Wrap-up or “Wrap” Construction insurance can be a highly effective tool on large or complex building projects to reduce premiums, minimize cross-litigation, and speed the claims process by providing General Liability, Workers Comp, and possibly other coverages for the general contractor and most – if not all –subcontractors under a single package policy. There are two basic types of Wrap coverage: owner-controlled insurance programs (OCIPs) and contractor-controlled insurance programs (CCIPs).
Although each type has its advocates, more and more project owners prefer have the general contractor sponsor the program because they:
- often use the same subcontractors, who are familiar with the safety requirements of the program – an essential element in a successful OCIP; Shouldn’t this read CCIP?
- usually have more control than owners over safety programs and are more experienced in the administration of OCIPs: payroll reporting, claims management, working with the insurance company, and so forth
- have a financial incentive to minimize accidents and injuries on the project (because insurers usually require the general contractor to pay a six-figure deductible, andin many cases, to prefund these potential losses)
- often have more financial resources than the project owner to provide letters of credit, collateral, or sureties the insurance company requires for projected and developed claims under the program.
However, in some cases, an OCIP can be a better solution than a CCIP. For instance, many owners might be ready to assume the risks of a Wrap-up – and to share the savings with the general contractor for a job completed safely. Picking the best approach for each project should be a win-win for all parties involved. Our Construction insurance specialists would be happy to offer you their input.