Program design

Wrap-up program design

Two wrap-ups quoted on the same project can come back thousands of dollars apart and cover meaningfully different things. The gap is almost always in four design decisions that get made early and quietly.

The four decisions

New to the structure? Start with wrap-up insurance and come back here.

The short version

Four decisions, one price

How long the program runs, including the completed operations tail. How the covered location is described, and what happens to work done outside it. Whether one program covers one project or several. And who is excluded from enrolment, which decides who still has to hand you a certificate.

Each of these is negotiable at quote and expensive to change later. Each one has its own page below.

None of them is a technicality. Every one of them has been the deciding fact in a claim somebody lost.

On this page

The four that matter most
What an underwriter can actually move
Why two quotes are rarely comparable
The insurance has to match the contracts
Common questions

What we place, and where

Programs: Owner-controlled (OCIP) and contractor-controlled (CCIP) wrap-ups, rolling wrap-ups, builders risk, and project-specific or practice liability where a wrap is not the right structure.
Project types: Multifamily and mixed-use, condominium and for-sale residential, podium and wood-frame, commercial, tenant improvement, and industrial.
Where: Licensed in all 50 states. Deepest bench in California, where the wrap-up statutes are covered in detail on this site.
Project size: No minimum to ask. A wrap typically starts to pay for itself around $25 million in hard construction value. Smaller projects are placed on conventional structures instead.
Who we work with: Owners, developers, general contractors, and subcontractors buying practice coverage for the off-site gap.
Who you deal with: Cary W. White, producer. ISU Insurance Services of San Francisco, CA Lic. #0778092. Cary W. White, CA Lic. #0B77854. We place coverage; we are not the carrier.

The decisions

The four that matter most

Two wrap-up proposals on the same project can arrive thousands of dollars apart and cover meaningfully different things. Comparing them on premium and headline limit will not tell you which is better. The differences are in the design, and four decisions account for most of them.

The four design decisions and what each one changes
Decision	The question	What it changes
Policy term	How long does coverage run, during construction and after it	Most of the premium on residential work. Whether a claim filed in year nine finds a policy at all
Covered locations	Where does the coverage apply	Whether fabrication, staging, transit and off-site tie-ins are inside or outside the program
Multiple projects	One program for one project, or several	Whether a loss on one job can erode the limits available to another
Exclusions	Who and what is left out	Who still has to produce a certificate, and where the uninsured gaps sit

Each is negotiable while the program is being marketed and expensive or impossible to change later. Each one has its own page.

The wider frame

What an underwriter can actually move

When construction insurance gets negotiated, the conversation often collapses into a single question: what is the premium? Premium is one tool among several. An underwriter is deciding whether to take the risk, how much of it, on what terms and at what price, and there are levers for each of those.

Yes or no. The most basic decision. Usually the answer is not no, it is yes if, and the rest of the list is what fills in the if.
Scope. Who is covered, what is covered, where coverage applies and for how long. Then shaped further by extensions, exclusions, sublimits, endorsements, definitions and conditions.
Limits. How much the insurer will expose on any one loss, occurrence, project, location or period. A ten million dollar policy with a one million dollar sublimit on a particular exposure is a one million dollar policy when that exposure causes the loss. A sublimit works like an exclusion once the loss passes it.
Deductibles and retentions. Flat, percentage, per occurrence, different by cause of loss, waiting periods, aggregate structures. On a construction project the contract also has to say who ultimately bears it.
Premium. Worth taking apart. What is the rate, what exposure is it applied to, is it fixed or auditable, is there a minimum, can it rise if construction costs rise, and what happens if the job runs long.
Warranties and conditions. Fencing, lighting, security, water detection, hot work procedures, geotechnical recommendations, site inspections. There is a real difference between something an underwriter would like you to do and something the policy makes a condition of coverage, and that difference matters after a loss.
Time. One year, the expected construction period, a longer multi-year term, or construction plus completed operations. And what happens if the project is delayed: can it be extended, at what price, on what terms, automatically or by new underwriting.

So when an underwriter is uncomfortable with something, the better question is usually not whether the premium can come down. It is what is driving the concern, and which of these tools could change to make the risk work. That conversation produces a different result.

Reading a proposal

Why two quotes are rarely comparable

Put two wrap-up proposals side by side and the first things visible are the premium and the limit. Those are the two least informative numbers in the document. The questions that actually decide which program is better:

How many years of completed operations, and does that match the repose period in the state?
Are defense costs inside the limit or outside it? On a multi-party defect claim this can be the difference between a tower that responds and one that is exhausted by experts.
Are there sublimits, and do any of them sit on the exposures this project actually has?
Are the limits dedicated to this project, or shared with other work?
What is the retention, and who bears it? The policy says who owes it to the insurer. The contracts decide who ends up paying.
How is the covered location described, and does the description reach the staging and fabrication this job needs?
Who is excluded, and has anyone checked that list against the trade list?
What are the conditions, and is anyone responsible for meeting them?
Is the premium auditable, and what is the mechanism if the job runs long or the value grows?

A proposal that answers all nine is worth more than a cheaper one that answers four, and the difference usually only becomes visible at the worst possible time.

The other half

The insurance has to match the contracts

Program design is only half the job. The construction contracts are the other half, and they are usually drafted by people who are not in the insurance conversation.

If a subcontract requires a trade to indemnify the general contractor for obligations wider than the wrap covers, that trade carries uninsured exposure and almost certainly does not know it. If the subcontract requires insurance the wrap already provides, the project may be paying twice. If the subcontract is silent about who bears the retention, that gets decided after the loss, expensively.

In California part of this is settled by statute. Civil Code 2782.9 makes contractual indemnity unenforceable for claims a residential wrap covers, and sets conditions on charging participants for the retention. Civil Code 2782.95 requires the program terms and the bid credit to be disclosed in the contract documents. The California rules page sets out both.

Everywhere else it is settled by drafting. The practical rule is that the insurance program and the contract documents should be designed together, at the same time, rather than in sequence by two departments who do not read each other's work.

Questions

Common questions

Which design decision costs the most money to get wrong?

The policy term, specifically the completed operations extension. It has to be bought when the program is placed, it cannot be added after the program closes, and on residential work it accounts for most of the premium. A program with too short a tail looks cheap and may find no policy in force when the claim arrives.

Why are two quotes with the same limit not the same?

Because the limit is shaped by everything around it: sublimits on particular exposures, whether defense costs erode the limit, whether the limit is dedicated to this project or shared, and the exclusions and conditions attached. A ten million dollar policy with a one million dollar sublimit on the exposure that causes the loss is a one million dollar policy that day.

Should defense costs sit inside or outside the limit?

Outside, where the budget allows. On a construction defect claim with twenty trades and expert reports on both sides, defense can consume a substantial part of the tower before any damages are paid. Ask for both versions to be quoted so the difference is visible.

What is the difference between a condition and a recommendation?

A recommendation is something the underwriter would like done. A condition is something the policy makes a requirement of coverage. Fencing, lighting, water detection, hot work procedures and site inspections can appear as either. After a loss the distinction decides whether the claim is paid, so it is worth checking which one each item is and making someone responsible for it.

Can the program be changed after it is bound?

Some of it. Adding insureds, adjusting values and extending a construction term that has run long are normally possible, at a price and sometimes subject to fresh underwriting. Adding years of completed operations after the program has closed generally is not. The decisions with the least flexibility are the ones worth the most attention before binding.

Who should be in the room when the program is designed?

The broker, whoever is drafting the construction contracts, and whoever will administer the program day to day. Designing the insurance without the contracts, or without the person who will have to run enrollment and certificate collection, is where most of the expensive gaps come from.

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

Pricing

Price your project

Tell us about the project and we will give you a straight answer on whether a wrap makes sense for it. If it does not, we will say so, and then we will price the structure that does. That answer is worth more to you than a placement that costs more than it saves. There is no project minimum to ask. This goes straight to Cary White, who handles wrap-up placements for our construction clients.

The project

Project name or description

State

City

Project type

Hard construction value

Estimated start date

Duration (months)

Structure and exposure

Who would sponsor the program

One project or rolling

Coverages sought (optional)

Limits sought (optional)

Estimated number of trades (optional)

Estimated total payroll (optional)

Loss history, last five years (a summary is fine, loss runs can follow)

Current or incumbent program (optional)

You

Name

Title

Company

Your role on the project

Phone

Anything else we should know (optional)

We will come back with a price range and what else underwriters will need. No obligation, and we will tell you if a wrap is the wrong answer.