & Topographical Exposures that can cause heavy damage to the works. Flood&Inundation:Floodshavecauseddamagedtoroadunderconstructionandinoperation heavilyinpast.Extraordinarilyheavyrainfallcanalsocausedamagetoroadworks.Duringrainy seasonsthewaterlevelcanraisesignificantly,evenbeyondriver,lakeorwaterbodies,banks, causing extensive flooding damage. Rivers running parallel to roads over long distances may heavilydamagetheconstructionworks,especiallyifculvertsareunderdesignedorobstructed bydebris.Thiswouldgenerallybeinlargeamountanddamagewouldbetoentireareaaffected in kilometers/miles & would be largely part of property damage claims. After flood situation wouldrequirereconstruction&repairingworkstobecarriedout. Rain: Heavy or longlasting rain can wash away unprotected, incomplete or inadequately stabilizedroadsectionsandcauseerosion.Inadequatelydesignedorunavailabilityofdrainage systems, culverts, ditches and other facilities with the road under construction may result in flooding. Windstorm:Windstormexposureexistsforstructuresliketemporarybuildings/office;electric pollsetcunderconstructionandcanaffectthestability.Indesertsordesertlikeareas,subbase orbasecoursecanbecontaminatedbydriftingsandduringsandstorms. Snow&Ice:Frost(Ice):FrostweightandsettlementmaycausedamagetoRoadSurface,lossof compaction and loss of strength during thaw. Snow will normally cause losses to road construction only if it appears in the form of avalanches, in particular if sizeable quantities of debrisarecarriedalong. Earthquake: Earthquake can cause damage to road works by making it uneven, cracks etc. Particular exposures exist in sections under construction or already completed as well as undergroundservicescanberupturedasaresultofanearthquake GroundFailure:ThecasesofsoilcollapsecanleadtodamagewhichwouldrequireTemporary repairs and repairing works afterwards. Also, the unexpected change of soil quality, especially withthepresenceofgroundwaterinareawoulddamagetheroadworksandmaycallforsoil improvement treatment prior putting up the patch up works. This would largely be in specific shortareas(metersetc) Landslide:Thesuddenaccumulatedwatervolumenotbeabsorbedbythegroundwouldcause landslideoccurredaffectingroadworksandditchesunderconstruction.CutSlopeislessstable thananaturalslope;itmaycollapseandcreatealandslidedisaster.Exposureisthere,assoilis inveryweakconditionastheprotectionworkstostabilizetheslopeisnotcompleted. Collapse of Road: When cut slope angles are not adequately adapted to ground conditions, thereareinsufficientinstallationsofgabionstoprotectcanalandroadstructure&insufficient benchingchancesforcollapseofroadwouldbe higher.Inadequatedrainage ofslopesagainst watercoursesandrainfallwouldalsoleadtocollapse.
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HiteshKhristy,MSW,CIIA
LicensedGeneral&ReinsuranceBroker

RiskexposuresotherthanNaturalCatastrophes&TopographicalConditions CauseofLoss ChancesofLoss SeverityofLoss Failure of construction equipments / LowtoModerate ModeratetoHigh humanerror DefectiveDesign LowtoModerate ModeratetoHigh DefectiveMaterial LowtoModerate ModeratetoHigh DefectiveWorkmanship LowtoModerate ModeratetoHigh ThirdpartyLiability Moderate ModeratetoHigh ImpactDamage Moderate Moderate Fire Low Moderate Terrorism Low High ContractorP&M ModeratetoHigh ModeratetoHigh Faulty Material or Workmanship: Incorrect consideration or even nonconsideration of important design factors may lead to serious losses during construction or during the maintenance period. Faulty material often involves the use of materials not classified for the construction.Suchassubbaseorbasecoursematerialsoffaultycompositionorwearingcourse materialwhichdoesnotfulfillthespecifications.Faultyworkmanshipmay,forexample,resultin insufficientcompactionofthevariouslayersoftheroadstructure. FaultyDesign:Thedesignshouldbecarriedoutduringtheinsuranceperiodandinsurershould be intimated & informed accordingly. Designing aspect should consider the geographical conditions, soil conditions, project specifications etc. There are cases in past when the design aspecthavenotbeenaspertheabovefactorsandinsurershavekepttheclaimoutofthescope ofthepolicy. Third party liability: Land subsidence, landslide during excavation etc can cause damage to water pipelines, electricity polls, transmission lines, communication networks, surrounding propertyandbuildingsetcwhichmayresultintothirdpartypropertydamageclaims.Roadsin mountainous areas have high potential of TPL losses by high probability of landslides while major excavation, anchoring works, retaining walls change the soil stability. Surrounding structures adjacent to the road/bridge under construction can be severely damaged by construction activity. Under roads in rural areas, neighboring farms etc can be damaged by executionofinsuredworkswhileblastingoperationsetc.Roadinurbanareaswhereconcurrent traffic is in most of times allowed during construction, TPL exposure aggravates significantly. ThismaycausetoFatalorbodilyinjuryaswell. Human Error: Human error can take place while selection of Material, following the contract specifications,workbeyondscopeofwork,breachofcontractduties,supervisionofworkand site, failure to maintain timeline as per Bar Chart, failure to comply tender conditions, government rules,principle'sinterestsetcandwouldbepartof professionalindemnity claims underproject.
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HiteshKhristy,MSW,CIIA
LicensedGeneral&ReinsuranceBroker

Damage to Bridge, Culverts, underpass & Collapse: Various reasons can lead to damage to structuresassociatedwithroadandsubsequentlyitwoulddamagetheroadaswell.Earthquake, Flood,faultydesign,faultymaterialorlackofsupervision,badworkmanship,onsiteaccidents etc can cause damage to the structures and continuity of road under construction and operation. Theft:Largelywouldbeapartofremoteroads,highways,ruralroads,longdistancehighways etc. Isolated locations, site away from traffic and city experience the theft cases frequently. These claims may be small in nature but can create unavailability of required material or equipmentsontimecancausedelayinconstructionanddisturbthetimeschedule. LackofSkillorNegligenceofWorkers:Lackofskillsamongtheemployedpeoplecancausethe projectheavily.Suchasallmaterialhavebeenusedproperlybutwateringaspecthavenotbeen done properly which can result in to weak structure, damage, cracks etc. Lack of proper skills alsoincreasesthechancesofemployeeaccidentsonsite. ImportantUnderwritingClauses Abovewehaveexaminedvariousreasonsandperilswhichcancauselossestoroadunderconstruction andintooperation.Nowwewouldseefewoftheimportantcoversarerequiredinordertomakethe insuranceprogrambetter. Put in to Use: Road projects are largely given on Design, Built and Operate structure, where maintenance of the road becomes responsibility of contractor once the construction part is over. Ideally contractor would make part of the road open for use once it is ready (and connectedtoothertrafficroutes).Whiletheprojectperiodcontinues,developmentofroadis underprocess,thiscoverwouldprotectthecontractorfromlosstothehandedoverarea. Fire Policy: Design, Built and Operate contracts would require project policy (CAR) and Fire policy in order to protect the damages once the entire project is handed over. This would provideprotectionagainstthefire&alliedperils. WarrantyConcerningSections:Thiswouldgenerallybeinstandardformbutitvariesbetween differentunderwriters.Alsoonrequestandwithlogicaljustificationslengthofsectionscanbe increased. Cover for Offsite storage: This would largely cover the damage to property insured in offsite withintheterritoriallimits. TemporaryStructures:Onsitecontractmayrequiretocreatestructureswhicharetemporaryin naturesuchasbuildings,foundations,sheds,contractorssupportingitemsetc.Thecoverwould provideindemnificationagainstlossestothesestructures. Additional Expenses Arising out of change in methodology of Construction flowing indemnifiable loss: After suffering a loss that is covered under the policy, supplementary expensesmayarisebecauseofprojectdemandingchangeindifferentmethodofconstruction.If such expenses are unavoidable & necessary and solely for the purpose of avoiding increasing lossunderadvancelossofprofitpolicy,theinsurancepolicywouldprovidecompensationtothe contractorforsuchexpenses.
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HiteshKhristy,MSW,CIIA
LicensedGeneral&ReinsuranceBroker

CoverforDocuments:Thecostofrewritingdocument,plans,drawings,specificationsfollowing anincidentcausingdamagetosuchdocumentswouldbereimbursed. Special conditions for Open Trenches: This would generally be in standard form but it varies between different underwriters. Also on request and with logical justifications length can be increased. TemporaryaccessRoads:Irrespectiveoftheperiodoftheinsurancespecifiedinthepolicy,the insurer will indemnity the insured for accidental loss or damage to temporary access road insured under the policy if such loss or damage occurs prior to such road being completed or takenintousefortheirpurposebythecontractorwhichevertakesplacefirst. Works related to Water (Wet Risk & works in water): Generally works up to 5% of the sum insuredrelatedtowaterwouldbecoveredunderthemainpolicy;howevertheyhavetobein noticeoftheinsurer.Above5%ofsuminsured,aseparatecoverwouldberequiredcoveringall theworkssuchasriverbridges,passbycanals,culvertsetc. CoverforBridges,Culvertsetc:Generallyworksupto20%ofthesuminsuredwouldbecovered underthemainpolicy;howevertheyhavetobeinnoticeoftheinsurer.Iftheworksareabove 20% of the contract works, a separate cover would be required with payment of additional premium. CoverforTunnelingworks:iftheprojectinvolvesworksoftunnelingorroadconstructionunder tunneling, it has to be mentioned and inform to insure properly. The works would have to complywithcodeofinternationaltunneling. Apart from the above the regular covers required for road projects would be basic project insurancecovers,Thirdpartyliability,Terrorism,Earthquake,Surroundingproperties,72hours clause, Automatic reinstatement, Loss minimization expenses, removal of debris, professional fees,Crossliability,Escalationofsuminsured,CostofAirfreightandExpressfreight,Extended maintenance,DesignDefect(withappropriatewordings&class),Sudden&accidentalpollution, Temporaryrepair,Vibrationremovalandweakeningofsupport,Firefightingfacilitiesexpenses. PartiesshouldbeinsuredaccordinglyasperthewordingsofCoInsured,AdditionalInsuredor MultipleInsured.Allofthemhavedifferentinterpretationsandliabilitywouldshiftasperthe wordings. Additiontotheprojectinsurance,thepoliciescontractorwouldbesuggestedtoarrangeare Workmenscompensationinsurance:Forprotectingtheemployeesfromfinancialdamagedin an accidental situation. Workmen compensation is a form of insurance that provides compensation & medical care for employees who are injured in course of employment in exchangeformandatoryrelinquishmentofemployeesrighttosuehisorheremployerforthe tortofnegligence. Professional Indemnity Insurance: Construction Industry Professional Indemnity Insurance Policy provides protection against financial loss arising from a breach of professional duty
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HiteshKhristy,MSW,CIIA
LicensedGeneral&ReinsuranceBroker

committed by a professional in the conduct of their business. It also covers the costs and expenses of defending such claims. It is essential cover for construction professionals to help protect their business and personal assets. The policy can cover all project participants with responsibility for professional services rendered in connection with the construction process. Thisincludescontractorsandconsultantsalike,whetherworkingindividuallyorinjointventures orconsortiums. Contractors Plant & Equipments insurance: This is an All Risk policy covering sudden and unforeseenphysicaldamagetomachineryinsuredbyanycauseorperilnotspecificallyexcluded under the policy. CPM is specially designed to cover Machineries, Plants, Cranes, Equipments etc.Basedontheterms,thepolicycanprovideindemnityprincipaltoo. FireInsurance:Design,BuiltandOperatecontractswouldrequireprojectpolicy(CAR)andFire policyinordertoprotectthedamagesoncetheentireprojectishandedover. An effort have been made under this article to keep the information and language simple in order to make it easy to understand for the insurance managers and people buying commercial insurance productsfortheirbusiness.Theideabehindthesecontentsistoprovideabasicplatformsothateach enterprise can evaluate their insurance program based on the policies recommended. Specialized requirementsshouldbeevaluatedincoordinationwithunderwriterforfurtheraction. Formoreinformationpleasecontact:khristyhitesh@gmail.com

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