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Insurance MCQ Daily-24

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Insurance MCQ daily proved very useful to all Insurance aspirants or insurance savvy who regularly seek insurance knowledge.   

These 20 Insurance MCQ’s covers DE clauses and LEG clauses under Construction policies in detail.

These Design Engineering(DE) Clauses and London Engineering Group(LEG) clauses are used under construction and engineering project policies.

These are basically exclusions and used under policies to limit the coverage of policies, otherwise, these policies operate on All risk basis.

Principals and contractors were uncomfortable with a total exclusion because of

  • a relatively small or minor defect could result in a larger catastrophic occurrence
  • responsibility could lie with the architect, not them
  • even the best run business has accidents
  • techniques to determine whether a loss was due to a defect / what that defect was were very basic
  • insurers could find a defect in almost any situation and interpret that in their favour to exclude a loss

After that Insurers and brokers established the principles that

  • A defect is a condition, not a peril
  • Intent was to exclude the defect but to cover resultant damage

In the early 1980s a group of insurers, known as London Market drafted the DE clauses

  • 1985 DE1 – DE5 model clauses widely adopted by UK/ European insurers
  • 1995 these clauses further reviewed,modified and improved these clauses

And, found that DE clauses were felt to be more suitable for CAR insurances, whereas London Engineering Group drafted the LEG clauses to be more aligned to larger EAR exposures.

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Q-1- Under DE Clause in Project Insurance, what is DE1 covers?

  1. it doesn’t covers anything, its an exclusion.
  2. providing covers to owner’s surrounding property.
  3. its a comprehensive coverage for all design defects.
  4. covers only losses/damage due to engineer’s design defects.

Option 1 DE1 is a total exclusion of all loss or damage.It excludes all damages due to design defect.

Q-2- Under DE Clauses in Project Insurance, what is DE2 covers?

  1. covers only bad engineering defects only
  2. covers damage to surrounding property only
  3. covers damages of owners property, CTL damages
  4. covers damages to owners property, other than in which design defect

Option-2 Provide cover for other insured property which is free of defect but is damaged as a consequence of the defect i.e surrounding property.

Q-3- Which is the equivalent LEG clause of DE 2?

  1. LEG01/96
  2. LEG02/96
  3. LEG03/06
  4. None of these

Option-4 There is no equivalent LEG clause against DE2 Clause.

Q-4- Under DE Clause in Project Insurance, what is DE3 covers?

  1. All damages are covered except defective property damage itself
  2. All damages are covered including defective property damage itself
  3. Damage to defective property is not covered but surrounding property damages are covered
  4. none of above

Option-1 All damages are covered like surrounding property, other damages rely on defective property,but damages to defective proprtey are not covered.

Q-5- What is DE4 clause in project insurance policies?

  1. It provides coverage to all civil construction damages only
  2. It provides coverage to surrounding property other than civil part
  3. It is similar to DE3 but is intended to apply in respect of machinery only
  4. It is similar to DE2 but is intended to apply in respect of machinery only

Option-3 Similar to DE3 but is intended to apply in respect of machinery rather than building work i.e civil part.

Q-6- What is DE5 clause in project insurance policies?

  1. It provide coverages available in DE1 and DE3
  2. It provide coverages available in DE3 and DE4
  3. It provide coverages available in DE2 and DE4
  4. It provide coverages available in DE2 and DE3

Option-4 It is a comprehensive coverage. It covers damages to the defective property also alongwith the coverage available in DE2 and DE3.

Q-7- Under DE5, cost of betterment is also coverd. Is it TRUE?

  1. True, DE5 is a comprehensive coverage
  2. False, DE5 doesn’t covers any cost of betterment of defective property
  3. True, DE5 doesn’t covers any cost of betterment of defective property but betterment to surrounding property is covered
  4. Can’t say

Option-3 DE5 doesn’t covers any cost of betterment of defective item or improvement in the specification of the defective property.

Q-8- Which is similar to DE clause against LEG2/96 clause?

  1. DE3
  2. DE4
  3. DE3 & DE4
  4. none of above

Option-3 DE3 & DE4 are similar to LEG2/96 clause.

Q-9- Which DE clause is not available in India under Construction insurance policies?

  1. DE2
  2. DE3
  3. DE4
  4. DE5

Option-4 DE5 is not available under Construction policies in India.

Q-10- Which is similar to DE clause against LEG3/06 clause?

  1. DE2
  2. DE3
  3. DE4
  4. DE5

Option-4 DE5 is similar to LEG3/06 clause.

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