Many property owners or general contractors planning a project will secure a construction wrap-up policy. This is a type of policy that is controlled by the site owner (OCIP) or construction manager (CCIP) and provides coverage for all contractors involved in the job. It not only protects the owner/manager, but also any subcontractors performing work, including excavation/grading contractors, HVAC, plumbers, electricians, drywallers, etc. It also ensures that the limits on the policy are adequate and specific to the project. A construction wrap-up typically includes Contractors Pollution Liability for any issues resulting from the work performed by the contractors. A Completed Operations endorsement may also be added which will guarantee that coverage is in place for as long as the owner/manager needs it to fully complete the job.
Construction Wrap Up Policy Details
A Construction Wrap Up Policy is typically controlled by the OCIP or CCIP. The owner or construction manager procure certain insurance coverages on behalf of some or all of the parties working at a job site, rather than having each firm supply its own insurance. The chain of liability under a wrap up policy is not shifted, as any insured under a wrap up is still responsible for their own actions.
Some of the advantages of a wrap up include control of costs and control of the insurance program:
- Control of costs: Very often, these programs are written on a loss sensitive basis or paid-loss retrospective basis. This means that if an insured maintains a certain loss ratio, there may be some return on premium. In order to implement such a plan, administrative costs are typically incurred. If there is only one entity on a construction project incurring administrative costs, this typically reduces the overall insurance costs. Another way that this type of program helps to control costs is through economies of scale. This type of program creates purchasing leverage and opportunities for the insured to negotiate advantageous cash flow programs because of the higher premiums associated with such programs. Finally, this type of policy typically eliminates the insurance mark ups found in most contractor bids, therefore passing those savings to the site owner or construction manager.
- Control of the insurance program: One of the most important things that owners or construction managers can control under a Construction Wrap Up Policy is the quality of their insurer. It is a way for them to be able to ensure that the coverage that they are requiring of their contractors is actually in place. They can ensure that the limits they are requiring, quality of the coverage (including carrier stability), claims management, and loss control services are in place to the degree that they require.
In many circumstances, wrap up coverage for construction projects that includes environmental insurance could be a beneficial alternative to having every entity on the project procure insurance coverage for themselves.