Article 56 Insurance

Works insurance

56.1 The Contractor shall effect and maintain at its own expense the insurance cover as specified in Articles 56.2 through 56.5. It shall provide terms and conditions as are reasonably available in the insurance market and that are customarily purchased by contractors on similar projects with regard to size, technology and location and the insurance cover shall be effected with financially responsible insurers or re-insurers reasonably acceptable to the Employer. The Employer shall be named in the relevant insurance policy as co-insured or additional insured, as the case may be.

56.2 Unless otherwise agreed in the Special Conditions, Marine Cargo Insurance shall be maintained for not less than one hundred ten percent (110 %) of the Incoterms® 2020 rule CIF value to cover loss or damage to the Works during transportation with conveyances of whatsoever kind from any warehouse worldwide until and including unloading at the Site. This cover shall not be less than the internationally known Institute Cargo Clauses (A) of the Institute of London Underwriters, provided war risks are available at base rate and the deductible shall not be higher than the amount per occurrence specified (if any) in the Special Conditions.

56.3 Construction/Erection All Risk Insurance shall cover loss or damage to the Works on all-risks basis for not less than the full reinstatement cost, subject to sub-limits as are reasonably commercially available and with exclusions customarily required by the insurance market, such as the exclusion of the terrorism risk. This insurance shall cover any Site activity after unloading of the Works at the Site, including storage on or near the Site, construction, erection, assembly, cold and hot commissioning and testing until the Taking-Over Certificate is issued or deemed to be issued.

56.4 The policy conditions shall comply with good international standards and shall contain all terms and conditions and endorsements as are customarily available in the insurance market. Loss or damage to the Works arising from the consequences of Negligence in respect of Design, material or workmanship shall also be covered (in accordance with the internationally known Design Clauses LEG 2/96 or Munich Re Endorsement 200). The general deductible in such policy shall not exceed the amount per occurrence specified (if any) in the Special Conditions.

56.5 The Contractor shall maintain the Construction/Erection All Risk Insurance to provide cover during the Defect Correction Period for loss or damage for which the Contractor is liable arising from a cause occurring through Site activities prior to the Date the Taking-Over Certificate is issued or deemed to be issued, and for loss or damage caused by the Contractor or Subcontractors in the course of any other operations in connection with their Defect liability obligations under the Contract (“extended-maintenance cover”).

General requirements for Articles 56.2 through 56.5 - Works Insurance

56.6 Unless otherwise agreed, the Contractor shall effect and maintain the insurance cover as set out in Articles 56.2 through 56.5 in the joint names of the Employer and the Contractor and shall provide for a waiver of recourse from the insurers against all insured parties.

Proof of Contractor’s Works insurance

56.7 On request of the Employer, the Contractor shall provide certificates of insurance or, if requested, copies of the policies and evidence that all premiums are paid by the Contractor at the latest thirty (30) Days before any risks with respect to which the Contractor is obliged to effect and maintain insurance in accordance with Articles 56.2 through 56.6 are likely to occur.

Application of insurance proceeds

56.8 Any insurance proceeds under the Works Insurance under Articles 56.2 through 56.5 shall be paid from the insurers directly to the Party having the risk at the time of the loss or damage and shall be applied for the repair or rectification of any damage that has occurred.

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Other Insurance

56.9 The Contractor shall, further to the Works Insurance as set out in Articles 56.2 through 56.5, effect and maintain at its own expense, or shall cause its Subcontractors to effect and maintain at their own expense, the following insurance cover with reputable insurance carriers authorised to do business in the Country:

  1. Employer’s liability and workman’s compensation insurance in accordance with any applicable law(s). If the law does not provide for any obligations in this respect or requires only some minimum limits, then the Contractor shall arrange this insurance in a manner and with limits as a prudent and reasonable Contractor in the same circumstances and environment would so do. This insurance shall be maintained in full force and effect during the whole time that Contractor’s Personnel are assisting in the execution of the Works on Site.
  2. Automobile liability insurance in the Country in accordance with any applicable law(s). If the law does not provide for any obligations in this respect or requires only some minimum limits, then the Contractor shall arrange this insurance in a manner and with limits as a prudent and reasonable Contractor in the same circumstances and environment would so do.
  3. Comprehensive third-party liability insurance to cover Contractor’s legal liability with a limit, unless otherwise agreed, of indemnity of not less than 1,000,000 (one million) EUR (or equivalent in other currency) per occurrence and 2,000,000 (two million) EUR (or equivalent in other currency) in the aggregate.
  4. Contractor’s Equipment insurance to cover loss or damage to Contractor’s Equipment on an all risks basis for not less than the full replacement value, during any activity on the Site and including delivery to Site.

Proof of Contractor’s Other Insurance

56.10 On request of the Employer, the Contractor shall provide evidence to the Employer that the Contractor’s insurance under Article 56.9 is in place and all premiums are paid by the Contractor at the latest within thirty (30) Days after such a request from the Employer.

Subcontractor’s Insurance

56.11 Subcontractors may themselves effect and maintain any type of insurance requested by the Contractor under Articles 56.9 (a) through 56.9 (d) with terms and conditions and limits as are reasonable for such Subcontractors with respect to their engagement in the Works. The Contractor shall however be responsible for the Subcontractor’s compliance with these provisions.

Employer’s Insurance

56.12 The Employer shall maintain in full force and effect a Property All Risk Insurance, including machinery breakdown coverage, covering all real and personal property of the Employer and - starting on the Date the Taking-Over Certificate is issued or deemed to be issued - also covering the Works. It shall provide terms and conditions as are reasonably available in the insurance market and that are customarily purchased by owners of similar projects with regard to size, technology and location and shall be effected with financially responsible insurers or re-insurers reasonably acceptable to the other Party.

56.13 The Employer shall secure that the insurance under Article 56.12 shall name the Contractor and its Subcontractors as co-insureds and provide for insurer’s waiver of subrogation whereby Contractor’s insurance specified in Article 56.5 shall be primary to Employer’s insurance specified in Article 56.12. In cases covered by Employer’s insurance under Article 56.12 where Contractor is liable under or in connection with this Contract for the repair of loss of or damage to the Plant and such loss or damage is not covered by the insurance under Article 56.5 Contractor shall be responsible for the cost of such repair up to the amount specified in the Special Conditions; Contractor and its Subcontractors shall only be co-insured in Employer’s insurance under Article 56.12 to the extent the amount specified in the Special Conditions is exceeded.

56.14 The Employer shall provide to Contractor a certificate in respect of the Property All Risk And Machinery Breakdown Insurance upon request.

General provisions—compliance with policy conditions

56.15 For all insurance policies that either Party is obliged to effect and maintain, the insuring Party is responsible for proper and complete disclosure of all information required by insurers and shall comply with all requirements and policy conditions of such insurance policies.

Change of policy conditions

56.16 Neither Party shall make any changes or alterations in the policy conditions of the insurance that the Party is obliged to effect and maintain without having earlier notified the other Party of such

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changes or alterations and without having the approval of the other Party where the other Party’s rights and interests could be affected by any such changes or alterations. The insuring Party shall promptly notify the other Party if any of the insurers of the insuring Party’s insurance policies are cancelling or altering any of the insurance policies whereby any rights or interests of the other Party could be affected.

Insurance cover no effect on liabilities

56.17 Nothing in this Article 56 limits the obligations, liabilities or responsibilities of the Contractor or the Employer under the other terms of the Contract and nothing in this Article shall be construed to increase the limitations on liability in the Contract. Any amounts not insured or not recovered from the insurers shall be borne by the Contractor and/or the Employer in accordance with their obligations, liabilities or responsibilities. However, if the insuring Party fails to effect and keep in force an insurance that is available and that it is required to effect and maintain under the Contract and the other Party neither approves the omission nor effects insurance for the coverage relevant to this default, any moneys that should have been recoverable under this insurance shall be paid by the insuring Party.

Damage mitigation

56.18 The Employer and Contractor acknowledge that in the event of damage, both Parties shall exert all reasonable efforts to mitigate the damage accruing from such event. In the event that the Works sustain damage, notwithstanding the foregoing obligation to mitigate, Contractor shall:

  1. Promptly notify Employer;
  2. Take all necessary steps to preserve any damaged items, and not clean, destroy, discard or attempt to modify or unnecessarily move or remove any parts that are directly a part of the damage (except as is reasonably necessary to mitigate the damage and/or to ensure the safety of personnel); and
  3. Co-operate with, and assist in relation to, any survey carried out by any insurance loss adjustor as soon as is practically possible following the occurrence of the damage.

Policy terms take precedence over descriptions

56.19 The coverage referred to in this Article 56 is set forth in full in the respective insurance policies. The descriptions of such policies in this Contract are not intended to be complete, nor to alter or amend any provisions of the actual policies. In the event of a conflict between the insurance policies and this Contract, the provisions of the insurance policies shall prevail.

Insurance deductible

56.20 In case of damage to or loss of the Works caused by any of the following risks, the Employer shall bear the deductibles of the Marine Cargo or Construction/Erection All Risk Insurance:

  1. All risks resulting from ground, sub-soil or climatic conditions, including, without limitation, pre-existing pollution at the Site and/or unusual climatic conditions;
  2. All risk resulting from the actions of the Employer’s employees and/or agents;
  3. All risks resulting from the Employer’s Design, materials or specifications; and
  4. All risks that the Employer has otherwise accepted as Employer’s risks under this Contract.

In all other cases the Contractor shall bear the deductibles of the aforementioned insurances.