Wrap-Ups and your Insurance

Wrap-ups, also known as OCIP or CCIP (Owner or Contractor Controlled Insurance Program) depending on who is considered the "CIP sponsor" of the project, are an increasingly popular avenue for Owners and/or Contractors to control critical elements of a construction project, including the insurance coverage. From the insurance perspective; this concept involves purchasing insurance policies that will cover all, or most, of the participants on the project instead of each participant providing their own coverage for the project. The result for the CIP sponsor is reduced insurance costs.

Since the wrap-up policy is providing coverage for the entire project, the CIP sponsor will request calculations of your normal insurance costs on the exposures related to their project and deduct those costs from your contract. In order for you to "recover" these premium deductions you would need to make sure that any exposure related to the wrap-up project is excluded from your insurance premium calculation on your own policies. To accomplish this, your current insurance policy(ies) will need a wrap-up exclusion. Some wrap-up exclusions are "total" exclusions and others provide "excess" coverage to the wrap-up policy. Knowing which exclusion will apply to your policy is a very important consideration. Other items worth consideration would include: how long will the wrap-up policy provide coverage after completion of the project? Are the limits of liability provided by the wrap-up sufficient? Does the wrap-up policy provide "primary" coverage regardless of other coverage available to you? These is information that the CIP sponsor or their broker should have worked out well before the bid process starts and the CIP sponsor or broker should be communicating this information to you. As a participant in a wrap-up project you have every right to know exactly how the wrap-up policy will work.

What may not be communicated to you from the CIP sponsor is how to handle covering the exposures related to this project that are not covered by the wrap-up policy; such as coverage for work performed "off-the-site". Most wrap-ups do NOT provide coverage for work performed away from the site that is covered by the wrap-up. Will your own policy's coverage apply to work performed "off-the-site" of a wrap-up project? A review of the wrap-up exclusion on your policy will be necessary to determine this. There are ways to structure your current insurance policies to cover the gaps of the wrap-up policy. You will want to consult with your carrier or broker to understand the scope of the wrap-up policy and how your own policy will provide coverage for what is not covered by the wrap-up policy. Knowing how each policy will react before a claim occurs will better prepare you for handling that claim if it does happen. I hope you find this information useful. Please call me if you have any questions or need additional information in this regard.

Chuck Thompson, CRIS - Thompson & Smith, LLC. An independent insurance agency and risk management firm specializing in the insurance and bonding needs of contractors. Contact: cthompson@thompsonandsmith.com. 731-664-4750 phone