Article Date: 08/29/2014

Attorney Offers Advice on ‘Wrap’ Insurance for Construction Projects

By Steve Rizer


For construction projects using a consolidated insurance program -- otherwise known as a “wrap” -- make sure there is adequate contract language in place to deal with such an arrangement, Sherman & Howard’s Christopher Mosley advised professionals attending a recent WPL Publishing webinar. “It is important to address wraps in your construction contracts,” he said, noting that standard form contracts are of insufficient help on this front. 


“A typical American Institute of Architects (AIA) form does not contemplate a wrap,” Mosley said during the webinar, “OCIP & CCIP Insurance Coverage: Wraps and How they Can Protect Your Projects for Winning Results.” “And so, the insurance provisions of a typical AIA contract may be inconsistent with the actual insurance requirements in light of the wrap. It becomes important to make sure that those insurance provisions are modified -- whether they’re between the developer and the general [contractor] or the general and the subcontractors -- to be consistent with the coverage that’s being provided by the wrap.”


Mosley explained that wraps are being used “quite frequently” on many large, commercial construction projects. “Wraps have become a very important tool for managing construction risks in today’s business environment and, in particular, they become a critical tool for managing construction defect risks as construction defect litigation continues to be quite heavy throughout the country and poses a significant risk to the success of any project construction professionals may be involved in.”


A wrap insurance program can insure a single project or, in what is called a “rolling wrap,” a series of related projects, Mosley said. “It is called a ‘wrap’ not because of anything specific or unique to the policy itself, but because it wraps in all construction professionals into a single insurance policy designed to insure one project."


Mosley reported that for residential projects, particularly those valued at $1 million and above, wraps “are quickly becoming the only option in many areas to insure or provide construction defect risk insurance for those types of projects.”


Mosley’s presentation focused on providing a “somewhat high-level view of wraps,” what they are, why they are important, and how they can help various types of professionals within the construction community.


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