What Is a Wrap-Up Policy for Construction Projects?
Learn how a wrap-up policy centralizes insurance for large construction projects, streamlining coverage and administration for all parties.
Managing insurance for large-scale construction projects presents complexities. The involvement of many parties on a single project creates challenges for consistent risk protection. Each entity typically carries its own insurance, which can lead to fragmented coverage, potential gaps, or disputes over responsibility. A coordinated approach to risk management is essential for successful project execution.
Understanding Wrap-Up Policies
A wrap-up policy, also known as a Controlled Insurance Program (CIP), consolidates insurance coverage for a large construction project under a single program. It functions as a master policy that encompasses various parties involved in the project, rather than requiring each contractor and subcontractor to secure their own separate insurance. This approach aims to streamline the insurance process and centralize risk management for the entire undertaking.
The fundamental nature of a wrap-up policy involves one entity procuring insurance for all or most participants working at a specific construction site. This differs from traditional insurance models where individual contractors maintain their own independent policies. By combining multiple coverages, a wrap-up policy provides a consistent framework for addressing potential liabilities and losses that may arise during the course of the project.
Types of Wrap-Up Policies
Wrap-up policies come in two forms: Owner Controlled Insurance Programs (OCIPs) and Contractor Controlled Insurance Programs (CCIPs). The distinction lies in which party sponsors and manages the program. Both OCIPs and CCIPs aim to provide consolidated liability coverage for all project participants.
An Owner Controlled Insurance Program (OCIP) is procured and managed by the project owner. The owner becomes the primary policyholder and oversees all aspects of the insurance program for the construction project. This allows the owner to maintain direct control over the insurance coverage, ensuring uniformity and consistency across all enrolled parties.
Conversely, a Contractor Controlled Insurance Program (CCIP) is purchased and managed by the general contractor. In a CCIP, the general contractor extends coverage to subcontractors working on the project.
Key Coverages and Included Parties
Wrap-up policies include several types of insurance coverage for construction project risks. General Liability insurance protects from third-party claims related to bodily injury, advertising claims, and property damage during construction, covering defense costs and potential settlements. Workers’ Compensation insurance provides benefits to workers injured on the job site for medical expenses, rehabilitation, and lost wages. Excess or Umbrella Liability coverage provides additional limits of protection beyond underlying general liability and workers’ compensation policies, offering broader financial protection against unforeseen or catastrophic claims.
The policy covers most entities working at the construction site, including the project owner, general contractor, and subcontractors. However, certain specialized trades, material suppliers, or off-site operations may require separate insurance arrangements.
Implementing and Administering a Wrap-Up Policy
Implementing a wrap-up policy involves a structured process for proper coverage and administrative requirements. Enrollment of contractors and subcontractors is an initial step, involving documentation and adherence to guidelines established by the policy sponsor.
Ongoing data collection and reporting are essential for administration. This includes regular reporting of payroll figures for workers’ compensation, as premiums are often calculated based on these figures. Accurate reporting ensures proper cost allocation and compliance.
Claims management is centralized, with claims for all enrolled parties handled through the single policy. This streamlined approach leads to more efficient processing and resolution, avoiding disputes between multiple insurers. The policy sponsor or a designated administrator manages the claims process from initiation to resolution.
Upon project completion, the policy undergoes a close-out process, involving a final reconciliation of reported data, claims, and premiums. Some policies also include a “completed operations” component, providing liability coverage for a specified period after physical completion, addressing potential claims that may arise years later.