Risk & Business Magazine Moody Insurance Spring 2017 | Page 29

WRAP-UP POLICY
BY: DON ABERBOOK
MOODY INSURANCE
W
Understanding The
Construction Wrap-Up Policy
HAT IS A WRAP-UP POLICY?
A Wrap-Up policy, also referred to as Owner-
Controlled Insurance Program or Contractor-
Controlled Insurance Program (OCIP or
CCIP, respectively), is a single insurance policy
that names all participants involved in a construction project
for general liability coverage purposes. Under the Wrap-Up, all
contractors and subcontractors who perform construction work
on the project are named insureds on the general liability policy,
except for any suppliers, delivery personnel, or off-site fabricators
who are all ineligible for Wrap-Up coverage.
WHAT DOES A WRAP-UP TYPICALLY COVER?
The Wrap-Up policy covers general liability exposures for claims
arising from the construction project. The coverage includes third-
party bodily injury claims during construction and construction
defect claims under the statute of repose of the particular state.
In our state of Colorado, the statute of repose is up to eight years
following the substantial completion of a project.
POTENTIAL ISSUES WITH SEPARATE STAND-ALONE
GENERAL LIABILITY POLICIES
Insolvent insurance companies, policy exclusions, inadequate or
canceled coverage, and denials of coverage by claims adjusters are
all possibilities when insurance is purchased by each contractor on
the job site. This can often result in quite a bit of finger pointing.
Having one policy and one insurer involved should mean fewer
coverage disputes and faster, cleaner claims handling.
BENEFITS OF A WRAP-UP POLICY
A Wrap-Up mitigates the likelihood of disputes over on-site work,
multiple insurers, or cross-liability suits. The common insurer for
all parties represents a unified defense in the event of a claim.
Under a Wrap-Up policy, it is unnecessary to allocate liability for
third-party bodily injury claims during construction, or property
damage claims following completion of construction, since all
project participants are listed on the policy. This allows for a
consolidation of claims handling between the project owner and
the claimant which leads to a speedy and early resolution o f claims.
The Wrap-Up policy provides completed operations coverage to all
insured and enrolled parties. This becomes an issue particularly
with multi-family projects since the typical general liability policy
excludes coverage for these types of construction projects.
Wrap-Up policy claims directed against a subcontractor working
on the project will not affect its loss runs or loss history, and
enrolled subcontractors can often realize a credit on their separate
general liability policy at the time of an audit since their carriers
are not exposed during the Wrap-Up project.
Don provides Moody clients with contract review and preparation,
and offers expert legal counsel on insurance and employment issues.
On the risk management side, in addition to offering counsel on
programs, Don delivers training sessions designed to educate clients
on procedures and policies.
COLORADO’S WRAP-UP ENVIRONMENT
Over the past few years, Colorado has experienced a substantial decline
in condominium projects primarily due to extensive construction defect
suits. More recently, however, we are starting to see condominium
projects making a comeback. For reasons mentioned above, these
projects are insured through Wrap-Up policies. It is noteworthy that
the insurance markets offering Wrap-Ups are putting their toes back in
the waters, so to speak, as premiums are becoming more stable in the
marketplace.
This appears to be true for townhome projects in Colorado as well. We
are witnessing many more apartment projects being insured under
Wrap-Up policies, which is a trend that has become more prevalent
in recent years. Even if there is a deed restriction that prohibits the
conversion of apartments into for-sale condominiums, the overall pricing
and coverage features of Wrap-Up policies are appealing to developers
and general contractors. Moody Insurance expects this trend to continue.
How things go in the future for potential changes in construction defect
legislation is something that we are paying particular attention to. +