Wrap-up Insurance Programs for Construction Projects

Managing all the risks inherent to large-scale construction projects can pose a significant challenge for all parties involved. The traditional method entails each party procuring and maintaining separate coverage, including insurance costs and mark-ups in project bids. This standard approach often cascades risk downstream, from owners to general contractors, and from general contractors to subcontractors, through contractual indemnifications, contractually mandated minimum insurance requirements, and additional insured provisions.

Shortcomings of Traditional Insurance Approach

Although this traditional insurance approach is conventional in the construction industry, it’s not devoid of complications. The involvement of numerous policies and insurers might lead to unexpected liability gaps. There could be issues with inadequate coverage, gaps in coverage, or a complete lack of insurance. Additionally, having various insurance providers covering one project can potentially lead to costly and time-consuming cross litigation.

As an alternative to each party procuring separate liability policies, project owners and general contractors can utilize a wrap-up insurance program to manage their risks more effectively.

Also known as controlled insurance programs (CIP), wrap-up insurance programs serve as centralized insurance and loss control programs, aiming to protect the project owner, general contractor, and subcontractors under a single policy or set of policies for the construction project.

Understanding Different Types of Wrap-up Programs

Insurers typically offer two types of wrap-up programs: the Owner Controlled Insurance Program (OCIP) and Contractor Controlled Insurance Program (CCIP), depending on the party sponsoring the program. While wrap-up programs are most frequently employed for large, single-site projects, a rolling wrap-up can be utilized to insure multiple projects under one program.

Though each wrap-up program is tailor-made to the specific project, most programs insure employer’s liability, general liability, and excess liability exposures. In some cases, builder’s risk, environmental liability, contractor default, and other types of insurance can be included under a wrap-up program.

Liabilities occurring away from the project site are generally excluded under wrap-up programs, along with specific operations such as blasting, demolition, or other high-risk operations.

Evaluating the Benefits of Wrap-up Programs

Wrap-up programs offer numerous benefits, including potential cost savings, consolidated coverage, higher insurance limits, centralized safety and risk management, efficient claims processing, and reduced disputes among insured parties.

Considering Potential Drawbacks of Wrap-up Programs

Despite the benefits, wrap-up programs can be expensive due to the broad range of coverage they offer for various entities. The cost can be mitigated by opting for higher deductibles or by distributing premium costs to all parties covered under the policy.

Wrap-up programs, like any insurance policy, are subject to market fluctuations, which can impact potential cost savings.

Contact the Horton Group for More Information

The Horton Group acknowledges that the implementation of a wrap-up program can be a complex process. With no “one size fits all” model, each program needs to be thoroughly analyzed and customized to fit a project’s specific needs.