Many contractors have asked, “Why does an owner request a Wrap Up Liability policy for a project when they already have an annual Commercial General Liability policy?”
Wrap Up Liability is a type of insurance policy that provides coverage for multiple parties involved in a construction project. In a typical construction project, various contractors, subcontractors and other entities are involved. Each of these parties usually carries their own insurance policies to cover their liability risks. However, in larger construction projects, it can be challenging to co-ordinate and manage insurance coverage for all the parties involved.
Wrap Up Liability insurance is designed to streamline the insurance process by consolidating liability coverage for all contractors, subcontractors and sometimes even the project owner, under a single insurance policy. This type of policy can be purchased by either the project owner or the general contractor, and covers all the participants involved in the project.
By having a Wrap Up Liability insurance policy, the project owner can ensure that all participants are adequately insured, avoid coverage gaps and potentially reduce insurance costs by purchasing coverage in one policy. This approach can simplify the claims process and provide a more comprehensive and co-ordinated insurance solution for everyone involved in the construction project.
The expiration date of a Wrap Up Liability insurance policy depends on the specific terms and conditions outlined in the policy agreement. Wrap Up policies are typically tailored to the duration of the construction project they cover. Once the project is completed, the Wrap Up policy may expire, unless specified otherwise in the policy terms. The expiration date is clearly stated in the insurance policy document. It is essential for all parties involved to be aware of the policy’s expiration date. It’s crucial to plan accordingly and secure alternative insurance coverage, if necessary, especially if the project extends beyond the original policy period.
This type of policy can be purchased by either the project owner or the general contractor, and covers all the participants involved in the project.
It’s important to consult the insurance provider or broker handling the Wrap Up policy to understand the specific terms, including the expiration date, renewal options and any requirements for extending coverage if the construction project lasts longer than initially anticipated. Each Wrap Up policy can have unique terms and conditions, so it’s essential to review the policy document carefully and communicate with the insurance provider to ensure continuous coverage as needed.
In a Wrap Up Liability insurance policy, the “completed operations period” refers to the duration for which the policy provides coverage after the construction project has been completed. Construction projects involve various risks, and the completed operations coverage is designed to protect the project owner, contractors, subcontractors and other involved parties from liabilities that may arise after the project is finished.
During the completed operations period, the insurance policy continues to cover claims related to the work performed during the construction project, even after the project is completed and handed over to the owner. This coverage is crucial because issues or defects in the construction work might not become apparent immediately; they could surface months or even years after the project’s completion.
For example, consider a construction project where a contractor is responsible for building a commercial office complex. The project is completed and the building is handed over to the owner. Several months after the completion, a sprinkler line bursts, leading to damage throughout the building. The leak damages the interior of the building, including office equipment, furniture and important documents of the tenants leasing the office spaces. In this scenario:
- Completed operations period: As specified in the Wrap Up Liability policy, is 12 months after the project’s completion date.
- Claim occurrence: The leakage and subsequent damage occurred after the completion of the construction project, but within the 12-month completed operations period.
- Claim process: The affected parties, such as the building owner, tenants or property management company, file a claim under the Wrap Up Liability policy. The insurance provider investigates the claim to determine that the resultant damage is indeed a result of defective construction work, falling within the completed operations coverage.
- Coverage: The Wrap Up Liability policy covers the cost of repairs to fix the resultant damage within the building. The insurance provider handles the claim settlement process, ensuring that the affected parties are compensated for the damages caused by the construction defect.
In this example, the completed operations coverage under the Wrap Up Liability policy protects the parties involved in the construction project, including the subcontractor who installed the sprinkler system, from liabilities arising due to construction defects, even after the project has been completed and handed over.
The length of the completed operations period can vary and is specified in the insurance policy. It typically lasts for a specific number of months after the project’s completion. Common completed operations periods range from 12 to 36 months, but the duration can vary based on the terms negotiated between the parties involved and the insurance provider.
It’s essential for all parties to be aware of the completed operations period outlined in the Wrap Up policy to understand the timeframe during which they are protected from liabilities related to the completed construction work. It is important to note that if damage from any of the general contractors’ or subcontractors’ work occurs after the completed operations period, then their own individual Commercial General Liability policies would need to respond.
Wrap Up Liability policies are designed to protect all parties. There is an added cost for these policies, so contractors should ensure they get an accurate cost for these policies before submitting a bid. Wrap Up policies can provide additional protection, but it is important to understand the terms, and discuss with a broker to ensure the cost and coverage provided are understood. 
This article originally appeared in Building Rural Manitoba and is reprinted here with permission.