David DeLaRue, CPCU, ARM, AIC Senior Vice President National Project Insurance Practice General...
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Transcript of David DeLaRue, CPCU, ARM, AIC Senior Vice President National Project Insurance Practice General...
David DeLaRue, CPCU, ARM, AIC
Senior Vice President
National Project Insurance Practice
General Liability OnlyWrap-Ups
General Liability (GL) Only Wrap-Up
• Defined– Project Specific General
Liability Coverage– Single policy for all insureds– Sponsored by the owner or
contractor– Covers all eligible
contractors– Should be used in concert
with practice programs
GL Only Wrap-Ups
ResidentialRisk
(Incl. Rolling)
CommercialRisk
Mid 1990’s to Present 2009 to Present 2010 to present
RollingGL Only
CommercialWraps
Benefits
• Coverage Certainty• Addresses Additional Insured &
Indemnity Requirements• Project Specific• Risk/Exposure Specific• Removes Primary Coverage
Concern for Small Subcontractors• Litigation Defense• Integrated Project Delivery • Reduce Cost of Risk
WC/GL Wrap vs. GL Only Wrap
• Standard Market
• Deductible
• Minimum Retention usually begins at $250K
• Better control over workers’ compensation (WC) claims.
• Little exposure for WC subrogation
• Carrier safety resources
• Standard ISO forms with wrap-up modifications
• Reliance on broker administrator – Carriers will consider broker experience in underwriting
• Normally does not mandate TPA for QA/QC
• Excess & Surplus (E&S) Lines
• Self-Insured Retention*
• Minimum Retentions begin as low as $25K (or lower)
• No control of workers’ comp. claims
• Greater challenge to secure protection from WC subrogation
• Limited safety services
• Greater use of manuscript forms and endorsements – No approvals
• Can mandate use of third party program administration in addition to broker
• Can mandate TPA QA/QC firm (Residential)
WC/GL CIP vs. GL Only CIP – Cont.
• Higher claims frequency (WC)• Better understanding of large
commercial project cover needs• Greater savings or profit
opportunity• Greater downside exposure• Greater administration burden and
cost• Fee based• Large collateral requirements• Greater government regulation• Claims adjusting fees apply• Longer lead time needed for
marketing and set-up• Greater contract dependence –
i.e., complex credit recovery
• Low claims frequency (GL)• Greater reliance on coverage
limitations such as Ins. vs. Ins.• Modest savings or profit
opportunity**• Limited downside exposure• Lower administration burden and
less cost• Often commission based• No collateral• Limited regulations• Claims adjusting fees may not apply• Less lead time needed for marketing
and set-up• Lower contract dependence –
Structure simplicity
Considerations
• Understand the broker’s relationship to the E&S carrier and wholesale broker.
• Consider any contractual limitations on using E&S coverage.
• Make sure the E&S carrier is approved in the state.
• Coordinate coverage with the practice policy.
• Self-insured retention or deductible.
• Start early and communicate with contractors.
• Primary and excess policy alignment.
• Amend contract for the wrap-up.
Considerations
• Surplus lines taxes and fees usually apply – they are your responsibility.
• Commission, Fee, or Combination – Understand the approach• Policyholder service differences.• Limitations of state guaranty funds if carrier fails.• Limits are shared and need to be adequate.• State wrap-up legislation is now more likely to include GL Only by
reference.• Exposures go beyond general liability.• Consider how you value the program to the owner.• E&S Lines are not regulated – Terms & conditions vary widely.• Contractors should request the policy and maintain a record of all
wrap-ups.• Underwriter anonymity – Attempt face-to-face.
Considerations
• Understand the implications of wrap exclusions on contractor policies.– Warranty period exposures
• Beware of state-specific forms: for instance, California residential construction.
• Is there an insured versus insured exclusion? Full or limited. • Broad form additional insured coverage as required by written contract.
– Some E&S carriers struggle with this allowance.• Understand the completed operations trigger – When does the clock
start?– Statutes of repose may exceed the completed operations term.
• Does defense erode the limit? If so, consider more limit.• EIFS exclusion – Does your project have it and policy exclude it.• Mandatory waiver of rights to recover.• Excluded contractors – No excluded contractors in the “chain of
insureds.”• Review the forms – Everyone!
Five Important Things
• Most wrap-up coverage benefits are delivered by the GL policy.
• GL Only rates can be more competitive than the GL rates on a WC/GL wrap-up.
• No collateral!
• Form freedom – Good, Bad, & Ugly
• Lower administration cost
Sponsors
• Ask if a project will be covered by a wrap-up.• Review the contract and the wrap-up policy.• Maintain thorough records of all project wrap-
ups.• Communicate requirements to lower level
subcontractors.• Structure practice programs as DIC.
Five Important Things
Contractors
Questions&
Answers