Understanding risk and responsibility for machinery movement exposures5th April 2022
Businesses involved in the manufacture of machinery, machinery movements and specialist machinery installations may be liable for the physical loss of or damage to plant and machinery that belongs to the business or is the responsibility of the business under contractual agreements during the handling, dismantling and transportation operations.
For those businesses, an insurance solution should be considered that provides protection for movement of plant and machinery which they either own or have been made contractually responsible for. This solution should encompass defined operations during the movement phases and cover may be requested as a one-off contract or on an annual basis.
It is important to note that Machinery Movement Insurance can be procured to protect the owners of the machinery or those who are responsible under contract or common law. Operators carrying on behalf of the machinery owners should ensure that appropriate operating conditions are appropriately incorporated into contracts.
Identifying the exposures
Identifying what operations the business is responsible for in respect of liability for the physical loss of or damage to plant and machinery is key to ensuring that the right level of protection is in place. For example, a manufacturer of packaging machines may be responsible for the physical loss of or damage to machinery during the handling, transportation, and installation operations. Whereas, in addition to these operations a specialist machinery mover may also be responsible for the dismantling of packaging machinery or simply be contracted for the re-siting of machinery within a third-party premises.
It is essential that the right protection is considered, and Machinery Movement Insurance may be the answer.
Where NMU can help
Development Underwriter, Matt Shaw talks us through a recent example of where he assisted a broker partner in placing their policyholders’ machinery movement exposure with NMU.
We assisted a business that was incorporating a label press and associated equipment into a production line at their premises.
The label press and associated equipment were being imported from France to the policyholder’s premises in the northwest of England. Under the terms of sale, the policyholder was responsible for insuring the transit, installation, and testing of the machinery. This included the loading of the machinery onto trailers for transportation via road and cross channel ferry.
Providing support around operations
When originally presenting the opportunity to underwriters the policyholder was enquiring as to whether a solution could be found to provide protection for the installation and testing operations only, as it was assumed that cover whilst in transit was being provided by the appointed haulier. However, we highlighted that the haulier’s liability was governed by the CMR convention, which limits liability to 8.33 SDRs per kilo and not the full value of goods, and the haulier may have defences enabling them to avoid liability altogether. If liability of the haulier was proven, the limitation under CMR based on the weight of the goods (13 tonnes) would have been about GBP 113,600, whereas the goods were valued at GBP 350,000.
We delivered a solution under our machinery movement product for the policyholder, to provide insurance protection for physical loss or damage during the conveyance of machinery between the supplier’s location in France and policyholder’s premises in the UK (United Kingdom) including loading on to the transport vehicle and the unloading from the transport vehicle to the actual working position and subsequent installation, this also included trans-shipment storage. In addition, testing cover was provided for an agreed period of 7 days for the mechanical and electrical testing of parts.
Building insurance solutions based upon a real understanding of the risks faced by policyholders
We made the difference by using our machinery movement underwriting expertise and taking the time to understand the policyholders’ business, developing a product that protected their individual business needs and adding value by being able to complement the cover with Risk Control support around the machine handling processes. In addition to the Machinery Movement Insurance we assisted the broker by covering the client’s Machinery Damage, Computer, CyberSafe and in this case, Cargo exposures too.
For businesses with exposures outside the UK, we are also able to offer global capabilities for certain products, saving our brokers and policyholders the inconvenience of securing policies for individual territories separately elsewhere.
What information do we need to consider a Machinery Movement risk?
As always, having as much information about the risk at initial enquiry stage is key. For Machinery Movement risks, the following seven areas can really help us consider the right solution for the clients’ needs:
- Is the plant/machinery new or second hand?
- Clearly identify the operations for which the client is liable for physical loss or damage, this can include – loading, transit, unloading, dismantling, erection, re-siting and testing. If the client is moving third party plant and machinery, we need to confirm if there is a contractual agreement making the client responsible. If no contractual agreement in place then “common law” may apply.
- Who’s moving the plant and machinery, client or third party? If a third party is being used, what are their conditions of carriage?
- In the event of damage, can spare parts be sourced in order to carry out repairs or would any damage result in constructive total loss? This is key underwriting consideration for second-hand machinery, but due to the nature of the item it’s possible that even a new item might be deemed as a constructive total loss following damage.
- Has a written method statement been put in place detailing how each operation will be carried out, assessing the hazards involved in each step and describing how to control hazards and mitigate the risks?
- If cover is required on an annual basis, we need to understand estimated annual value of plant and machinery being moved (not the company turnover) along with the maximum value for a single contract.
- Relevant past experience of similar jobs and declaration of any previous incidents.