What is the difference between construction equipment and engineering tools insurance and a contractor's work policy?
Dec 30, 2018
Contracting work on a construction site naturally requires the use of facilities, tools, and engineering mechanical equipment (EME). It is therefore important to understand the insurance aspects related to these tools and EME, and especially to recognize that a contracting work insurance policy offers a very limited solution for them .
Chapter A of the contractor's policy (property) includes insurance for light equipment and facilities, which is limited to a maximum ceiling (usually up to 10% of the project value) and the value of a single item up to 40,000 shekels only.
Many people misunderstand this issue, under the mistaken belief that a policy for contractor work under the "All Risks" framework necessarily includes insurance for the engineering tools that will enter the site, which is not the case .
What does the contractor's policy include? As noted - insurance for light equipment and facilities up to the value stated in the policy - usually up to about 10% of the cost of the work and a maximum stated amount, and up to a ceiling of NIS 40,000 for a single item . This is a significant limitation on coverage for tools used to perform the work , as opposed to construction inputs that are "part of the project" and are insured within the full insurance amount of the project. Furthermore, the value ceiling for a single item (40,000 shekels) does not allow for partial insurance. For example, if a tool worth approximately 60,000 shekels is used on site, the equipment is excluded from the policy completely and for the first shekel, and is not insured at all, not even for the "first" 40,000 shekels.
Contracting work on a construction site naturally requires the use of facilities, tools, and engineering mechanical equipment (EME). It is therefore important to understand the insurance aspects related to these tools and EME, and especially to recognize that a contracting work insurance policy offers a very limited solution for them .
Chapter A of the contractor's policy (property) includes insurance for light equipment and facilities, which is limited to a maximum ceiling (usually up to 10% of the project value) and the value of a single item up to 40,000 shekels only.
Many people misunderstand this issue, under the mistaken belief that a policy for contractor work under the "All Risks" framework necessarily includes insurance for the engineering tools that will enter the site, which is not the case .
What does the contractor's policy include? As noted - insurance for light equipment and facilities up to the value stated in the policy - usually up to about 10% of the cost of the work and a maximum stated amount, and up to a ceiling of NIS 40,000 for a single item . This is a significant limitation on coverage for tools used to perform the work , as opposed to construction inputs that are "part of the project" and are insured within the full insurance amount of the project.
Furthermore, the value ceiling for a single item (40,000 shekels) does not allow for partial insurance. For example, if a tool worth approximately 60,000 shekels is used on site, the equipment is excluded from the policy completely and for the first shekel, and is not insured at all, not even for the "first" 40,000 shekels.
How, then, do you deal with this complex insurance issue?
The answer is divided into three overlapping levels:
First level, awareness: The contractor/developer/client must recognize that the contractor's policy does not cover the tools and engineering equipment that enter the site if the cost of the individual item is higher than 40,000 shekels.
Second level, involvement: The contractor/developer/client of the work is not allowed to "rest on their laurels" and must be actively involved in examining the insurance policies applicable to the engineering tools and mechanical equipment that enter the gates of the construction site. He must ensure that the tools are insured by their owners with all the necessary insurance, starting from mandatory insurance (as required) and ending with additional comprehensive insurance, including third-party insurance.
Third level, exemption clause: In any contract with subcontractors who bring tools and equipment to the construction site, a clear and unambiguous exemption clause must be included, according to which the responsibility for insuring the tools applies to their owners and is not based on insurance purchased by the contractor/developer/client of the work (including, of course, regardless of the contractor work insurance policy).
The answer is divided into three overlapping levels:
First level, awareness: The contractor/developer/client must recognize that the contractor's policy does not cover the tools and engineering equipment that enter the site if the cost of the individual item is higher than 40,000 shekels.
Second level, involvement: The contractor/developer/client of the work is not allowed to "rest on their laurels" and must be actively involved in examining the insurance policies applicable to the engineering tools and mechanical equipment that enter the gates of the construction site. He must ensure that the tools are insured by their owners with all the necessary insurance, starting from mandatory insurance (as required) and ending with additional comprehensive insurance, including third-party insurance.
Third level, exemption clause: In any contract with subcontractors who bring tools and equipment to the construction site, a clear and unambiguous exemption clause must be included, according to which the responsibility for insuring the tools applies to their owners and is not based on insurance purchased by the contractor/developer/client of the work (including, of course, regardless of the contractor work insurance policy).
Every vehicle entering the construction site must have third-party insurance, because the contractor's work insurance policy contains an exclusion for damage caused to third-party property as a result of using a vehicle (such as a truck-mounted crane hitting the side of a nearby building while loading and unloading).
The contractor's policy states that third-party coverage resulting from the use of a vehicle is "above the standard liability limit of the offending vehicle," which at its lowest level is approximately 400,000 shekels.
In other words, the developer/contractor/client must therefore ensure that vehicles entering the site have standard third-party insurance (at least 400,000 shekels), and the remainder for third-party compensation will be through the project insurance (needless to say that this does not exist automatically and a special extension must be purchased for this purpose. The coverage is of course present in the insurance specifications offered to our clients).
What about vehicles?
What about bodily injury? A tractor or vehicle hitting a pedestrian? Insofar as we are dealing with a "traffic accident" according to its definition in the Road Accident Compensation Law, 5735-1975 (the Road Accident Compensation Law), the coverage applies to the vehicle's compulsory insurance. In this regard, it should be emphasized that the Road Accident Compensation Law (almost always) prevails over any other legislation. Therefore, every vehicle that enters the construction site must have compulsory insurance as required by the Motor Vehicle Insurance Ordinance.
Sounds simple? Think again. Not every vehicle used for construction work is required to have compulsory insurance by law. About 15 years ago, in January 2002, the Ministry of Transportation established a long list of vehicles of the type "TSA" that are not required to have compulsory insurance (as a result, insurance companies even stopped issuing compulsory insurance for them).
These are tools that are found on almost every construction site in Israel, such as tower cranes and lifting platforms. Where will compensation be paid for bodily injury due to the operation of construction equipment that is not subject to mandatory insurance? Through the contractor's policy. This is as long as it was purchased "correctly" and with the appropriate extensions, including coverage against bodily injury due to the use of a vehicle that is not subject to mandatory insurance.
Bodily injuries resulting from a car accident
Highlights in conclusion:
A. The contractor's policy provides very limited property insurance coverage for light equipment and light work tools brought to the site for the purpose of its execution.
B. Any facility, equipment, vehicle, or CMA vehicle, the value of which exceeds 40,000 shekels, is not insured by property insurance in the contractor's policy and appropriate specific insurance must be purchased for it.
C. A vehicle as defined in the traffic regulations must be insured with compulsory insurance.
D. A vehicle as defined in the traffic regulations must be insured with third-party property insurance. If an extension for third-party damage resulting from the use of a vehicle has been purchased in the contractor's policy, then it will only apply above the standard liability limit of the offending vehicle, and up to the liability limit set in the policy for this extension.
E. CMA vehicles that are not required to have compulsory insurance and are used on the construction site will be covered by the third-party chapter of the contractor's policy for bodily injury, only if an extension has been purchased for bodily injury from CMA vehicles that are not required to have compulsory insurance, and according to the liability limit set in the extension (in the insurance policies we issue to our clients, the liability limit is the full limit of the third-party chapter).
F. Construction vehicles such as cranes, platform presses (not wheeled) and more - according to a list defined by the Ministry of Transportation as vehicles that are not subject to mandatory insurance and were excluded from the definition of "vehicles" according to the Traffic Ordinance - are covered by the policy for insurance of the contracting works in third-party insurance for property damage during their activity on the construction site, to the extent that no exceptions to this are specified in the policy.
G. It is recommended to incorporate into the work contract with contractors and subcontractors a clause exempting them from liability regarding property insurance for vehicles, equipment, and facilities brought by them to the work site for the purpose of performing them, as well as an exemption regarding compulsory and third-party insurance for vehicles.
A. The contractor's policy provides very limited property insurance coverage for light equipment and light work tools brought to the site for the purpose of its execution.
B. Any facility, equipment, vehicle, or CMA vehicle, the value of which exceeds 40,000 shekels, is not insured by property insurance in the contractor's policy and appropriate specific insurance must be purchased for it.
C. A vehicle as defined in the traffic regulations must be insured with compulsory insurance.
D. A vehicle as defined in the traffic regulations must be insured with third-party property insurance. If an extension for third-party damage resulting from the use of a vehicle has been purchased in the contractor's policy, then it will only apply above the standard liability limit of the offending vehicle, and up to the liability limit set in the policy for this extension.
E. CMA vehicles that are not required to have compulsory insurance and are used on the construction site will be covered by the third-party chapter of the contractor's policy for bodily injury, only if an extension has been purchased for bodily injury from CMA vehicles that are not required to have compulsory insurance, and according to the liability limit set in the extension (in the insurance policies we issue to our clients, the liability limit is the full limit of the third-party chapter).
F. Construction vehicles such as cranes, platform presses (not wheeled) and more - according to a list defined by the Ministry of Transportation as vehicles that are not subject to mandatory insurance and were excluded from the definition of "vehicles" according to the Traffic Ordinance - are covered by the policy for insurance of the contracting works in third-party insurance for property damage during their activity on the construction site, to the extent that no exceptions to this are specified in the policy.
G. It is recommended to incorporate into the work contract with contractors and subcontractors a clause exempting them from liability regarding property insurance for vehicles, equipment, and facilities brought by them to the work site for the purpose of performing them, as well as an exemption regarding compulsory and third-party insurance for vehicles.
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