Wrapping Up Risk: Understanding Wrap-Around Insurance Liability Policies

Large-scale building projects come with complex risks and responsibilities, but you’re not in it alone. A wrap-around liability policy offers a unified solution to protect all parties involved, simplify coverage, and strengthen your foundation of trust and accountability. Rooted in service and guided by integrity, we’re here to help you navigate the details and ensure your project is covered from the ground up.

Understanding the Terminology: What’s in a Name?

You’re right, the terminology surrounding these policies can be a bit fluid. While the core concept of a consolidated insurance program for a specific project remains consistent, you might hear various terms used. Based on industry usage, the following terms are often used synonymously to describe a wrap-around insurance liability policy for construction projects:

• Wrap-Up Insurance
• Wrap Insurance
• Construction Wrap-Up Insurance
• Project-Specific Insurance Policy – This is a broader term, but often refers to wrap-ups.
• Owner-Controlled Insurance Program (OCIP) – Typically purchased by the project owner.
• Contractor-Controlled Insurance Program (CCIP) – Typically purchased by the general contractor.

While these terms generally point to the same concept, it’s important to understand who is sponsoring the policy (owner or contractor) as this can have implications for how the program is structured and managed.

What Does a Wrap-Around Policy Cover?

A wrap-around insurance liability policy is designed to provide comprehensive liability coverage for all or most of the parties involved in a specific construction project under a single insurance program. The primary coverages typically included are:

• General Liability: This covers bodily injury and property damage to third parties arising from the construction activities. This protection extends to the owner, general contractor, subcontractors of all tiers, and potentially architects and engineers involved in the project.
• Excess Liability (Umbrella): This provides an additional layer of liability coverage above the limits of the primary General Liability policy, offering increased financial protection for potentially large claims.
• Workers’ Compensation (Often Included): In many wrap-up programs, Workers’ Compensation coverage for all participating contractors and subcontractors is also included within the single policy. This streamlines the handling of work-related injuries across the project.

Key Benefits of a Wrap-Around Policy:

• Centralized Control: Consolidating coverage under one policy allows for more efficient risk management and claims handling.
• Consistent Coverage: All participating parties operate under the same policy terms and conditions, reducing the potential for gaps or disputes in coverage.
• Cost Savings (Potentially): The collective purchasing power of a large project can sometimes result in lower overall insurance costs compared to each party obtaining individual coverage.
• Simplified Administration: Managing one policy is often less burdensome than overseeing numerous individual policies.
• Reduced Litigation: When all parties are insured under the same program, it can minimize “finger-pointing” and cross-litigation in the event of a claim.

When Does a Construction Project Need Wrap-Up Coverage?

Wrap-up insurance is typically considered for larger, more complex construction projects where the benefits of centralized control and consistent coverage outweigh the administrative effort of setting up the program. Common scenarios include:

• Large Dollar Value Projects: Projects with significant construction costs often warrant the use of wrap-ups.
• Long-Duration Projects: Projects spanning several years can benefit from the consistent coverage offered by a wrap-up.
• Projects with Multiple Contractors and Subcontractors: The more parties involved, the greater the potential for coverage gaps and the more valuable a consolidated program becomes.
• Projects with Unique or Significant Risks: Projects involving complex engineering, hazardous materials, or work in densely populated areas may benefit from the tailored risk management approach of a wrap-up.
• Publicly Funded Projects: Government entities often utilize wrap-ups for large infrastructure projects.

What is Not Covered with Wrap-Up Coverage?

While comprehensive, wrap-up policies do have exclusions, they typically do not cover: 

• Professional Liability (Errors & Omissions): Architects, engineers, and other design professionals typically need their own E&O insurance to cover claims arising from their professional services.
• Contractors’ Equipment: Damage to a contractor’s own tools and equipment is usually covered under their separate contractors’ equipment floater policies.
• Pollution Liability (Unless Specifically Endorsed): While some wrap-ups may include limited pollution coverage, significant environmental exposures often require a separate Pollution Liability policy.
• Subcontractors’ Auto Liability: Accidents involving a subcontractor’s vehicles are typically covered under their own commercial auto insurance policies. However, the wrap-up’s General Liability might extend to vicarious liability arising from these accidents.
• Surety Bonds: Wrap-ups do not replace the need for performance or payment bonds.
• Owner’s Separate Liability: The wrap-up primarily covers liabilities arising from the construction activities. The owner may need separate coverage for their ongoing operations or ownership risks unrelated to the construction.
• Intentional Acts or Gross Negligence: Coverage generally doesn’t extend to intentional wrongdoing or gross negligence by any insured party.
• Certain Warranty or Defect Claims: While the General Liability portion might respond to bodily injury or property damage caused by defective work, it typically doesn’t cover the cost to repair or replace the defective work itself.

Wrapping It All Up for Project Success

At Rollo Insurance, we deeply value the hard work, dedication, and impact of those in the construction industry. Construction projects shape our communities and build the future and that deserves strong, reliable protection. Wrap-around liability insurance policies offer a smart, efficient way to manage risk on large-scale construction projects by consolidating coverage for all involved. This not only helps reduce costs and potential disputes, but also ensures smoother coordination across the board. Our team is here to help you navigate the details, understand your coverage, and determine if a wrap-up policy is the right fit for your next build. We’re proud to support those who build America, one project at a time.