Wrap-Up Plans

April 25, 2012

Combines Liability, Other Coverages, for Construction Projects

Summary: The term “wrap-up” has become increasingly common in the insurance business — usually in reference to construction projects — without having become particularly precise in its meaning. One meaning of the term wrap-up is “owner-furnished general liability and/or workers compensation insurance for the owner and all contractors on a construction project.” Another meaning takes the concept a step further and states that a wrap-up “involves either an owner or general contractor providing and paying for general liability or some other line or lines of insurance for all interests involved in a construction project at one location.” Still another is control by a single entity of the liability or the workers compensation coverage or both (and perhaps some other coverage such as builders risk) of a construction project. Regardless of the precise meaning, the basic idea of wrap-up plans is uncomplicated: concentration of insurance coverages that would otherwise involve numerous insurers and producers, resulting in a competitively more attractive risk as well as the elimination of gaps and duplications among coverages.

These pages present a general discussion of the subject. However, no single statement here should be applied unqualifiedly to any existing or proposed wrap-up plan since the plans are subject to insurers' underwriting philosophies, individual construction exposures, and state regulations.

 

Nature of Wrap-Up Plans

Basically, a program of wrap-up combines all interests involved in a construction project — general contractor, subcontractors, architects, and owners of the project — for insurance purposes, with one insurer chosen by the owner or general contractor of the project. These programs have been referred to as “controlled construction insurance plans,” and this name is illustrative as to the nature of wrap-up plans. The key word is “controlled,” implying the authority of some one entity — usually the owner or general contractor — to place one line or combine several lines of insurance with one insurer. The word “construction” is key to the types of projects amenable to wrap-ups: primarily new construction projects involving buildings, subways, tunnels, pipelines, bridges, and similar projects with a definite completion date. Note the point about a definite completion date — this is required for wrap-up plans.

In some plans only general liability insurance is involved in the wrap-up. Other plans may involve liability and workers compensation coverages and may also include builders' risk and some marine insurance. Infrequently, surety coverage is also combined in the wrap-up. Policies may be written to include personal injury liability and broad form property damage insurance. However, other hazards, such as contractual liability and independent contractors exposures, are often omitted when all interests are to be combined under one policy. And, automobile coverages are not usually written under this type program.

When a wrap-up plan is written, it is important for all parties involved to acknowledge and agree that the wrap-up coverages are issued to cover a specific construction job; in other words, coverage is to be limited to a specified location. Damages arising from other projects or other activities of the plan's insureds are not meant to be covered by the wrap-up plan and this has to be made definite from the inception of the wrap-up plan.

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