In today’s highly competitive construction marketplace, companies need to manage their costs effectively, but safety remains an essential consideration on every project.Proactive construction companies strive to continually improve safety and more effectively manage insurance and claims costs, and wrap-up programs offer an attractive way to achieve these goals. Under a wrap-up program, an owner, developer or general contractor procures insurance on behalf of all the parties working on a project, instead of each subcontractor purchasing its own insurance and indemnifying the contractor. Wrap-up programs not only help to manage a project’s insurance costs and potentially reduce litigation among insureds, but these programs also provide a consistent set of requirements that can enhance safety for everyone on the jobsite.
A wrap-up program involves more than just the purchase of an insurance policy; it requires that all the participants work together, from the sponsor to the broker and insurer, including risk engineering, claims department and the underwriters. It’s crucial that the wrap-up insurer have the underwriting, risk engineering and claims expertise necessary to understand the extent of the risk. Keys to a successful wrap-up program include communication, coordination and collaboration.
Wrap-up programs are most common on single-site construction projects, but they can be used for contract maintenance or for multiple-site construction projects. In addition, a wrap-up enables a sponsor to deploy a consolidated, coordinated strategy with regard to coverages, claims and litigation. Wrap-ups can be complex, but they provide significant benefits, including a single general liability contract, a coordinated litigation strategy and a comprehensive approach to safety.
Most importantly, a wrap-up sponsor needs to build a strong safety culture throughout the organization and on every project. In addition, the sponsor should enforce that same safety discipline with all of its contractors, holding them accountable for their safety performance. This investment in safety, essential in a high-hazard industry like construction, pays off in terms of retaining a skilled workforce, enhancing quality, and avoiding costly delays and negative publicity. A reputation for safety is a valuable asset that makes a company more attractive to clients and insurers.
In order to plan for safety, wrap-up sponsors should select subcontractors with strong safety cultures, develop and implement a project-specific safety plan, and train and educate workers about safety regulations and equipment utilization. Once work is under way, the sponsor should actively monitor safety performance by holding risk management meetings on a regular basis throughout the project life cycle. Additionally, because falls are the leading cause of fatalities in the construction industry, it is essential to eliminate or control potential fall exposures. Stringent and effective fall management plans and procedures should be implemented. The sponsor should be actively engaged and involved in promoting safety from the project’s beginning all the way through to completion.
Because most wrap-up programs require substantial deductibles, they represent a significant commitment from both the sponsor and the insurer. The sponsor should work with an insurer that has significant expertise in underwriting construction projects and managing construction claims and litigation. For its part, the carrier will want to work with a sponsor with a track record that demonstrates a solid commitment to safety and that is able to provide clear, detailed information about the project, including construction methods and subcontractor safety records. Once a risk is bound, a successful wrap-up requires constant communication with the claims department, and cooperation on claims and litigation strategies.
A successful wrap-up begins with a dedication to continually improving safety as part of an organization-wide culture. That dedication to safety must be reflected in the selection of contractors whose track record demonstrates the same level of commitment. A robust safety culture not only helps protect workers, prevent costly accidents and expensive delays, but it also safeguards a company’s hard-earned reputation and prevents negative publicity that may cause lasting damage to the business. Together, these steps can help enhance safety and ensure the wrap-up program continues to run smoothly toward a successful conclusion.
ACE Construction presents additional details in its October 2013 report, Building a Successful Construction Wrap-Up Program.