Explanation of rules, features, and benefits of Wrap-Up Construction Projects.
An explanation of Wrap-Up Construction Projects is found in the Basic Manual Rule BM‐WRAP‐W6C9A. “A wrap-up construction project is a large construction, erection or demolition project for which policies have been issued by one or more carriers under the same management, to insure two or more legal entities that are working on the project.”
Many contractors may be lumped together for the purposes of premium discount or retrospective rating, however, separate polices and experience ratings must be issued for each contractor per:
Basic Manual Rule BM‐OWNL‐CEB4F. Combination of Legal Entities: “Separate legal entities may be insured by one policy only if the same persons, or group of persons, own the majority interest in such entities. Where combination of separate entities is permissible, a single policy may be issued to insure more than one corporation.”
Experience Rating Plan Manual, Rule 5.D.1. states “…There shall be no experience modification for the wrap-up construction project as a unit.”
The essence of a Wrap-Up involves contracts that are let on an ex-insurance basis. This means that the bids for work on the project were submitted excluding the workers compensation cost, with the agreement that the workers compensation insurance would be procured by the owner, principal or general contractor. Under the Wrap-Up approach, such insurance is provided in the individual names of the contractors and subcontractors on the project. The premium is paid by the owner, principal, or general contractor, but each contractor or subcontractor nevertheless has a workers compensation insurance policy in its own name with its own experience modification. Payroll and claim data for each contractor involved with the project are segregated out and reported to the ICRB/NCCI for use in the calculation of the contractor’s future experience rating modifications.
The benefit from a premium level standpoint is the combination of all policies in the “Wrap-Up” for premium discount or retrospective rating purposes. Based on the above information, it would behoove the owner, principal, or general contractor to hire contractors with good safety records. Such a practice should reflect good past experience (credit mod) which in turn should result in a lower overall premium for the owner, principal, or general contractor. Hiring contractors with good experience records would also enhance the owners/contractors chance of a return premium on a retro plan. Hiring contractors with poor safety/loss records would likely increase the cost of insurance.
Owner Controlled Insurance Program (OCIP)
An OCIP is an insurance program for construction projects, similar in concept to Wrap-Up Construction Projects. Unlike traditional construction insurance coverage where each contractor provides his or her own insurance coverage, an OCIP allows the owner of the construction project (like a school district or hospital) to purchase a master program covering all construction and contractors associated with a given project. The contractors then submit their bids net of insurance costs. Owners can realize savings of 1-3% of their total construction costs. Savings are generated by purchasing a less expensive master program, rather than by purchasing individual policies. In general, coverage will include worker’s compensation/employer’s liability, general liability (CGL) and builder’s risk property insurance.