| Builder's All Risk (BAR): | | | | If required, coverage can include items to become |
| What is it? BAR coverage is first-party coverage | | | | part of the vessel / rig under construction while in |
| which is essentially an all risk property policy, plus | | | | storage at Suppliers' warehouses - usually those in |
| liability and protection and indemnity (P&I) | | | | relatively close proximity to the shipyard or else |
| extensions to it. | | | | those specifically declared to Underwriters. |
| Who is to be included within the Named | | | | Coverage for Owner-Furnished Equipment (OFE) |
| Assureds? The parties to be included within the | | | | usually commences under the BAR section from |
| Named Assured Clause include Builder, | | | | the point whereby a Named Assured inspects and |
| Sub-Contractors, Owners, Lenders if applicable, | | | | accepts delivery of same at the port near the |
| and other parties with insurable interests if | | | | relevant shipyard (either on land or at sea). |
| applicable | | | | What comprises the Interest that is covered? We |
| Who is to have subrogation rights against them | | | | recommend that all contract works that are to |
| waived? All parties with whom the Named | | | | comprise the new construction are included within |
| Assureds have agreed in their negotiations, in | | | | the covered Interest. This includes all Contract |
| either a written or verbal contract, to waive the | | | | Works of the Shipyard plus Sub-Contractors in |
| rights of subrogation should benefit from waiver | | | | respect of the construction in all its phases, |
| of subrogation. Usually, Manufacturers of major | | | | including design, engineering, procurement, strike |
| equipment are not amongst the parties who | | | | steel, keel-laying, fabrication, construction, |
| receive the benefit of this waiver of subrogation; | | | | dry-docking, undocking, installation of equipment, |
| instead, they are held accountable for their | | | | fitting out, supply of all materials |
| product and uphold their warranties provided to | | | | pre-commissioning, testing, commissioning, sea |
| the shipyard and are prepared to allow recourse | | | | trials and all works until delivery of the unit. |
| against them for failure or defects in their product | | | | What are the parts of coverage usually afforded |
| / equipment. | | | | under BAR coverage?a. Property All Risk - |
| What is the period? We recommend that BAR | | | | Subject to specific terms, conditions & exclusions, |
| coverage is in place during the entire course of | | | | marine builder's risk insurance (BAR) covers the |
| the vessel's / rig's construction; i.e., that coverage | | | | builder / owner (others with an insurable interest - |
| commence upon contract signing, remain in place | | | | as specified in the policy) of a vessel / rig under |
| during design and engineering phase, throughout | | | | construction against physical loss of, or damage |
| construction, and cease upon delivery to owner, | | | | to, the vessel / rig caused and discovered during |
| be it ex-Yard or at final Site following a transit. | | | | the period of insurance. We recommend that any |
| What is the Sum Insured? This sum is usually | | | | restrictions be removed; common ones in |
| specified in the construction contract between | | | | standard policies include those for earthquake, |
| Builder and Owner, and should include the | | | | volcanic eruption, faulty design, and faulty welds.b. |
| estimated Final Contract Value (FCV) plus the | | | | Collision Liability - Sums paid by the respective |
| Owner-Furnished Equipment (OFE) [plus it can | | | | Yard to any other person(s) arising out of the |
| include the value of the incoming hull in the event | | | | Yard's legal liability to pay sums for the following |
| of a conversion]. | | | | damages, as consequence of any vessel the Yard |
| The inclusion of an Escalation Clause allows for | | | | is working on coming into collision with any other |
| coverage up to a certain percentage above the | | | | vessel: |
| Estimated Total Sum Insured, the standard | | | | - Loss or damage to any other vessel or |
| provision being 25% escalation. | | | | property thereon |
| In theory, the Builder's All Risk Underwriters | | | | - Delay to, or loss of, use of any other vessel or |
| reserve their capacity to ensure that they can | | | | property thereon |
| pay four times (4x) the limit multiplied by the | | | | - General average, salvage of, salvage under |
| escalation provision. With an escalation provision of | | | | contract of, any such other vessel or property |
| 25%, this means that Underwriters would require | | | | thereon.c. Protection & Indemnity (P&I) - |
| capacity to pay a claim of 500% of the | | | | Sums paid by Yard to any other party arising out |
| Estimated Sum Insured, or 125% four times, i.e., | | | | of Yard's legal liability to pay sums for the |
| once for physical damage, once for collision liability, | | | | following damages, as a consequence of an |
| once for protection & indemnity, and finally once | | | | accident or occurrence during the policy period: |
| for sue & labor expenses. We say "in theory" | | | | - Loss or damage to any fixed, movable, |
| because in practical application, Underwriters would | | | | property or any other thing or interest |
| likely come to a point of ceasing to pay sue & | | | | whatsoever |
| labor charges and instead pay the full amount of | | | | - Any attempted or actual raising, removal, |
| the physical damage / replacement costs. | | | | destruction of any fixed movable object or |
| An example wherein each coverage section is | | | | property or other thing, including the wreck of a |
| used is this: | | | | vessel, or any neglect to raise, remove or |
| During construction, an oily rag falls into the engine | | | | destroy same |
| room sparking a fire which burns out of control | | | | - Liability assumed by the Yard under contracts of |
| and burns the lines mooring the vessel to the | | | | customary towage for purpose of entering or |
| dock. The vessel breaks free from her moorings, | | | | leaving the port or maneuvering within a port |
| and then collides with another vessel at an | | | | - Loss of life, personal injury, illness, and payments |
| adjacent shipyard which causes damages in the | | | | made for life salvage.d. Sue & Labor - Sums paid |
| hulls of both vessels. Then, the insured vessel | | | | for the following expenses, as a consequence of |
| keeps on floating away out of control. The | | | | an occurrence during the policy period, incurred in |
| shipyard personnel quickly hire a nearby tug in an | | | | attempts to minimize recoverable loss: |
| attempt to slow the vessel and get in close | | | | - In case of any loss or misfortune, it is the duty |
| enough proximity to fight the fire. The fire is not | | | | of the Assured and their servants and agents to |
| brought under control and the vessel eventually | | | | take such measures as may be reasonable for |
| sinks in a shipping channel. What is recoverable | | | | the purpose of averting or minimizing a loss which |
| under a broad Builder's Risk policy? | | | | would be recoverable under this insurance. |
| - First party physical damage to be recoverable | | | | - Subject to the provisions of this clause, the |
| under the All Risk main section | | | | Underwriters will contribute to charges properly |
| - Damage to the other vessel at the adjacent | | | | and reasonably incurred by the Assured their |
| shipyard to be recoverable under the Collision | | | | servants or agents for such measures. General |
| Liability section | | | | average, salvage charges, collision defense or |
| - Wreck removal costs to be recoverable under | | | | attack costs and costs incurred by the Assured in |
| the P&I section | | | | avoiding, minimizing or contesting liability. |
| - Sue & Labor costs incurred by the hire of the | | | | - Measures taken by the Assured or the |
| tug boat and any fire fighting expenses to be | | | | Underwriters with the object of saving, protecting |
| recoverable under the Sue & Labor section | | | | or recovering the subject-matter insured shall not |
| What are the Situation / places of coverage? We | | | | be considered as a waiver or acceptance of |
| recommend that the Situation is territorial | | | | abandonment or otherwise prejudice the rights of |
| coverage which includes the movement of | | | | either party. |
| material and equipment between yards and | | | | What else should be considered / looked at with |
| various contractors' yards. Additionally, we | | | | BAR policy? |
| recommend ensuring the adequate distance that | | | | - Deductibles - Are they at levels that the |
| will be required during sea trials is specifically | | | | Assureds can comfortably absorb? Do they apply |
| expressed within the coverage. (This is usually | | | | per occurrence and/or in the aggregate? |
| 250NM.) | | | | |