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Contractors WRAPs / Bonds & Completion Bonds Insurance

The customary approach for insuring against risks associated with work under third-party contracts is to require contractors to purchase and maintain insurance coverages that the grantee specifies within the terms and conditions of the third-party contracts. There are situations, however, when it may be advisable for the grantee to consider purchasing some type of "wrap-up" program for their larger construction projects (those over $10M). These programs are also known as "owner controlled insurance programs (OICP)."

A “wrap-up” program is one in which the grantee procures an insurance program covering all contractors and subcontractors who will be working on a large construction project. Typical insurance coverage would provide for: workers compensation, general liability, and "all risks course of construction" (sometimes referred to as "builder's risk"). This policy is usually purchased through the services of an insurance broker. As construction contracts are awarded over the term of the policy period, the names of the contractors and all subcontractors are added to the policy as named insureds.

Among the advantages of a “wrap-up” program are:

  • The grantee knows for certain that its contractors have adequate coverage.  

  • There will be premium discounts for workers compensation because of the size of the policy, and when the grantee informs the construction contractors in its IFB that the grantee is providing insurance, the contractors are able to request credits from their insurance companies and are in a position to pass along the savings to the grantee in the form of lower bid prices.

  • Newer and smaller construction contractors, especially some Disadvantaged Business Enterprises (DBE's), may have a difficult time getting insurance. A wrap-up program may improve the competitive environment by allowing more contractors to compete for the work.

  • The cost of settling claims is greatly reduced because the injured party does not have to prove which contractor is at fault, only that a loss has occurred. Grantees must be cautious about contractors with poor safety records and high insurance costs. Care must be taken to consider the contractor's past performance with respect to safety matters as part of their pre-award determination of the contractor's "responsibility."


For more information please call us at (415) 876-5440.  You can request a free quote here.


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