EAR vs CAR Insurance for Solar EPCC Projects in Malaysia: Getting the Right Coverage

The Consequence of Using the Wrong Policy

An inverter fails during commissioning testing on a 5 MW rooftop solar installation in Selangor. The equipment is worth RM 800,000. The contractor submits a claim to their insurance provider, confident the project is covered. The insurer reviews the policy: Contractor All-Risk (CAR). The rejection letter arrives three weeks later. Testing of mechanical and electrical (M&E) systems is outside the scope of CAR coverage for this project. The contractor faces a bill they cannot afford. The solar plant sits incomplete for two months while disputes resolve.

This scenario plays out repeatedly across Malaysia's solar sector. The root cause is simple: most EPCC (engineering, procurement, construction, and commissioning) contracts specify the wrong insurance product for solar work.

Why Solar EPCC Projects Get Insurance Wrong

Solar energy projects are not building projects. Yet solar EPCC contracts routinely copy insurance clauses from construction contracts designed for roads, factories, and apartment blocks. This mismatch creates a coverage gap that neither the contractor nor the project owner recognizes until a loss occurs.

Consider the contract value breakdown on a typical 10 MW ground-mounted solar farm. Civil works (roads, fencing, foundations, switchyard building) represent 15-20% of costs. Mechanical and electrical works (panels, racking, inverters, transformers, cabling, controls) represent 70-80% of costs. When your contract is 70-80% M&E, you need a policy designed for M&E installation. Erection All-Risk (EAR) insurance is that product. Contractor All-Risk (CAR) insurance is designed for building and civil construction.

Using CAR for solar M&E is like using a fire policy for machinery breakdown. Both products exist in the insurance market. Both serve real needs. Applying the wrong one to your project creates false confidence.

Head-to-Head: EAR vs CAR for Solar Work

The following table shows how EAR and CAR align with solar project requirements:

Coverage Element	EAR (Erection All-Risk)	CAR (Contractor All-Risk)	Typical Solar Need
Erection of M&E equipment	Yes, primary scope	Limited or excluded	Essential (panels, inverters, transformers)
Testing and commissioning	Yes, standard coverage	No, typically excluded	Essential (grid synchronisation, performance testing)
Maintenance period after commissioning	Yes, up to 12 months usually	Not applicable	Desirable (early defect detection)
Civil works (fencing, roads, buildings)	Usually excluded	Yes, primary scope	Needed for switchyard building and access roads
Defects liability period coverage	Not standard	Yes, via DLP extension	Needed for solar work (12+ month DLP is common)
Third-party liability (Section II)	Yes	Yes	Essential (covers damage to third-party property)
Existing property damage (Section III)	Available as extension	Available as extension	Critical for rooftop solar (roof/building damage)

The key difference is scope. EAR assumes the insured party is installing, testing, and commissioning equipment. CAR assumes the insured party is constructing buildings or infrastructure and hires others to do M&E installation later. This distinction matters enormously on a turnkey EPCC contract where the same contractor does both civil and M&E work.

When You Need EAR Only, CAR Only, or Both

EAR Only (Rare for Solar)

EAR-only projects exist in solar work but are uncommon. You would use EAR alone if your contract covers M&E installation and testing only, with a separate contractor handling civil works. Most Malaysian solar EPCC contracts bundle both, making EAR-only inadequate. Consult your EPCC scope document to confirm what work falls under your contract. If you are responsible for roads, building, fencing, or other civil works, do not rely on EAR alone.

CAR Only (Not Recommended for Solar EPCC)

CAR-only solar projects are high-risk and often result in coverage gaps. CAR policies typically exclude or limit M&E testing and commissioning. Since solar projects cannot achieve practical completion until testing and grid synchronisation are verified, CAR leaves your project exposed during the final, highest-cost phase. The only scenario where CAR-only is appropriate is if you are a civil contractor responsible for the switchyard building, access roads, and earthworks only, and a separate M&E specialist handles the solar plant. This structure is rare in Malaysian EPCC work.

Both EAR and CAR (Standard for Comprehensive Solar EPCC)

Most solar EPCC contracts in Malaysia should have both policies working together. EAR covers M&E works (panels, inverters, transformers, cabling, mounting structures, controls, testing, commissioning, and maintenance period). CAR covers civil works (switchyard building, fencing, roads, earthworks, and defects liability period for those works). The two policies have different cover periods, different deductibles, and different scopes; they complement rather than duplicate each other. Your insurance broker must coordinate both policies so that the combined coverage matches your contract scope with no gaps.

How to Structure Insurance for Different Solar Project Types

Ground-Mounted Solar Farms (Utility-Scale, 1-50 MW+)

Ground-mounted solar is typically a turnkey EPCC contract combining all work under one contractor. Your insurance structure should be:

Work Scope	Primary Policy	Key Consideration
Earthworks, fencing, site roads, drainage, switchyard building	CAR (Section I: Plant & Temporary Structures)	Ensure civil works are not excluded; specify DLP coverage for defects
Solar array installation, racking, wiring, combiner boxes, string inverters or central inverters	EAR (Section I: Equipment Installation)	Confirm testing and commissioning are included; check maintenance period length
Transformer installation and testing	EAR or specialist transformer installation policy	Verify high-voltage testing is covered; some EAR policies require additional premium
Control systems and grid synchronisation testing	EAR	Essential; no EAR policy should exclude grid synchronisation testing
Damage to adjacent properties during construction	Both (Section II: Third-Party Liability)	Ensure aggregate limit is sufficient for industrial solar sites

Ground-mounted solar projects are the most straightforward to insure because liability is limited to the site boundary and adjacent land. Your main risk is during the 12-18 month construction and commissioning phase. Both EAR and CAR policies typically run for 18-24 months, providing continuous cover from mobilisation through final handover.

Rooftop Solar on Existing Buildings (5-500 kW Typical)

Rooftop solar introduces a critical insurance requirement that many contractors overlook: damage to the existing building during installation. When you install equipment on someone else's roof or building, you must carry Section III (Existing Property) coverage under both your EAR and CAR policies. Without Section III, any damage to the host building's roof, structure, or systems is uninsured.

Work Scope	Primary Policy	Critical Requirement
Building structural assessment, roof reinforcement, waterproofing	CAR with Section III	Section III must cover the existing roof and building structure; specify high limit (damage can be expensive)
Roof penetration, mounting structure installation	EAR with Section III	Section III is non-negotiable; roof leaks from poor installation can cost RM 50,000-150,000 to repair
Solar panel installation, wiring, inverter, cabling	EAR	Testing and commissioning are essential; check maintenance period
Integration with building electrical system, testing, handover	EAR	Ensure policy covers the "energisation" phase when panels are connected to building circuits
Damage to building contents or adjacent spaces	Both (Section III)	Consult building owner on coverage; may require separate contents insurance for sensitive equipment

Rooftop solar claims on existing property damage are common and can be expensive. A missed roof repair during installation leads to water ingress, structural damage, and mold. Section III is not optional; it is essential. Confirm the Section III limit matches the replacement value of the host building's roof.

Floating Solar (Emerging in Malaysia)

Floating solar installations on reservoirs or lakes add water hazards and environmental liability to the mix. Your insurance structure should include EAR for all M&E works, plus CAR for the floating platform and anchoring systems (treated as temporary structures). Environmental liability coverage is also recommended; consult your broker on water pollution extensions. Floating solar is still niche in Malaysia, and policy wordings vary significantly by insurer. Begin insurance discussions early in the project if water-based installation is your scope.

What to Check in Your EPCC Contract's Insurance Clause

EPCC contracts almost always include an insurance clause. Many are boilerplate text copied from building construction contracts. Use this checklist to audit your contract before signing:

Checklist Item	What to Look For	Action if Missing or Unclear
Policy type specified	Contract should name EAR and/or CAR by policy type, not just "construction insurance"	Request amendment naming both EAR and CAR; vague terms create disputes at claim time
Scope of M&E testing and commissioning	Contract should explicitly state testing, grid synchronisation, and energisation are covered	Add specific language: "Testing and commissioning of electrical systems are covered under the EAR policy"
Maintenance period coverage	Contract should state the maintenance period (usually 12 months post-commissioning) and confirm coverage extends through this period	Negotiate minimum 12-month maintenance period; confirm your EAR policy covers this duration
Defects Liability Period (DLP)	For solar, DLP is usually 12-24 months; contract should specify DLP for M&E separately from DLP for civil works	Ensure CAR DLP matches contract DLP for civil works; ensure EAR maintenance period covers the full M&E DLP
Section III (Existing Property)	Rooftop or retrofit projects must specify Section III coverage for the host building	For rooftop work, add explicit requirement: "EAR and CAR policies must include Section III with limit not less than [host building roof value]"
Cover period and mobilisation date	Contract should state when insurance cover commences (usually first day of site mobilisation, not contract signature date)	Confirm policy cover start date matches site mobilisation date in the contract schedule
Deductible and insured limits	Contract should specify minimum insured limits (e.g., "not less than contract value") and maximum deductible acceptable	Negotiate deductible to align with your risk tolerance; large deductibles shift risk to contractor
Contractor's liability (Section II)	Contract should specify third-party liability minimum (typically RM 5M for industrial sites, RM 2M for rooftop)	Confirm Section II limit is adequate for project location; industrial estates may require higher limits
Professional indemnity or latent defects	For solar: latent defects insurance for engineering design errors should be addressed separately (not under EAR/CAR)	Confirm whether latent defects insurance is the project owner's or contractor's responsibility
Waiver of subrogation	Contract should state whether contractor waives rights of recovery against the project owner (common in turnkey EPCC)	If waiver is required, confirm your EAR/CAR insurer will accept this; some insurers add premium for waiver

Do not sign an EPCC contract without reviewing the insurance clause with your insurance broker. Contract language drives insurance placement. Vague contract terms lead to claim disputes months or years later.

Common Scenarios: What Gets Covered, What Doesn't

Scenario 1: Inverter Damaged During Testing (EAR vs CAR)

During commissioning testing, an inverter fails due to a wiring fault introduced during installation. Repair cost: RM 120,000. Under EAR with testing coverage, this is a covered claim. The insurer covers equipment damage during erection and testing phases. Under CAR, this claim is almost certainly declined because CAR excludes testing of M&E systems. The contractor must absorb the cost. The lesson: specify EAR for all M&E installation and testing on solar projects.

Scenario 2: Roof Leak from Poor Solar Mount Installation (Section III)

A rooftop solar installation on an office building in Kuala Lumpur develops a leak three months after commissioning during the maintenance period. The mounting structure was not properly waterproofed. Remedial work and water damage: RM 85,000. If the EAR policy includes Section III (Existing Property), the damage to the host building is covered. Without Section III, the contractor is liable for the full cost. The building owner must pursue a recovery claim against the contractor, which can take months. The lesson: Section III is not optional for rooftop solar.

Scenario 3: Transformer Damage During Installation (EAR Coverage Limits)

A 1,000 kVA transformer arrives on site damaged due to transportation mishandling. The transformer is a critical path item. Replacement cost: RM 250,000. If your EAR policy covers equipment in transit (most do), the damage is covered. If your EAR policy excludes "in transit" and limits to "site installation only," the claim is declined. The lesson: confirm your EAR policy covers all phases: receipt, storage, transport to site, installation, testing, and commissioning.

Scenario 4: Site Access Road Collapses (CAR vs EAR)

During construction of a 10 MW ground-mounted solar farm, a temporary access road built by the contractor collapses during heavy rain, damaging temporary construction equipment and delaying the project by four weeks. Cost: RM 200,000. This is a CAR claim (Section I: Temporary Structures and Plant). EAR does not cover civil works or temporary structures. The lesson: ensure your CAR policy covers temporary roads and site infrastructure, not just the final solar plant infrastructure.

Scenario 5: Adjacent Factory Damaged by Construction Equipment (Section II Liability)

During site mobilisation for a solar farm adjacent to an operating factory, a crane lifts a solar panel array improperly, the array sways, and a panel strikes the factory's roof, causing RM 150,000 in damage. Both the EAR and CAR policies carry Section II (Third-Party Liability). The third-party liability coverage pays the factory's claim, protecting the contractor from direct liability. Without Section II, the contractor pays out of pocket. The lesson: ensure both your EAR and CAR policies include third-party liability with adequate limits for the project location.

Frequently Asked Questions

Q1: Can I use one policy instead of two (EAR and CAR)?

Only if your contract scope covers either M&E work only or civil work only, which is rare. Most turnkey EPCC solar contracts include both. If you use one policy, you will have a coverage gap. EAR excludes most civil works. CAR excludes most M&E testing and commissioning. A single policy leaves your project exposed. Two policies (EAR for M&E, CAR for civil) are necessary for comprehensive coverage.

Q2: Does my EAR policy cover the maintenance period after commissioning?

Most EAR policies include a maintenance period of 12 months after commissioning as standard. However, policy terms vary by insurer. Review your policy schedule to confirm the maintenance period length. If your EPCC contract specifies a 24-month maintenance period, request a 24-month EAR policy or negotiate an extension. Do not assume the standard 12-month maintenance period is adequate.

Q3: My EPCC contract is silent on insurance. What do I do?

A silent contract is dangerous because it leaves insurance obligations ambiguous. Review your country's and your lender's requirements. Most Malaysian solar EPCC projects financed by banks require EAR and CAR. Approach your project owner and contractor with a proposed insurance schedule specifying both policies. Document the agreement in writing. Do not proceed without clarity.

Q4: What is "latent defects" and do I need it for solar?

Latent defects insurance covers design errors or manufacturing defects that emerge years after a project is handed over. For example, if a string inverter fails prematurely due to a manufacturing defect, latent defects insurance would cover the claim. EAR and CAR do not cover latent defects (they are accident policies, not performance policies). Latent defects insurance is typically the design engineer's or equipment supplier's responsibility, not the contractor's. Confirm in your contract who carries latent defects insurance.

Q5: My policy has a RM 500,000 deductible. Is that normal?

Deductibles of RM 500,000 are not uncommon for large solar projects, but they are negotiable. A high deductible reduces the insurance premium but shifts risk to the contractor. For a 10 MW solar farm with a 500,000 RM deductible, the contractor self-insures the first RM 500,000 of any claim. Consider your financial capacity to absorb this loss. If a project-critical component fails, can you afford the RM 500,000 out of pocket? If not, negotiate a lower deductible (typically RM 50,000 to RM 250,000 for solar projects).

Foundation Conclusion: Avoid the Wrong Policy Decision

The inverter damaged during commissioning in our opening scenario could have been covered under the right policy. The contractor had EAR listed in their insurance schedule but CAR as the primary policy. During claim negotiations, the insurer (CAR) pointed to the contract language specifying CAR as primary and declined the claim. The contractor wished they had fought harder for EAR as primary during contract negotiation.

Solar EPCC projects are not building projects. Your insurance must match the work you are actually doing, not the work a construction contractor does. EAR is designed for M&E installation, testing, and commissioning. CAR is designed for building and civil works. Most solar projects need both. Review your EPCC contract's insurance clause before signing. Confirm with your insurance broker that both EAR and CAR (where needed) are in place and correctly scoped. Do not assume a CAR policy inherited from a construction project provides adequate coverage for solar M&E work. The cost of getting it wrong is far higher than the cost of getting it right upfront.

Start by understanding your contract scope: what work is your responsibility? Then structure insurance to cover that scope. Both EAR and CAR are available in Malaysia. Both serve essential purposes on solar projects. The question is not whether to buy insurance; it is whether your insurance matches your actual contract obligations.