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. +