Owner Controlled Insurance Programs (OCIP) and Contractor Controlled Insurance Programs (CCIP), types of “wrap-ups,” have become more common over the last two decades. Implemented typically for specific projects or project groupings with construction values of $100 million or more, they wrap up the workers’ compensation and general liability insurance for all on-site contractors (including the general contractor or construction manager) and owners of the project site. The premium for this insurance is paid for by the owner. In return, all participating contractors reduce their bid prices by the cost of their own insurance.
As an entity enrolled in a wrap-up, you may be tempted to relax and depend on the OCIP or CCIP to protect you, should any project-related issues arise. Instead of relaxing, consider the following:
Wrap-ups are specific to the project site. If you perform project-related work off-site or an incident occurs in transit, you will need to rely on your own commercial general liability (CGL) insurance.
Wrap-ups have coverage limits. If you cause a project-related issue and the issue’s resolution exceeds the limit of the wrap-up, where does that leave you? Your standard CGL policy likely will exclude anything that is part of the wrap-up policy. Consider also that wrap-ups don’t cover all types of liability.
Wrap-ups expire. If a claim arises after the project has been completed and the wrap-up expires, what recourse do you have?
Wrap Your Construction Insurance Around the Wrap-Up
While the coverage provided under the wrap-up is typically broader than a contractor’s own policy(ies), wrap-ups present unique challenges. Let your insurance broker know that you may become a party to a project performed under a wrap-up.
When you win the job bid and become an enrolled member in the wrap-up, ask the project owner or manager for a copy of the policy. As a member, you have a right to receive this document. Review it thoroughly with your broker. Wrap-ups are truly a case where “the devil is in the details.” Some of the topics you may want to discuss include the following:
Additional coverages. Should you purchase completed operations coverage to protect your business after the project has been completed and the wrap-up has expired? Should your broker ask your insurance carrier to endorse your policy for difference-in-conditions (DIC) coverage to protect you against losses that exceed the wrap-up coverage?
Claims procedures and protocols. What steps must you follow to be covered by the wrap-up in the event a claim is made?
Deductibles. Who pays the deductibles if a claim is made? Are there limits? How will disagreements between you and the wrap-up owner be resolved?
Finally, keep a copy of the wrap-up policy in your files. Sometimes there are disagreements between the project owner and the contractor, and the contractor may need to rely on the wrap-up to file a claim and resolve the issue.
To learn more about managing and insuring construction risks, listen to the “Construction Risk and Insurance Roundtable” podcast episodes or contact your local Hylant office.
The above information does not constitute advice. Always contact your insurance broker or trusted adviser for insurance-related questions.