Why Choose a Wrap or Project-Specific Policy?

In the complicated landscape of large residential and commercial construction projects, mitigating risks is crucial for all stakeholders involved. While a General Liability (GL) policy held by a general contractor provides a degree of risk transfer, it may leave owners susceptible to substantial coverage gaps and depleted limits. It can also be hard to guarantee that all subcontractors involved have the proper coverage for the project. To protect themselves and to simplify the insurance process, many developers opt for a Wrap or Project-specific policy.

 

A contractor holding a wood plank with a construction project in the background.

Wrap policies protect the owner, contractor, and all subcontractors working on a project.

Why Choose a Wrap?

Consolidated Coverage

Wraps consolidate coverage for multiple stakeholders into one policy, streamlining the insurance process and ensuring comprehensive coverage for everyone involved. They include coverage for all contractors working on a project, including multi-family projects, which are often excluded on GL policies.

Simplified Administration and Risk Management

Since all parties are covered under one policy, Wraps foster better coordination and communication between parties, reducing the likelihood of legal disputes. Peer review firms are often involved in streamlining risk management on Wrap projects.

Single Source of Defense

Wrap policies ensure that in the event of a legal dispute, there will be a single source of defense and no-fault allegations to be determined in the event of a loss.

 

Why Choose a Project-Specific Policy?

Cost-Effectiveness

Project-specific policies can provide coverage for both the owner and the general contractor on a designated project or for just one of them. They are more cost-effective than a Wrap policy, but are often used on smaller projects.

Completed Operations

Both Project-Specific and Wrap policies offer completed operations coverage through the statute of repose.

Diversification

Both WRAP and project-specific policies help diversify an owners’ and builders’ insurance carrier relationships, limits, and coverages. This helps mitigate risk and allows businesses to access specialized industry expertise.

 

Types of Wrap and Project Specific Policies

Wrap Programs – Contractor-Controlled Insurance Program (CCIP) and Owner-Controlled Insurance Program (OCIP)

  • CCIP: Purchased by the general contractor for the GC and all enrolled subcontractors
  • OCIP: Purchased by the owner for the owner and all enrolled contractors and subcontractors
  • Offers full GL coverage for all contractors enrolled in the program
  • Flexible policy terms and PAYS (Pay As You Sell) pricing available
  • Pollution Wrap policies are available
  • Enhances consistency of coverage and administrative efficiency but comes at a higher cost
  • Requires a Wrap administrator and third-party peer review provider
  • Excess coverage may be available
  • One carrier provides a single source of defense

Project-Specific CGL with the Ability to Name Both Owner and GC as Named Insureds

  • Stand-alone policy purchased in the name of both the owner and the GC
  • Provides full CGL coverage for both entities at a moderate cost
  • Owner and GC share limits, and subcontractor coverage verification is essential
  • Subcontractors must maintain their own GL policy for the project
  • Excess coverage may be available
  • Possibility for defense outside the limits
  • Multi-year terms available

Owners Interest GL Policy (OIP)

  • Stand-alone policy purchased by the owner for their liability
  • Provides additional GL coverage beyond construction activities; covers both premises and construction claims
  • Offers completed operations tail coverage through the statute of repose
  • GC cannot be listed as a named insured
  • Excess coverage may be available
  • Coverage limited to designated project with dedicated limits

Owners and Contractors Protective Liability Policy (OCP)

  • Stand-alone policy purchased by the general contractor for the project owner
  • Covers the vicarious liability the project owner incurs due to the contractor’s acts or omissions
  • Limited to the project owner hiring the general contractor; GCs can purchase as well
  • Does not cover gaps for premises liability and products/completed operations related to construction operations
  • Excess coverage not available

 

While Wrap, Project-Specific CGL, OIP, and OCP policies each have their unique advantages and limitations, choosing the right insurance program depends on the specific needs and preferences of the project stakeholders. Understanding the intricacies of these insurance options is crucial for effective risk management and ensuring the successful completion of construction projects. We’re always here to help guide you in choosing the best coverage match for your insureds. To learn more about our programs for Wrap and Project-specific policies, click here.