Engineering Insurance Claims
How claims under CAR, EAR, CPM and boiler policies are reported, surveyed and settled: the insured's first duties, the surveyor's role, the records that prove a loss, common disputes and how they are resolved.
Why these claims are different
An engineering loss is rarely simple. The subject is technical, several parties are involved in the project, the amounts are often large, and deciding what failed and why needs an engineer's eye. Claims under Contractors All Risk, Erection All Risk, Contractors Plant and Machinery and boiler policies are therefore assessed by specialised surveyors and depend heavily on project records.
The first hours after a loss
Engineering policies require immediate notice of a loss to the insurer, followed by written particulars. Emergency steps to make the site safe and to prevent further damage are taken straight away.
Beyond those steps, the damage is left undisturbed. The insured secures the site, takes photographs, preserves the evidence as it is and keeps the damaged parts until the surveyor has inspected. Repairs or clean-up carried out before the inspection can jeopardise the claim, because the surveyor can no longer see what happened.
The surveyor and the records
The loss is assessed by an IRDAI-licensed surveyor and loss assessor with relevant engineering qualifications, such as structural or mechanical. Under IRDAI's surveyor regulations, a licensed surveyor is mandatory for losses above ₹1 lakh in general insurance classes other than motor.
The surveyor has to establish two things: the cause of the loss and its amount. Daily construction or erection logs, material purchase records and photographic evidence are the essential proof of both. The logs show what stage the work had reached and what was happening on the day; the purchase records show what the damaged materials cost.
Disputes and how they are resolved
A well-known source of disputes in CAR and EAR claims is the design-defect exclusion and the interpretation of the LEG clauses. LEG 1/96 excludes all loss due to defects, LEG 2/96 excludes the cost of remedying the defective part but covers resulting damage to sound work, and LEG 3/96 is the widest. Parties also disagree over the cause of a loss and over its amount.
Engineering policies are commercial policies, and their disputes, particularly over the amount of a loss, commonly go to arbitration under the Arbitration and Conciliation Act, 1996, before technically qualified arbitrators. IRDAI's circular of 27 October 2023 removed the arbitration clause from retail general insurance policies; in commercial policies arbitration now rests on a separate agreement between the parties. The retail claim timelines in IRDAI's 2024 master circulars are for retail policies; commercial and large-risk claims have their own timelines.
Rules at a glance
A slab collapse handled well
Illustration: at a flyover site near Indore, shuttering gives way during a night pour and a span of fresh deck slab falls. The site engineer cordons the area and props the adjoining span, which are safety and loss-prevention measures. He informs the insurer at once and sends written particulars the next day. The debris is photographed and left where it fell, and the failed props are tagged and stored. When the surveyor, a structural engineer, arrives, the pour log, the concrete delivery records and the photographs let him fix both the cause and the quantity of work lost. Whether the claim is paid in full then turns on the policy terms, including which LEG clause applies if a defect is found.
Key points
- Notice of an engineering loss is immediate, followed by written particulars.
- Only emergency measures for safety and to prevent further damage are taken before the surveyor inspects; the rest is left undisturbed.
- Losses are assessed by IRDAI-licensed surveyors with relevant engineering qualifications.
- Daily logs, material purchase records and photographs prove the cause and the amount of the loss.
- Design-defect exclusions and the LEG clauses are a well-known source of disputes in CAR and EAR claims.
- High-value disputes commonly go to arbitration under the Arbitration and Conciliation Act, 1996, on a separate agreement between the parties.
Common misunderstandings
- Leaving the site undisturbed does not mean doing nothing: emergency steps for safety and to prevent further damage are expected straight away.
- Clearing debris quickly is not a help to the claim: repairs or clean-up before the surveyor's inspection can jeopardise it.
- Arbitration is not automatic in every policy: since October 2023 it is absent from retail policies and rests on a separate agreement in commercial ones.
- A defect does not always end the claim: the result depends on which LEG clause the policy carries.
Questions people ask
Why are daily site logs so important?
They record what work was in progress and what had been completed on the day of the loss, which is what the surveyor needs to establish cause and amount. Material purchase records and photographs support them.
Can damaged parts be scrapped once photographs are taken?
The damaged parts are kept until the surveyor has inspected. Photographs supplement the physical evidence; they do not replace it.
How does an arbitration begin?
Where the parties have agreed to arbitrate, it begins with a written notice under section 21 of the Arbitration and Conciliation Act, 1996. Costs are for the tribunal to allocate under section 31A.
What this lesson relies on
- Contractors All Risk, Erection All Risk, Contractors Plant and Machinery and Boiler and Pressure Plant policy wordings — claims conditions
- Insurance Act, 1938 — section 64UM, and IRDAI surveyor regulations
- IRDAI circular of 27 October 2023 on the arbitration clause
- Arbitration and Conciliation Act, 1996 — sections 11(3), 21, 31A and 34
- LEG defects clauses LEG 1/96, LEG 2/96 and LEG 3/96
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.