International risk team - What’s my part in all this?

Published on 19 May 2020

One of the most common issues to arise in offshore energy construction claims is the application of WELCAR’s Defective Parts clause.

The opening paragraphs of the clause state:

“The insurance afforded by Section I covers physical loss and/or physical damage to the property insured herein occurring during the Policy Period and resulting from a Defective Part, faulty design, faulty materials, faulty or defective workmanship or latent defect even though the fault in design may have occurred prior to the attachment date of the Policy".

Section I, however, does not provide coverage for loss or damage to (including the cost of modifying, replacing or repairing) any Defective Part itself, unless all of the following are satisfied:

a) such Defective Part has suffered physical loss or physical damage during the Policy Period

b) such physical loss or physical damage was caused by an insured peril external to that part, and

c) the defect did not cause or contribute to the physical loss or physical damage.”

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