Coverage 101: Understanding Wrap Up Insurance In Canada
A blueprint for mutual risk management. In a nutshell, this is what wrap up insurance delivers to construction project owners, general contractors and even subcontractors. It’s a unique tool that more and more Canadian builders are using to simplify job-site risk management…from the ground up.
Ok. So here’s how traditional construction policies manage risk...
Separate is not always equal…or efficient. Every business and individual involved in a construction project faces risk. It may be juggling finances, project managing trades or health and safety issues. Regardless of the type of risk, it needs to be managed. That’s why each party involved in the build goes out and gets separate coverage. And it’s why the cost of each of these separate policies gets built into project bids.
Anyone involved in the trades knows that the traditional approach involves transferring construction risks to “the next in line”. Owners transfer risk to general contractors who then transfer risk to subcontractors. This happens because of the specific indemnifications, additional insured provisions and minimum coverage requirements built into each and every policy. Unfortunately, complexities can arise, such as:
- The possibility that some parties may have aggregate issues, inadequate limits, gaps in coverage or no insurance at all;
- Potential unforeseen liability gaps and/or issues between policies and/or insurers;
- With multiple insurance companies issuing policies for one project, a claim has the potential to result in cross litigation that’s both costly and time-consuming.
And this is how wrap up insurance in Canada works…
Effectively, wrap up insurance is all about simplification. Instead of downloading risks on the next party in a construction project, a wrap up insurance project delivers a seamless solution for all entities. In short, it centralizes insurance and loss control programs into one insurance policy or set of policies for an entire construction project.
Wrap up insurance enables subcontractors, general contractors and project owners to manage risk together. Here are the two most common types of wrap up insurance in Canada:
- CCIP – Contractor Controlled Insurance Program. The general contractor sponsors and controls the wrap up insurance program. The general contractor is the first named insured. Subcontractors and other participants are also named insureds. The project owner is either an additional insured or named insured, depending on the program.
- OCIP – Owner Controlled Insurance Program. The project owner sponsors and also controls the wrap up insurance program. As a result, the project owner is the first named insured. The general contractor, subcontractors and other participants are also named insureds.
Generally, wrap up insurance programs are used for large, single-site projects. It’s also important to note that blanket or rolling wrap up can be effective tools to insure multiple construction projects under one insurance program. Curious about the potential benefits of wrap up insurance for your next bid? We can help.
Whatever role your firm plays in construction projects, chances are simplifying risk management is always high on your “To Do” list. Our experienced brokers understand what it takes to build a wrap up insurance program that you can count on to respond when you need it most.