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