What is Wrap Up Liability Insurance in Canada?

By: Updated: January 7, 2022


If you work on large construction projects, wrap up liability insurance can reduce risk and improve efficiency. Read on to learn more about this product for insurance during construction.


What is wrap up liability insurance in Canada?

During major construction projects, dozens of companies and professionals work together. This could include owners, general contractors, engineers, architects and a wide range of trades, such as electricians and plumbers.

Wrap up liability insurance brings them all under a single policy, rather than each subcontractor having its own coverage. The main advantages of using wrap up insurance include:

  • There is a common claim limit for the project. The general contractor does not have to worry about whether subcontractors have enough insurance.
  • You can set the limit based on the size of the project. You may want more coverage on a $100 million build than on one worth $10 million.
  • It saves time in checking and managing insurance policies. There may be 150 different companies working on a project, each its own specific clauses and renewal dates. You don’t want insurance expiring in the middle of a multiyear build.
  • If there is an incident on the construction site, several parties may be involved and it can be difficult to determine liability. With a single insurance policy, it’s easy to settle a claim.


Who is eligible for wrap up liability insurance?

This type of insurance covers all the contractors working on a major project. It can be structured in one of two ways:

  1. Owner controlled: The owner of the property takes out the policy.
  2. Contractor controlled: The general contractor takes out the policy and is responsible for making sure that coverage is comprehensive and sufficient for the size of the build.

The policy can include all of the subcontractors. Suppliers, such as those delivering building materials to the site, are not usually covered. They must have their own commercial general liability insurance. In addition, companies providing security services on the property are excluded.


How much does wrap up insurance cost?

Since this insurance is used for projects ranging in value from $10 million to $100 million, the cost varies widely. In addition, the general contractor may wish to include specific clauses in the policy to protect everyone involved. Therefore, the insurance company will set a price on insuring the project rather than on its value.

Some insurance companies have a minimum premium for wrap up insurance. For example, Victor Insurance charges a minimum of $5,000 for $1 million in coverage.


What does wrap up liability insurance cover?

It depends on the policy. Wrap up coverage can be tailored to a specific project. That’s because the contractor understands what is entailed – and can alert the insurance company to potential risks.

Some of the common areas of coverage are:

  • Builder’s risk: Protection for the property and equipment on site
  • Pollution liability: Coverage when there is a risk of pollution during construction, such as gas leaks or soil contamination
  • Commercial vehicles: Covers construction equipment, trucks, cars and other vehicles
  • Professional liability: Protects the contractor, architects and designers for errors and omissions


What is a wrap up insurance exclusion?

This is a clause used to remove coverage for a contractor if it overlaps with coverage already provided to the contractor under a wrap up insurance policy.


Wrap up liability insurance claim example

There was a fire at a retirement home under construction and damages totaled $100,000. Fire officials were not able to determine the cause of the blaze. It could have been sparks from welding work. Or it might have been a faulty heater accidentally left on by drywallers when they departed for the day. The general contractor had taken out wrap up insurance for the project – so they did not have to determine which subcontractor was to blame. The insurance covered the loss.


Wrap up liability insurance vs general liability

Wrap up liability covers all of the contractors and subcontractors working on a project. On the other hand, each contractor should have commercial general liability insurance. However, there may be gaps in general liability coverage or the amount covered may be insufficient for the project. Wrap up liability insurance ensures that everyone working on the project is covered.

Wrap up insurance provides a guaranteed amount of protection. If the policy has $5 million in coverage, the contractor knows that the entire amount is available for the project if there is a claim. With commercial general liability, the coverage could be eroded if a contractor is facing two or more claims. There might not be enough funds to cover all claims.


Wrap up insurance vs builder’s risk

As we have indicated, wrap up insurance protects all contractors working on a project for liability. Builder’s risk provides property insurance, including coverage for equipment in transit or situated at another location offsite.


Do you need wrap up insurance?

Some insurance experts believe that wrap up insurance during construction actually saves contractors money. Yes, this protection costs money. However, there is a huge amount of project management time involved in tracking the liability insurance policies of hundreds of subcontractors. Each policy would need to be vetted for any gaps that could be an issue on this particular project. In addition, renewal dates would have to be monitored and proof of insurance verified throughout the build. Since major construction projects can take several years, this would require ongoing vigilance. A wrap up liability policy saves contractors from having to do all of this work.


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