Benefits of Wrap-Ups
You’re embarking on a large project. You’ve heard about wrap-ups and understand the basic concepts, but you’re still not sure why you should consider one. So why do sponsors prefer wrap-ups to traditional insurance?
The first, and usually most obvious, reason is the potential to reduce project costs through the savings garnered by the implementation of a wrap-up. To understand how a sponsor accomplishes this, one needs to understand that imbedded within each and every bid submitted by a contractor is the contractor’s insurance costs for their work. And, within every contractor’s insurance cost is their insurance carrier’s allocation for claims, or what is referred to as pure premium. On a large project, the combined total of the contractors’ insurance costs can be millions of dollars. Furthermore, what’s not contemplated in the contractors’ individual programs is that a wrap-up is one large project (or group of projects), and not multiple projects across numerous different contractors and projects that are much smaller than the wrap-up. The sponsor uses its economies of scale, and integrated risk management programs, to secure lower insurance and claim costs, which in turn reduce construction costs.
While financial considerations may be one reason to implement a wrap-up, clearly savings aren’t the only reason. Some of the other benefits are:
- Higher Limits – Instead of depending on multiple policies of varying degrees of limits, the sponsor is able to secure much higher limits at more cost-effective rates. These limits will be deployed for the sponsor and all contractors.
- Broader Scope of Coverage – Because of the economies of scale, which equates to more premium dollars, and because of the specialized quality control, safety and claims management programs, a sponsor can work with its carriers to craft specific coverage grants that are broader than those available for it through its additional insured status on its contractors’ policies.
- No Improperly Insured Contractors – No longer is there any concern what edition date a contractor has for its additional insured language, or if the contractor has completed operations. No more worry over primary and non-contributory wording; the sponsor now has the protection it needs.
- Centralized Safety and Claims Management – The sponsor can now count on one specialized safety program that’s unique to its project and can sleep easy knowing its contractors are following its requirements. There is no concern with claims handling from multiple contractors and multiple carriers, no worries over reservation of rights letters from its contractors’ carriers. One unified defense, less litigation amongst project parties.
- Known Completed Operations Coverage and Term – Wrap-ups are now written to cover the statute of repose/limitations so latent defect claims are covered. Typically, these are written to match the time frame for the specific state where the project is located.
- Reduced Litigation – With one centralized program there is no more finger pointing. Everyone’s interests are aligned and the sponsor will select coverage counsel prior to the implementation of the wrap-up and counsel will be specific to liability and workers’ compensation. All parties work together, avoiding self-interests of how the claim affects only “my” program.
Wrap-ups offer sponsors the opportunity to reduce project costs while integrating state-of-the-art risk management programs. For more information on minimizing risk while maximizing health, contact a member of the ‘A’ Team.
- Liability E-Book
- Wrap Up Flyer
- 6 Tips to Remember When Enrolling in a Wrap-Up
- Keys to Implementing a Successful Wrap-Up
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