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Flyover construction failure could spare insurer from payout

April 11, 2016

The insurer of the Vivekanda Road flyover in Kolkata that collapsed last Month may not foot the bill for reconstruction if it is found that raw materials of inferior quality were used or there was gross negligence on the part of the contractor. The sum insured with the government-owned United India Insurance under a Contractor All Risk policy is INR1,646.4 million (US$24.7 million). The completion of the construction was already delayed by five years at the time of the crash.

An official of United India Insurance told Times of India that the company’s survey team had already visited the crash site twice but it would take some time to complete the investigation and assess the loss. He also indicated that the company is likely to seek technical help from institutions like IIT-Kharagpur or Jadavpur University, which has expertise in structural engineering. At least 26 people were killed and around 100 injured after about 150 metres of the 2.2 km-long Vivekananda Road flyover collapsed. A Contractor All Risk policy – mandatory for any flyover under construction – was taken out in 2009 by IVRCL which was awarded the flyover construction contract. According to the insurance official, the sum insured for the policy is INR1,646.4 million and the policy expires in November 2016. The initial construction cost for the flyover was INR1,640 million when IVRCL started work in 2009. The policy also has a third-party cover of INR250 million.

Elaborating on exclusions contained in the policy, the United India official added that there are three major exclusions in the Contractor All Risk policy. Insurance is not payable if there is any design defect; if it is found that there is a gross negligence on the part of the contractor and if inferior raw materials are used. “If the investigation reveals that the cement was not up to the mark, we shall not pay the amount for the damage because then it can no longer be called an accident. Then only third-party will be payable, and that too subject to a court award,” the official added. Questions have been raised about the strength of steel used in the pier and the inadequacy of joints in the construction. An inquiry has already been ordered by the West Bengal government to find out the causes of the collapse.

The project started in 2009 with a completion period of about two years. But after 65 months, only two-third of the total 2.2-km length of the flyover was completed, with several revisions of project completion time. The delay appears to be due to changes in the alignment of the bridge’s superstructure and underground utility services, according to a report in The Economic Times. The contractor was later asked to finish the remaining 24% of the project within only seven months.

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