The WRAP-UP Liability policy is also known as an Owner Controlled Insurance Program (OCIP). Under this concept, the owner or contractor purchases a policy which covers the owner, the general contractor, and all their respective Subcontractors.

The subcontractors are required to deduct the cost of the liability insurance from their bids since it is being provided for all parties by the project owner. The wrap up administrator will audit the bids to make sure this has been followed. What most people do not understand is that it is generally more economical for the developer to furnish the wrap up to the contractors than it is to have them buy their own insurance and bill it back to him as a part of their bids. Recently, we saw a wrap up that cost 2% of the construction costs to include everyone. Separate policies would have cost much more: 1% for the GC, 2% for the framer, 1/5-3% for the plumber.  And then, there is the concern as to whether the subcontractor has insurance that actually covers his job.  Many do not.

The wrap up eliminates another source of worry: will there be coverage 8 or 9 years later if something structural causes serious injury to people or to property?  With a 10 year extended completed operations feature, there is coverage until the statute expires.  (The statute of repose is generally defined as 120 months from final inspection, receipt of occupancy, or substatial completion, whichever comes first.)  And, the wrap up eliminates the clause that says all coverage is voided if the big apartment building you built gets converted to a condo during those 120 months.

The policy offered to projects ranging from 4 units or hundreds of units. The needs of smaller project owners has finally been addressed. Minimum premiums have dropped to $50,000 with a $10,000 deductible or Self Insured Retention, depending on the insurer. Underwriters usually write such policies for 24 or 36 month terms to allow for the construction and sale of the project. Some commercial projects may not require such long time frames and the period needed will be negotiated accordingly.

The rating varies by size of project, location, and soils reports. Small projects can buy a wrap up liability plan with a $10,000 deductible for about $50,000 starting price. Larger projects are looking at rates that range from about 1.25% of sales value to 4% of sales value. Some rate it on sales value of the project; others use the construction hard costs. Recently, we priced a $6,000,000 project at 2% of hard costs.

Build out periods can be as long as three or four years.  Completed operations begins when the building is complete and ready for occupancy. Some carriers give you 120 months of discovery; however, we try to get the language of the extension to say that the extended discovery period runs for as long as required by law in the jurisdiction of the project.

The deductible or Self Insured Retention chosen by the applicant also influences the rates that will be paid.   For larger projects, larger deductibles or retentions are often used, resulting in very low rates.  This frees up money to purchase higher limits of liability.

Most programs will provide a basic policy of $2,000,000 limits.  We have been able to get excess limits of $5,000,000, $10,000,000, and $20,000,000 excess of primary on a following form basis. This allows us to accommodate the needs of larger projects and of men of means who have a lot at risk.

Underwriting:

Most companies use the application form posted on this website, supplemented by loss runs for five to seven years from the general contractor, a copy of the construction budget, and a copy of the soils report, including a plot plan of the project.

Experience:

Our firm has been involved in providing Owner Controlled Insurance Plans for large building projects in the Los Angeles area for over 30 years.   We welcome your inquiries.