Wrap-Up Insurance (OCIP and CCIP): What Contractors Gain and Give Up on a Controlled Project

What is wrap-up insurance and how does it work?

A wrap-up is a consolidated liability program that covers all enrolled parties on a defined construction project. When the project owner buys and controls it, it is called an Owner Controlled Insurance Program, or OCIP. When the general contractor buys and controls it, it is a Contractor Controlled Insurance Program, or CCIP. The sponsor pays the premium up front, and enrolled contractors are told to remove the cost of the covered lines from their bid. That is the part people miss. You are not getting free insurance. You are being asked to price your work without it, and the sponsor keeps the savings and the risk.

• OCIP: the owner sponsors, controls the limits, and selects the carrier and the safety requirements
• CCIP: the general contractor sponsors, which usually means tighter site control and faster claim coordination
• Typical covered lines: general liability, excess liability, and often workers compensation
• Almost never covered: your commercial auto, your tools and equipment, your professional liability, and your pollution liability
• Enrollment is usually per project and applies only to work performed at the designated site

Why do owners and general contractors buy wrap-ups?

Sponsors buy wrap-ups to control limits, control safety, and control the claim. On a project with thirty trade contractors, an owner has no practical way to verify that every one of them carries adequate limits, names the right additional insureds, and keeps the policy in force for the full completed operations period. A wrap solves that by making the coverage uniform. It also buys much longer completed operations protection than a typical subcontractor policy will deliver, which matters enormously on residential and multifamily work where construction defect claims can surface eight or ten years after substantial completion.

• Uniform limits across every trade, commonly 2 million dollars per occurrence with 25 million to 100 million dollars in excess on larger projects
• Extended completed operations, often 8 to 10 years past substantial completion
• One carrier managing claims, which reduces cross-suits between trades
• Volume pricing that is usually cheaper than the sum of individual subcontractor policies
• A single mandated site safety program with one loss control team

What does a wrap-up leave out of your coverage?

The wrap covers your work at that site and nothing else. Everything you do off site, everything you own, and every professional judgment you make stays on your own policies. This is where contractors get hurt, because they assume enrollment means they are protected and they let their own program thin out. Your commercial auto exposure does not go away when your truck is parked at a wrapped job. Neither does the theft of 40,000 dollars in tools from your gang box. Read the enrollment manual and build a list of what is excluded, then confirm your own policies still respond to those items.

• Commercial auto liability and physical damage on vehicles traveling to and from the site
• Contractors equipment and tools, which belong on an inland marine policy
• Professional liability for any delegated design or engineering work you perform
• Contractors pollution liability, which is frequently excluded even on environmental scopes
• Off-site fabrication, yard operations, and any work outside the defined project boundary

How does a wrap-up change your workers compensation costs?

If the wrap includes workers compensation, your payroll for that project runs through the sponsor's policy, not yours. That sounds like savings, and the premium credit you deduct from your bid is real. What surprises contractors is the effect on their experience modification rate. How wrapped payroll and wrapped losses are reported to the rating bureau varies by state and by rating bureau, and in some jurisdictions the losses enter your experience while the offsetting payroll does not. Where that happens, one bad claim on a wrapped job can raise your mod for three rating years and drive up premium on all of your unwrapped work. Get the reporting treatment confirmed in writing before you enroll, because it changes the real cost of the project.

• How wrapped payroll and losses are reported varies by state and rating bureau, and in some jurisdictions losses count against your mod without the offsetting payroll
• Ask in writing how losses will be reported and whether the sponsor will provide loss runs at least quarterly
• Confirm the deductible or self-insured retention and who funds it
• Verify your own minimum premium will not create an audit surprise if most of your payroll moves to the wrap
• Build safety performance into your bid, because a wrap sponsor can and will remove a contractor with poor loss experience

What should you check before you enroll in a wrap-up?

Treat the enrollment manual as a contract document, because that is exactly what it is. Have your broker read it alongside the subcontract, because the two documents often disagree about who insures what. Pay particular attention to the credit calculation, the dedicated limits, and the completed operations term. A shared limit that is exhausted by another trade's catastrophic loss leaves you with nothing, and on a large project that is not a theoretical risk.

• Is the limit dedicated to this project or shared with the sponsor's other work
• Are completed operations limits reinstated annually or fixed for the whole term
• What is the deductible or retention per occurrence and who pays it
• How is your bid credit calculated, and does it match what your coverage actually costs you
• Are you still required to carry your own policies, and at what limits
• What happens to coverage if the project is delayed past the policy term

Ready to review your wrap-up enrollment?

Grandbay Financial Services reviews wrap-up enrollment manuals against subcontracts every week and tells contractors exactly where their own coverage still has to respond. If you have a controlled project coming up, bring us the documents before you finalize the bid. Schedule a working session at calendly.com/grandbayfinancial and we will walk your program line by line.