Insurance: Wrap Up versus Non Wrap Up. It’s important to know the difference. Do you?

Wrap up vs Non Wrap Up InsuranceBy Jenny Hutchinson

Are you a General Contractor or Sub Contractor working on projects involving government regulated contracts?

You are speaking with your insurance broker, either getting a new quote or renewing your Commercial General Liability policy, when they ask you; "What is the split between work done under ‘Wrap Up’ and ‘Non Wrap Up’? Too often the contractor’s response is "I'm not sure, I've never heard that term before". If you are being asked the ‘Wrap Up’ question, your broker is familiar with construction insurance. If you do not recognize this term despite working on larger projects, you might be paying too much for your insurance and coming up short on coverage if there is a claim. Knowing more about ‘Wrap Up’ insurance is the first step in tailoring coverage to suit your needs.

There are many construction contracts that require ‘Wrap Up’ liability insurance. The coverage is purchased by either the owner or prime contractor and is meant to provide liability protection to all tiers of contractors and sub-contractors under one main policy specific to the project site. It is very important that all contractors maintain their own Commercial General Liability policy as it will respond as “back-up” coverage in the event the liability limits of the ‘Wrap Up’ are exhausted due to a large claim.

It is also important for the Prime Contractor and Sub-contractor to be aware of the deductible limit on the ‘Wrap Up’ Liability policy. These deductibles are often higher than on a standard Insurance policy. For example, typical Commercial General Liability will have a deductible of $1,000, however, with a Wrap up it is common to see a deductible starting at $10,000 and going up from there. Therefore you need to be aware of the contract that you enter into and what your exposure is. Often the agreement between Prime Contractor and Sub-contractor may stipulate a transfer of risk. This provision states the individual causing the damages may be responsible to pay back the deductible to the Prime Contractor. This could be difficult for some to absorb financially. Being aware of the deductible limit will allow your broker to decide on a plan of action to mitigate this financial impact. Your Insurance broker is a great asset to you and may be able to advise options to “buy down” that deductible making it more affordable to you. 

Wilson M Beck Insurance

 

The moral of the story is how important it is to have a strong and open working relationship with a knowledgeable Insurance Broker. They should be kept in the loop on all your contractual obligations and requirements in order to protect you. An Insurance Broker is here to guide you and offer the correct insurance so you are covered in the event of a loss, potentially saving you from financial hardship due to a simple coverage requirement.

Jenny Hutchinson, Wilson M. Beck Insurance Inc. 


This article first appeared in the 2014-2015 issue of SICA's Construction Review Magazine. To read the entire magazine click here.

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