Wrap-up programs: how OCIPs and CCIPs work

A wrap-up program is one insurance program bought for a whole construction project and covering the owner, the general contractor and the enrolled subcontractors. An owner-controlled insurance program (OCIP) is bought by the project owner or developer, and a contractor-controlled insurance program (CCIP) by the general contractor. The core coverages are general and excess liability, sometimes workers' compensation. Enrolled subs then drop the cost of that insurance from their bids, and the sponsor takes on the premium, the deductibles and the administration.

OCIP and CCIP compared

Both are sometimes grouped under the term "controlled insurance program" (CIP). The guide from McGriff, which Marsh bought in November 2024, describes the main difference as who controls the program and who bears its costs (McGriff).

What a wrap usually covers

The main lines are commercial general liability with completed operations, and excess liability over it. Workers' compensation is included in some programs, mostly large ones, where the state permits. Builders risk is often bought separately or alongside; see builder's risk insurance: covering a building while it is under construction. Pollution and professional liability may be added for the project.

Much stays outside the wrap, and the program manual says exactly what:

• Commercial auto. Subs keep their own auto coverage.
• Off-site work. Wrap coverage generally applies only at the project site, so a sub fabricating components at its own shop relies on its own policies.
• Professional liability and, often, pollution, unless the sponsor specifically adds them.
• Excluded parties. Suppliers, haulers, short-duration subs and others the sponsor chooses not to enroll carry full traditional insurance and give you certificates.
• The sub's own operations elsewhere. The wrap covers the project and nothing else.

Practitioner descriptions differ on details such as auto and professional coverage, so the actual policies and manual control. Do not assume.

Completed operations: the main reason owners wrap

Construction defect claims arrive years after the sub has left. Individual sub policies may lapse, change or run out of limits. Wraps commonly include extended products-completed operations coverage, often described as 10 years or matched to the state's statute of repose, which is the outer deadline for suits over defective construction and differs from state to state (McGriff). Jones Day's discussion of OCIPs and CCIPs notes that a wrap can offer higher per-claim limits than subs usually carry, can be tailored to the limitations or repose period, and can cover residential work that individual policies may exclude, and that insurers typically cannot subrogate against enrolled participants, which cuts down finger-pointing (Jones Day, 2013). The same article warns that custom wording and few court decisions can raise the risk of coverage disputes. See products and completed operations coverage.

When a wrap makes sense

Size drives the economics because a wrap has fixed administration costs. McGriff gives these broker rules of thumb for hard construction costs, which are not legal requirements:

• Wood-frame or habitational projects: $25 million or more for a general liability program.
• Commercial or industrial: $75 million or more for a general liability program.
• Condominiums: possibly as low as $5 million, because contractors' policies often exclude condo conversion work.
• A combined liability and workers' comp program: generally $200 million or more.

Those thresholds shift with market conditions and the sponsor's appetite. Defect-prone residential work, a tight site with many trades, or a lender or owner that wants consistent coverage can justify a wrap earlier. A project with a few big trades and strong subs may do better with traditional certificates, as covered in managing subcontractor insurance and certificates and contractual risk transfer: shifting liability by contract and insurance.

How the money works

1. Bid credit. The bid documents tell subs to exclude insurance costs the wrap replaces. Some projects ask for the bid as an add alternate, others as a gross bid with a deduction.
2. True-up. Many wrap manuals adjust the credit to final contract value and payroll.
3. Deductibles. Sponsors often carry large deductibles. IRMI reports figures of roughly $250,000 to $1 million per occurrence on commercial projects and $25,000 to $250,000 on residential ones, and passes a smaller deductible, commonly $2,500 to $25,000 per occurrence, to the enrolled contractor responsible for the loss (IRMI). The manual defines who pays.
4. Loss-sensitive premium. On loss-sensitive programs, premiums adjust with claims, so a bad loss raises the sponsor's cost (Jones Day).
5. Rebates. Some programs return part of the premium for good loss experience.

Workers' comp inside a wrap

When comp is part of the wrap, enrolled employers submit payroll monthly, the insurer reports losses, and the project's claims can reach each contractor's experience mod. California requires an insurer under a wrap-up policy to report comp losses and payroll for each contractor and subcontractor to its rating organization and to give each contractor a copy of its report within 10 days of a request (Cal. Ins. Code 11751.82). Practitioners advise enrolled contractors to ask for loss runs regularly; IRMI notes Michigan as an exception on the mod effect. See The experience modification rate (EMR) explained.

Programs also often impose safety and return-to-work rules (drug testing, fall protection, safety orientation, full-time safety staff). Price them into the bid.

In the four monopolistic-fund states, North Dakota, Ohio, Washington and Wyoming, private insurers cannot write comp for in-state workers, so a private wrap generally cannot replace the state fund coverage there. Ask the sponsor and the administrator how comp is handled, and see Monopolistic state funds: workers' comp in ND, OH, WA and WY.

If you are a subcontractor

Before you sign, find out:

1. Are you enrolled or excluded? If excluded, you owe the full traditional insurance package and you are not an insured under the wrap.
2. Is your credit removed from your price, and is there a true-up?
3. What does the wrap exclude that you must still insure: auto, off-site, tools, pollution, professional?
4. What is the deductible and how much of it can be assigned to you?
5. How long does completed operations last, and are limits shared with other projects or exhausted by other claims?
6. Can you read the policy? IRMI recommends asking for a copy of the policy or binder and, if the sponsor refuses, reviewing it in person.
7. Does your own policy have a wrap-up exclusion, and does it apply only when you are actually enrolled?
8. Will you keep your enrollment documents, manual and correspondence? Claims can appear eight to ten years after closeout, according to IRMI.

If you are an owner or general contractor

Compare cost to a traditional approach, but also compare control: who selects the claims handler, who sets safety rules, and what happens at the end of the project. Plan staff or a CIP administrator for enrollment, payroll audits, loss control and claims. Sponsors should disclose wrap terms in bid documents. California, for example, requires owners, builders and general contractors to make certain disclosures about wrap-up policies under Civil Code sections 2782.95 and 2782.96, such as the premium credit or its method, policy limits, known exclusions and duration. Check California and your state's rules, because disclosure and enrollment rules vary.

A hypothetical project

Say a developer plans a $90 million wood-frame apartment complex, a type of project that a broker might consider for a general liability program. The developer buys an OCIP with general and excess liability and a 10-year completed operations extension. Subs bid net of insurance. A framing sub is enrolled, but a landscaping sub and a concrete supplier are excluded. The framer still needs auto coverage and cover for its yard; the landscaper provides a certificate and additional insured endorsement. Three years after completion a water intrusion claim arrives and the OCIP's completed operations coverage, instead of five different subs' policies, responds. The numbers and structure are invented for illustration.

Key takeaways

• A wrap-up is one project-wide program, bought by the owner (OCIP) or the general contractor (CCIP), usually covering general and excess liability and sometimes workers' comp for enrolled parties.
• Its biggest value is long-tail completed operations coverage and consistent limits; it generally excludes auto, off-site work and often professional and pollution exposures.
• Size thresholds are broker rules of thumb; McGriff cites $25 million, $75 million and $200 million depending on the type and lines covered.
• Subs should confirm enrollment status, remove the credit from the bid, understand the deductible and keep their own coverage for what the wrap leaves out.
• Comp losses on a wrap can reach contractors' mods, and in North Dakota, Ohio, Washington and Wyoming a private wrap cannot replace state fund comp coverage.