David DeLaRue, CPCU, ARM, AIC Senior Vice President National Project Insurance Practice General Liability Only Wrap-Ups

General Liability (GL) Only Wrap-Up Defined –Project Specific General Liability Coverage –Single policy for all insureds –Sponsored by the owner or contractor –Covers all eligible contractors –Should be used in concert with practice programs

GL Only Wrap-Ups Residential Risk (Incl. Rolling) Commercial Risk Mid 1990s to Present2009 to Present 2010 to present Rolling GL Only Commercial Wraps

Benefits Coverage Certainty Addresses Additional Insured & Indemnity Requirements Project Specific Risk/Exposure Specific Removes Primary Coverage Concern for Small Subcontractors Litigation Defense Integrated Project Delivery Reduce Cost of Risk

WC/GL Wrap vs. GL Only Wrap Standard Market Deductible Minimum Retention usually begins at $250K Better control over workers compensation (WC) claims. Little exposure for WC subrogation Carrier safety resources Standard ISO forms with wrap-up modifications Reliance on broker administrator – Carriers will consider broker experience in underwriting Normally does not mandate TPA for QA/QC Excess & Surplus (E&S) Lines Self-Insured Retention* Minimum Retentions begin as low as $25K (or lower) No control of workers comp. claims Greater challenge to secure protection from WC subrogation Limited safety services Greater use of manuscript forms and endorsements – No approvals Can mandate use of third party program administration in addition to broker Can mandate TPA QA/QC firm (Residential)

WC/GL CIP vs. GL Only CIP – Cont. Higher claims frequency (WC) Better understanding of large commercial project cover needs Greater savings or profit opportunity Greater downside exposure Greater administration burden and cost Fee based Large collateral requirements Greater government regulation Claims adjusting fees apply Longer lead time needed for marketing and set-up Greater contract dependence – i.e., complex credit recovery Low claims frequency (GL) Greater reliance on coverage limitations such as Ins. vs. Ins. Modest savings or profit opportunity** Limited downside exposure Lower administration burden and less cost Often commission based No collateral Limited regulations Claims adjusting fees may not apply Less lead time needed for marketing and set-up Lower contract dependence – Structure simplicity

Considerations Understand the brokers relationship to the E&S carrier and wholesale broker. Consider any contractual limitations on using E&S coverage. Make sure the E&S carrier is approved in the state. Coordinate coverage with the practice policy. Self-insured retention or deductible. Start early and communicate with contractors. Primary and excess policy alignment. Amend contract for the wrap-up.

Considerations Surplus lines taxes and fees usually apply – they are your responsibility. Commission, Fee, or Combination – Understand the approach Policyholder service differences. Limitations of state guaranty funds if carrier fails. Limits are shared and need to be adequate. State wrap-up legislation is now more likely to include GL Only by reference. Exposures go beyond general liability. Consider how you value the program to the owner. E&S Lines are not regulated – Terms & conditions vary widely. Contractors should request the policy and maintain a record of all wrap-ups. Underwriter anonymity – Attempt face-to-face.

Considerations Understand the implications of wrap exclusions on contractor policies. –Warranty period exposures Beware of state-specific forms: for instance, California residential construction. Is there an insured versus insured exclusion? Full or limited. Broad form additional insured coverage as required by written contract. –Some E&S carriers struggle with this allowance. Understand the completed operations trigger – When does the clock start? –Statutes of repose may exceed the completed operations term. Does defense erode the limit? If so, consider more limit. EIFS exclusion – Does your project have it and policy exclude it. Mandatory waiver of rights to recover. Excluded contractors – No excluded contractors in the chain of insureds. Review the forms – Everyone!

Five Important Things Most wrap-up coverage benefits are delivered by the GL policy. GL Only rates can be more competitive than the GL rates on a WC/GL wrap-up. No collateral! Form freedom – Good, Bad, & Ugly Lower administration cost Sponsors

Ask if a project will be covered by a wrap-up. Review the contract and the wrap-up policy. Maintain thorough records of all project wrap- ups. Communicate requirements to lower level subcontractors. Structure practice programs as DIC. Five Important Things Contractors

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