CCIP insurance: the contractor buys the job site’s coverage.

Mechanics

How a CCIP works

Ordinarily every contractor on a job carries its own insurance and builds the cost into its bid. Twenty subcontractors means twenty policies, twenty sets of limits, twenty certificates to chase, twenty carriers with their own ideas about who pays when something goes wrong, and a certificate-tracking job that never quite catches the sub who let coverage lapse in month nine.

A CCIP replaces that. The general contractor buys one program for the site. Enrolled subcontractors come in as insureds and deduct their own insurance cost from their bids, so the contractor is paying for coverage once rather than paying twenty markups for it.

What the sequence looks like

1. Feasibility. Before anything is marketed, someone runs the numbers on whether a wrap beats conventional insurance on this job. Sometimes it does not, and that is a useful answer.
2. Submission and marketing. Project details, payroll by class code, five years of loss runs and the safety program go to wrap-up carriers. Plan on 60 to 90 days on a large job.
3. Bid instructions. Subcontractors are told the project is wrapped and are required to state their insurance cost separately so it can be deducted.
4. Enrollment. Each subcontractor submits its payroll estimate and paperwork and is issued a certificate before it starts work.
5. The project. Payroll gets reported for wrapped work separately from everything else. Claims are handled inside the program.
6. Close-out and audit. Actual payroll is reconciled to estimated payroll and premium adjusts. This is where a program with sloppy reporting gets expensive.
7. The tail. Completed-operations coverage continues for years, commonly ten on commercial work and longer where construction defect statutes run long.

The case for it

Why a contractor sponsors one

• Control of claims. One program, one adjuster, one defense strategy. Cross-litigation between trades is largely removed, because the same insurer covers everyone involved.
• Limits you can verify. The contractor knows exactly what limits sit behind every trade on site, because it bought them. No certificate on file turns out to be a $1 million policy already exhausted by another job.
• Loss experience you keep. A well-run site with a clean record returns money to the contractor rather than to twenty subcontractors’ carriers.
• Access for smaller subs. Trades that could not otherwise meet the owner’s insurance requirements can bid the job, which widens the bid list and usually lowers the bids.
• A safety program with teeth. When the sponsor carries the loss cost, site safety stops being a compliance exercise.
• Something to sell the owner. On competitive pursuits, offering a wrap is a credible differentiator, particularly with owners who do not want to administer one themselves.

Scope

What it covers, and what it never covers

Wrap-up coverage is broad within a narrow boundary. The boundary is the job site.

Who typically cannot be enrolled

Most programs exclude the same categories, and the exclusions are usually non-negotiable with the carrier.

• Hazardous materials contractors, including abatement and remediation
• Truckers, haulers and suppliers who deliver without performing on-site installation
• Design professionals of any kind
• Contractors below a stated contract-value threshold, often somewhere around $25,000 to $50,000
• Blasting and demolition contractors on many programs

Excluded contractors work under their own insurance and are required to evidence specified limits. Their bids should not carry an insurance deduction, and that needs to be caught at bid time rather than at audit.

Structure

Single-project and rolling programs

A single-project CCIP covers one job. A rolling CCIP covers every qualifying project the contractor starts during an enrollment window, usually two or three years, with each project attaching as it begins.

Rolling is where most contractor wrap-up value sits. Three things change.

• The size threshold drops. A single-project wrap generally wants roughly $25 million or more in hard construction value. A rolling program can take projects well below that, because the underwriter is pricing a book of work.
• Loss experience smooths. One bad job inside a portfolio of twelve does not price the way one bad job standing alone does.
• Administration amortizes. The enrollment machinery, the payroll reporting process and the safety oversight are built once and reused, so the cost per project falls sharply after the first one.

Economics

How the money works

The premium is typically somewhere in the range of one to two percent of hard construction value before credits, with a wide spread around that. Project type, jurisdiction, loss history, retention, tower structure and tail length all move it materially. Residential and mixed-use work prices differently from commercial, in some markets very differently.

Bid deductions

Subcontractors state their insurance cost separately and it is deducted from their bid, because the wrap is providing that coverage instead. The mechanism only works if bid instructions are explicit and the deductions are verified. Subs routinely understate the cost, which means the contractor is buying coverage for them and only recovering part of it. Requiring a rate per $100 of payroll, supported by the sub’s own declarations page, is the practical fix.

Retention and loss-sensitive structures

Most contractor wraps of any size carry a deductible or self-insured retention, frequently between $100,000 and $500,000 per occurrence. Below the retention the contractor is paying claims out of pocket, and the carrier will usually require collateral, most often a letter of credit, to secure it. That letter of credit consumes bonding and borrowing capacity for years, which belongs in the analysis alongside the premium.

The audit

Premium is estimated on projected payroll and trued up at close-out against actual payroll by class code. Programs that let subs report sloppily, or that let wrapped and unwrapped payroll blur together, produce audit surprises well into six figures. Reporting discipline during the job is what prevents that.

Administration

Enrollment and the subcontractor gap

Enrollment is the operational heart of the program and the part most often underestimated. Every subcontractor and every lower-tier sub has to be enrolled before setting foot on site.

What enrollment involves

• An enrollment form with estimated payroll by workers’ compensation class code and contract value
• A copy of the subcontract, or at least the insurance exhibit
• Evidence of the sub’s own off-site coverage, usually with the sponsor named as an additional insured
• Acknowledgement of the site safety program and of the payroll reporting obligation
• A certificate issued back to the sub before mobilization

Somebody has to run this, chase the paperwork, and stop unenrolled crews at the gate. On a large program it is a third-party administrator. On a smaller one it lands on a project engineer who also has a day job, and that is where programs come apart.

The gap that catches people

Enrolled subcontractors regularly assume the wrap covers them generally. It does not. It covers work performed at that job site. Their shop, their yard, their vehicles, their tools, their employees driving between jobs and every other project they are running stay on their own policy. Telling subs this clearly at enrollment prevents a bad conversation after a loss.

The other side of the table

What the owner will ask for

If you are offering a CCIP on a pursuit, expect a sophisticated owner or its broker to come back with a list. Knowing it in advance lets you price it rather than concede it late.

• Named insured or broad additional insured status, with completed operations covered for the full tail rather than for the policy term.
• A project-specific aggregate, so the owner’s limits cannot be eroded by your other jobs. This is the most expensive request on the list and the most reasonable one.
• A tail matched to the state’s statute of repose, not to whatever was convenient to buy.
• Annual evidence of continuing coverage through the tail, plus notice of lapse, non-renewal or carrier change.
• A defined return-of-premium formula, with an audit right.
• Claims notice and cooperation rights on anything touching the project.
• Security for the retention, since an unsecured SIR behind a contractor that fails is not coverage at all.

Each of these has a price. Working out what they cost before the owner asks is the difference between a negotiation and a giveaway.

Submission

What underwriters need to quote

Carrier appetite is rarely what holds up a wrap-up submission. Assembling the file is. Having these ready shortens the process by weeks.

Experience

Where CCIPs go wrong

1. Sponsoring a wrap on a project too small to carry it. Fixed administrative costs do not scale down. On a $12 million single project the overhead frequently eats the whole saving.
2. Not verifying bid deductions. If subs understate their insurance cost, the contractor pays for coverage twice and finds out at close-out.
3. Treating the retention as free money. A $250,000 SIR is real exposure that has to be funded and collateralized, and the letter of credit securing it ties up capacity for years.
4. Buying a tail that is shorter than the statute of repose. The claims arrive at the far end. A program that stops answering in year seven in a state with a ten-year statute has left the exposure uninsured.
5. Letting unenrolled crews work. One lower-tier sub on site without enrollment is an uninsured exposure sitting inside a program everyone believes is complete.
6. Sloppy payroll segregation. Wrapped and unwrapped payroll blurring together produces an audit result nobody budgeted for.
7. Sharing the aggregate without telling anyone. Owners and lenders will eventually ask. Finding out late damages relationships that are worth more than the premium difference.

FAQ

Questions we get first

Who you would be working with

Cary W. White

Managing Director · ISU Insurance Services of San Francisco

Cary handles the wrap-up placements here. He has spent 38 years in construction insurance. The first ten were on the carrier side, underwriting builders’ risk and complex property exposures. The 28 since have been in retail brokerage, advising residential developers, general contractors and other construction clients on project-specific and annual programs.

He is also one of the original authors of the project liability application that much of the industry still uses to submit wrap-ups to carriers. In practice that means he knows what each question is actually asking for, and where a thin answer will cost you at quote.

cwhite@isusf.com · 415-613-5589