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As a contractor, you should be aware if your corporate insurance policy has a Wrap-Up Exclusion. This exclusion can potentially create issues for you if your company does any work on Wrap-Up projects.
What is a Wrap-Exclusion?
A Wrap-Up Exclusion commonly states that any time the contractor works on a Wrap-Up project, their corporate insurance carrier will exclude coverage for that project. This can be a problematic exclusion for contractors, especially since Wrap-Ups have become more popular in recent years.
On a Wrap-Up project, a contractor is typically enrolled in the insurance program for the length of their contract. Once their work is completed, they are ‘closed out’ of the program. However, they are still covered by the Wrap-Up policy for a specific amount of time after the project ends.
After that period, if a claim is discovered and the Wrap-Up master policy has expired, the contractor would look to their own insurance carrier for coverage. If the contractor has a Wrap-Up Exclusion on their policy, coverage would be denied and they would be responsible for the entire claim.
An example of a common Exclusion endorsement is the ISO CG 21 54 01 96. It states:
“This insurance does not apply to ‘bodily injury’ or ‘property damage’ arising out of either your ongoing operations or operations included within the ‘products-completed operations hazard’ at the location described in the Schedule of this endorsement, as a consolidated (wrap-up) insurance program has been provided by the prime contractor/project manager or owner of the construction project in which you are involved.”
The exclusion endorsement language prevents the intended risk transfer between parties in a loss situation caused by a contractor if they are:
- expected to enroll in the program but have not yet done so
- enrolled in the program with an off-site exposure that is not covered
- excluded from the program due to their scope of work, or
- covered under their corporate insurance since the Wrap-Up has ended
When the upstream party (Owner and/or General Contractor) is sued because of an uncovered loss by a contractor, the downstream risk transfer may be prevented by the Wrap-Up Exclusion.
What can you do to avoid this?
One solution to close coverage gaps is to enroll parties who may be initially excluded, and make sure all Contractors enroll in the Wrap-Up program promptly, if eligible.
Another solution is for any downstream parties to remove or modify their Wrap-Up Exclusion, so it does not apply to additional insured claims on their Wrap-Up projects.
Not sure if your corporate insurance has a Wrap-Up Exclusion? Reach out to TSIB for a free insurance review. Let us help you minimize your insurance risks before it’s too late!
TSIB’s Risk Consultants are currently servicing the following locations:
Texas: Austin, San Antonio, Houston, Dallas