WRAP & OCIP Insurance

Ryan Daugherty
January 24, 2012 — 1,674 views  

In order to law some validity to this article you must know something about the author. I currently work for an insurance company that has been in the insurance business for over 100 years. We have spent many years crafting insurance policies such as WRAP/OCIP. This article is geared for the new business owner or an inexperienced insurance shopper looking for simple answers to a complex insurance question. We urge you to contact your local insurance representative for a more in-depth and quantitative assessment of your needs.

Why WRAP Insurance?

Large construction projects have many contractors and sub-contractors and therefore there is an increased risk of litigation due to error on your part or the part of one of your contractors. This has caused building material shortage, under insured contractor disasters and high litigation costs. The construction industry needed something like an umbrella insurance coverage that protects the entire operation giving certain peace of mind to the developer that most financial disasters due to negligence or design defects can be mitigated through the use of the one large insurance policy.

How long ash WRAP been around?

WRAP Insurance has been around for the past 4o years which it has provided a single source of liability insurance for all parties involved. In the past 20 years WRAP/OCIP insurance policies have become very common due to its outstanding protection for the developer and consumer.

What was the underlying issue that WRAP Insurance solved?

Finding contractors and subcontractors with proper general liability insurance coverage is very difficult if not impossible when you are dealing with over 100 different contractors for a large construction project. WRAP solves this problem for the developer and the consumer alike.

How litigation costs affected WRAP.

Many contractors/sub-contractors were underinsured and therefore litigation costs skyrocketed. In turn, insurance premiums rose. Contractors purchased less insurance for simple economic reasons. When disaster strikes, the contractor is unable to pay any penalties involved. Thus, the contractor folds and the business dissolves, leaving the consumer and contractor literally penniless. This snowball effect has devastated the past 40 years of construction. Litigation and insurance premiums were the pebbles rolling down a hill collecting dust and debris and when it reached the bottom-the pebble blossomed into a 20 ton rock!

How WRAP Helps

When using a wrap-up, owners ensure continuous insurance on a project since they don't have to worry about contractors losing their coverage arrangements mid-project. WRAP is flexible enough that it can be tailored when your specific contractors bring in their own insurance, thus reducing your overall insurance costs. The single insurance policy simplifies the claims process as there is only one insurance company to deal with. The WRAP (wrap-up) gives the developer or general contractor (GC) more control and flexibility when selecting a subcontractor since they are free to select any subcontractor they choose without having to consider what level of insurance coverage they provide.

Saving Money with WRAP

Developers obtain bid credits for the general liability insurance component from contractors and subcontractors, thus the actual construction costs goes down. By negotiating a volume purchase the developer can save even more money as well as money in future litigation.

Wrap is 90% administration and 10% insurance. Having the right insurance company with the right people handling the 90% administration leaves you free to go about your work thus increasing your productivity. Since there is only one insurance package on the job site, when litigation does come into play, nobody is finger pointing. That leaves all of your construction assets pointing in the right direction - constructing the project.

 

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Ryan Daugherty


Ryan Daughterly is a lawyer and risk management consultant for Daugherty Insurance Services. Daugherty Insurance Services has been providing insurance in California for over 100 years. Daugherty Insurance Services is located in Stockton, California. Daugherty Insurance Services is a family owned and operated full service insurance firm with roots in the community dating back to 1860. As an independent agent, Daugherty Insurance Services has appointments and relationships with a broad scope of insurance markets, which allow its specialized producers the ability to craft insurance programs based on each client's individual need. The Risk Management Department helps clients manage their claims, reduce their exposure, avoid litigation and can create programs to help clients turn their insurance premium into an asset. Mr. Daugherty has a J.D. degree and has been in the insurance industry for over 10 years.