RISK MANAGEMENT
Michelle Lorenz
answers
the question: Does a
Wrap-Up Policy protect my
crane company?
59
DECEMBER 2013
ACT
I
n this litigation-crazed era, when
workers are injured on a construction
site, not only do they collect against
a worker’s compensation policy but they
often they attempt to sue multiple parties:
Project Owners, Project Managers,
General Contractors and many of the
subcontractors on the site. In response
to this, many owners, contractors and
municipalities resort to insurance
alternatives such as OCIPs or CCIPs,
which are types of Wrap-Up Policies.
What is an OCIP, CCIP or Wrap-
Up? A Wrap-Up is an insurance policy
that consolidates or “wraps up” all the
insurance on a construction project
under one insurance program. It provides
uniform coverage with high limits for all
companies enrolled in the Wrap-Up and
working at the construction site. Instead
of having a typical one year policy term,
the Wrap-Up policy lasts the life of the
construction project, most often ranging
from two to five years. They can cover
only one specific construction site or
multiple sites. Wrap-Ups can include
various types of insurance but the most
common purchased are: 1) a first-party
Builders Risk policy for damage to the
ongoing construction, 2) a worker’s
compensation policy that covers injuries
to employees of any contractor on the
site, and 3) a third-party general liability
policy that covers property damage or
bodily injury claims that occur on the site.
Additionally, there is typically a significant
layer of umbrella or excess coverage with
at least $50 million up to amounts of
several hundred million in limits.
Both OCIPs and CCIPs are types of
Wrap-Up policies. OCIP stands for
Owner Controlled Insurance Program
where an owner buys & administers
the insurance program; a CCIP is a
Contractor Controlled Insurance Program
where a contractor (generally the GC)
purchases and administers the Program.
While OCIPs and CCIPs have been
around for more than 40 years, they are
increasing in popularity because of large
capital improvement projects, big energy
projects like wind farm work, as well as
increasingly strict anti-indemnity statutes
and the risks of tenders not being accepted
by the carrier for a contracting party.
A Wrap-Up Program Administrator
often requires all subcontractors working
on a site to participate in the OCIP or
CCIP. However, crane companies are often
given the option of whether they want to
participate. Let’s review common coverage
gaps in Wrap-Ups as well as some things
you should discuss with your agent before
participating financially in a Wrap-Up.
Gaps/traps of Wrap-Ups
Participating in a Wrap-Up insurance
program can be a great alternative for a
crane company because of the protection
of one’s own loss history, higher available
limits and the ability to insulate the
crane company from subrogation claims
by other subcontractors enrolled in the
Wrap-Up. But, if you participate, you
need to understand the gaps in general
liability insurance coverage provided by a
Wrap-Up. Wrap-Up coverage is typically
provided with a standard insurance
industry policy form entitled CG 0001.
But crane companies need unique
coverage’s that your own GL carrier should
provide via endorsements that modify the
coverage in the CG0001 form. Wrap-Ups
don’t have this additional protection for
crane companies. Following are the most
common gaps in coverage:
HOOK COVERAGE.
If you drop and damage a
load you are lifting, the Wrap-Up has no
coverage for that property damage or the
lost profits emanating from the property
damage. This could be a several million
dollar claim.
CONTRACTOR’S EQUIPMENT.
Wrap-Ups have
no coverage for contractor’s equipment.
If you are erecting a tower crane and it’s
damaged during that process, the Wrap-
Up has no coverage for the property
damage or lost profits that result from
that.
POLLUTION COVERAGE.
The CG0001 form
has a standard exclusion for pollution
claims & thus a Wrap-Up has no coverage
for most pollution claims. Many crane
policies have limited pollution coverage
for “sudden & accidental” exposure or
pollutants such as hydraulic fluid that leak
from a piece of mobile equipment. Wrap-
Ups don’t.
Wrapped Up?
ABOUT THE
AUTHOR
Michelle Lorenz
is
manager of litigation and
claims for NBIS.
