OCIPs & CCIPs and the Seamless Integration of Builders Risk PlacementFUNDAMENTALS OF WRAP-UPS

• Joshua M. Rogove from Consolidated Risk Solutions • Tanya Santry from Lend Lease • William D. Motherway from Conner Strong & Buckelew• Tracy Alan Saxe from Saxe Doernberger & Vita, P.C.

FUNDAMENTALS OF WRAP-UPS PRESENTED BY:

CONSTRUCTION PROJECTInsurance - Traditional Approach

WC

WRAP-UPInsurance Program

OCIP vs CCIPWho is the Sponsor?

• Workers’ Compensation

• General Liability

• Builder’s Risk

• Pollution Coverage

• Professional Liability

• Other

WRAP-UPCoverages

• Supply Only

• Delivery Only

• Certain Trades

• Demolition

• Abatement

• Electrical Workers (LOCAL 3) – in NYC

WRAP-UPWho Will be Excluded?

AVOID CROSS LITIGATIONWrap-up Benefits

Higher Limits (Just in Case)…

ASSET PROTECTIONWrap-up Benefits

WRAP-UPTypical Structure

Excess InsurerExcess Liability

25M Per Occurrence25M General Aggregate

$250k/$500k/$1M/$1.5M/$2.5M Deductible

Primary InsurerWC – StatutoryEL – 1M/1M/1M

Primary InsurerGeneral Liability

2M/3M/5M Per Occurrence4M/6M/10M Gen. Aggregate4M/6M/10M Completed Ops

Excess InsurerExcess Liability

25M Per Occurrence25M General Aggregate

Excess InsurerExcess Liability

50M Per Occurrence50M General Aggregate

Negotiating Power

Avoid Typical Subcontractor Exclusions

Locking in Coverages and Pricing for Term of the Project

Consistent Completed Operations Coverage

BETTER COVERAGEWrap-up Benefits

Risk Management Controls§ Consolidated, Coordinated Strategy with Regards to Coverages, Claims, & Litigation§ More Control to Monitor/Settle Claims

§ Unified Claims Strategy§ Crisis Response Programs

§ Coordinate on Litigation§ Increased Safety Control

§ Consistent Safety Requirements§ Project Specific Safety Manual

§ New Hire Orientation§ Pre-Planning, Toolbox Talks

§ Safety Reports (Weekly, Bi-Weekly, Monthly)

Risk Management ControlsWrap-up Benefits

2 cents/piece 5 cents/piece

Savings – Buying in BulkWrap-up Benefits

Savings – Methods of Removing the CostsWrap-up Benefits

Wrap-up BenefitsRecap

TRADITIONAL

CrossLitigation

Inefficiency

GapsinCoverage

UninsuredContractors

MultipleInsurers

InadequateLimits

StackingofMarkups

WRAP-UP

VS

DuplicationofCosts

NoCrossLitigation

Efficiency

ConsistentCoverage

Control

OneInsurer

AdequateLimits

DecreasedMarkups

ConsistentServices

Disadvantages of Wraps

• Initial Estimating/Budgeting• Collateral Obligation• Cancellation of Coverage• Additional Premium Due from Audit• Poor Administration• Exhaustion of Shared Limits• Relationship Breakdown• Shared Program Performance• Uninsured Liabilities• Bankruptcy

Potential Gaps: Coverage

• Scope• Project location description

• Offsite Exposures• Length of coverage

• Completed Operations• Who should be enrolled?• Limits and Deductibles

Completed Operations

Policy Year

1

Policy Year

2

Policy Year

3

Policy Year

4

Policy Year

5

Policy Year

6

Policy Year

7

Policy Year

8

Policy Year

9

Policy Yrs1-3

6-year completed opsWrap-Up

Corp. Ins.

Builders Risk Builders Risk

Period

Common Issues for Builders Risk Policies

• Sue & labor• Protection of Property – “adequate and reasonable” efforts to cover up

during a fast-track project.• Time element coverage – delay and business interruption

• Comparable properties for measuring loss (i.e. Gaylord case)• Determining Period of Indemnity

• Damage to unbuilt portion/Keating decision• Loss of Market v. market change as a result of delay• Percentage deductible v, amount deductibles (i.e. Named Storm

Deductibles)• Concurrent causation (i.e. rain v. wind, ex. Houston Convention Center)

Examples

• Phased turnover• Transition of Project from BR to CP, and priority during overlap• Endorsing BR onto CP (but CP has a large SIR)• Renovation Projects.

• Builders Risk Exclusions• Example: Fire burns down adjacent building

Who should provide Builders Risk coverage?• When Owners provide the BR, they don’t want to use it.• When GC’s provide the BR, they have trouble providing delay in

completion coverage• GC’s should understand that failure to secure enough delay in

completion coverage can result in a claim against them for those losses.

Subrogation and Claim Waivers

• You need both• If policy does not include a subrogation waiver, but there is a

claim waiver, the beneficiary is still protected.• Subrogation rights cannot be greater than the rights you are

subrogating to.• So claim waiver effectively waives subrogation rights.

Examples

• Crane Coverage – Dangling crane, but no other property damage. Seamless integration of BR and GL (Lend Lease and Carnegie 57)

• 4 Times Square – Elevator fell and shut down surrounding businesses and residences. Builders Risk paid, but no loss of income.

Gaps Between Wrap and Builders Risk

• Problems tacking BR onto corporate GL – large SIR• Subcontractors named “as their interests appear”• Subcontractors have Wrap Exclusions• Builders Risk Exclusion –

• Getting defense when BR is in place – requires claim against enrolled part.

• BR doesn’t cover defense. Does OCIP/CCIP exclude when BR is in place, or only when BR covers?

• UDC Example – BR hasn’t paid, so nothing “is covered” under BR

Questions?