Wrap-up insurance programs are one of the most popular risk management tools used in today’s construction world. These programs are utilized on every form of project, including residential buildings, stadium projects, and large road and highway civil projects, providing owners, developers and general contractors alike with better insurance coverage and enhanced cost savings.
But what is a wrap-up insurance program and what problems does it solve? In the traditional insurance model for construction, every party involved in a project — the owner, general contractor and subcontractors — is required to obtain and maintain separate insurance coverages to insure their own work. Often times, additional coverage is required to cover the general contractor and the owner for their vicarious liability.
As insurance coverage has become more limited, and the willingness of insurance companies to expand additional insured status to other parties has waned, the traditional insurance model is no longer viable. All too often, accidents occur that are not covered or require extended legal battles that erode limits and fail to help the injured parties. Wrap-up programs eliminate the need for this concern.
Wrap-up Program Basics
In simple terms, wrap-up insurance programs consolidate insurance, claims and loss control (safety) into one single insurance policy(s) for the benefit of all parties, which include the owner, general contractor and all the subcontractors working on a project site. With one policy (or set of policies) and a single dedicated limit of insurance, a wrap-up insurance program can ensure all parties involved in the project have the right coverage for the duration of construction.
Wrap-up insurance programs can be purchased by both owners (via an Owner Controlled Insurance Program or OCIP) and general contractors (via a Contractor Controlled Insurance Program or CCIP). The types of insurance that can be aggregated under a wrap-up are workers’ compensation, general liability and excess liability. You may also see other lines of coverage purchased for the project, including builders’ risk, environmental/pollution and professional liability.
Expert Management is Critical
Wrap-up programs involve more than purchasing insurance and can get complicated for the owner and construction team. It is up to the owner and general contractor to make sure the insurance purchased meets the needs of all the contractors, and that all claims and safety activities are managed properly. Construction project exposures change every day, with contractors moving on and off the job and new risks being exposed as the project continues towards completion. In the beginning of a project, the owner and general contractor are concerned with setting up contracts that incorporate the proper bidding and insurance requirements. As the project progresses, the construction teams focus on changes and look more at contractor activity at the jobsite, safety oversight and the proper management of claims as they happen. All the while, they are working to complete the project on time and on budget.
Activities of Wrap-up Account Management
Once the program is bound, it is the job of the wrap-up management team to take the reins to implement the program by carefully monitoring the program’s success through quality control measures. The account manager carries out the day-to-day activities, including reviewing and approving all subcontractor insurance requirements, verifying insurance costs, reviewing off-site limits and monitoring payrolls.
The wrap-up account manager also educates all parties on the expectation of the wrap-up program, facilitates kick off, stewardship and other training meetings, and develops manuals that detail the program requirements. The wrap-up account manager essentially serves as the middle person for all activities happening on site, and is responsible for building relationships with the onsite construction contacts, claims, carrier and safety personnel, all of whom can impact the results of the program.download full article