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									 All Wrapped Up: Construction
Liability Claim Issues in Wrap Up
       Insurance Programs
I. Introduction and Overview of
Seminar

A.   Glenn Dienstag – AIG Domestic Claims, Inc.
B.   Cathy Glover – AIG Domestic Claims, Inc.
C.   Harry A. Griffith – Attorney at Law –
       Branson, Brinkop, Griffith & Strong, LLP
       643 Bair Island Road, Suite 400
       Redwood City, CA 94063
       (650) 356-7710 (tel)
       (650) 365-7981 (fax)
All Wrapped Up: Construction Liability Claim
Issues in Wrap Up Insurance Programs

At the end of the training session, the
    participants will have a greater
    understanding of:
1. The history and application of Wrap policies
2. Differences between standard
    Comprehensive General Liability Coverage
    and Wrap Up insurance programs
All Wrapped Up: Construction Liability Claim
Issues in Wrap Up Insurance Programs

At the end of the training session, the participants will
     have a greater understanding of:
3. Wrap Insurance programs formulation and
     formation issues
4. Claims adjustment issues in the context of
     operations and completed operations scenarios
5. Claims adjustment issues in the context of an
     emergency repair scenario
II. Introduction of Topic and Overall
Procedures

A.   Introduction of the basic facts and players
B.   Introduction of the coverage afforded the
     players
C.   Introduction to the contracts
A. Introduction of the Basic Facts
and Players

   Sells It, Inc. – Owner of the site, Project
    Developer
   Gump Construction, Inc. – General
    Contractor for the site
   We Own It, Inc. – Subsequent purchaser of
    the site
A. Introduction of the Basic Facts
and Players (Continued)

   Excavation Specialists – excavation
    subcontractor for the site
   Dan Taylor – Plaintiff, employee of ABC
    Excavation
   ABC Architects – architect for the site
A. Introduction of the Basic Facts
and Players (Continued)

   Exceptional Equipment – manufacturer of
    backhoe at site
   Cool Pool, Inc. – contractor that installed
    pool, heater and plaza decking at site
   Roofs, Inc. – roofing subcontractor at the site
B. Introduction of the Coverage
Afforded the Players

   Sells It, Inc. - Primary Wrap: $5M
                    - Excess Wrap: $5M
   Gump Construction Inc:
    –   Primary - $2M/$4M (No-Risk Ins.)
    –   Excess - $25M/$25M (No Risk Ins)
    –   Enrolled in Wrap
   Excavation Specialists:
    –   Primary- $1M/$2M (XYZ Ins. Co)
    –   Excess- $2M/$2M (ZZZ Ins. Co)
    –   Enrolled in Wrap
B. Introduction of the Coverage
Afforded the Players

   Exceptional Equipment – Self Insured
    -Not Enrolled in Wrap
   ABC Architects – Architects and Engineers
    Professional Liability Policy - $2M/$M, $125,000
    deductible (excess of limits).
    -Not Enrolled in Wrap
   Cool Pool:
    –   Primary- $1M/$2M (DEF Ins. Co)
    –   Excess- $2M/$2M (ZZZ Ins. Co)
    –   Not Enrolled in Wrap
   Roofs, Inc. - enrolled in Wrap policy
C. Introduction to the Contracts

   Gump Construction to add Sells It as additional
    insured on all insurance policies, with $3M on
    primary basis
   All subcontractors to name Gump Construction and
    Sells It as additional insureds on all insurance
    policies, with $5M on primary basis
   All subcontractors to indemnify Gump Construction
    and Sells It, unless they are solely negligent
   Sales contract from Sells It to We Own It, assigns
    Sells It’s rights against the general contractor and
    subcontractors to We Own It
III. History and Application of Wrap
Insurance Programs

A.      The Coverage Concept
     1. A single insurance program providing
        coverage to all parties involved in the
        construction process
III. History and Application of Wrap
Insurance Programs

A.        The Coverage Concept
     2.   Wrap Up Insurance:
          -Not a new product
          -In use for over forty years
          -Published decisions as early as the 1970’s
          -More extensively utilized in the last two
          decades
          -Moved from public works projects to large scale
          commercial projects, and most recently to single
          family homes
III. History and Application of Wrap
Insurance Programs

A.      The Coverage Concept
     3. Generally Includes:
        a.   Worker’s Compensation
        b.   Liability – Operations and
             Completed Operations
        c.   Builder’s Risk
        d.   Primary/Excess Layers
III. History and Application of Wrap
Insurance Programs

B.   Types of Programs – OCIP/CCIP
     1.   OCIP – Owner Controlled
          Insurance Program
     2.   CCIP – Contractor Controlled
          Insurance Program
III. History and Application of Wrap
Insurance Programs

C.   Applications
     1.    Project Specific –
           Public/Commercial/Residential
     2.    Rolling Wraps - Residential
III. History and Application of Wrap
Insurance Programs

D.   Advantages/Disadvantages
     -No dis-economies of scale for defense
     -Provides coverage for subcontractor
     trades without conventional market
     -Potential premium savings for the
     insurance program as a whole.
     -Greater range of insurance protection
     available.
IV. Differences Between Standard
Commercial General Liability Coverage and
Wrap Insurance Programs


A.   Who is an Insured?
     1.   Owner (OCIP)
     2.   Contractor (CCIP)
     3.   Enrolled Subcontractors
IV. Differences Between Standard
Commercial General Liability Coverage and
Wrap Insurance Programs


B.   Who is not an Insured?
     1.   Material Providers
     2.   Equipment Providers
     3.   Design and Engineering
          Professionals
     4.   Demolition Subcontractors
     5.   Asbestos Abatement Contractors
IV. Differences Between Standard
Commercial General Liability Coverage and
Wrap Insurance Programs

C.   What’s Covered?
     1.    Workers’ Compensation
     2.    General Liability – Operations
     3.    General Liability – Completed
           Operations – 10 year (or applicable
           statute of limitations) tail for Completed
           Operations Claims
     4.    Architects and/or construction
           managers professional liability
     5.    Builders Risk
IV. Differences Between Standard
Commercial General Liability Coverage and
Wrap Insurance Programs


D.   Business/Customer Implications
     1.   Sponsor/first named insured
          probably a major account
     2.   Party making the claim also paid
          the premium
V. Program Formulation and
Formation

A.   Wrap Enrollment
     1.    Wrap enrollment administration
           performed by broker/sponsor
     2.    Wrap underwriter receives list of
           enrolled contractors and dates of
           same
     3.    Master wrap liability policy issued
           to named insured with certificates
           to enrolled contractors
V. Program Formulation and
Formation

B.   Limits – Defense within limits at primary
     level
V. Program Formulation and
Formation

C.   Risk Retention/Deductibles –
     Policy/Contractual
V. Program Formulation and
Formation

D.   Wrap Program Materials
     1.     Generated by broker/sponsor
     2.     Should be consistent with terms/conditions of
            policy
     3.     Generally less specific than policy
     4.     Potential for claims for breach of contract to
            insure
     5.     Contractual documents also important
            -SIR/Deductible Allocation
            -Indemnity
            -Insurance Requirements
VI. Claims Adjustment Issues in the Context
of an Operations and Completed Operations
Scenario


A.   Property Damage/Bodily Injury Claims
     Occurring During Construction
B.   Property Damage Claims Under Completed
     Operations Coverage
A. Property Damage/Bodily Injury
Claims Occurring During Construction

Claim Scenario 1:
Bodily Injury
A. Property Damage/Bodily Injury
Claims Occurring During Construction

Fact Pattern:
 Crane, manufactured by Exceptional
  Equipment, is being operated by an
  employee of Excavation Specialists
 Crane tips over
 Plaintiff’s legs are traumatically amputated
A. Property Damage/Bodily Injury
Claims Occurring During Construction

Lawsuit Filed:
 GC ≠ provide safe work environment
 GC ≠ monitor sub/enforce safety programs
 GC ≠ implement safety training for sub
 GC ≠ ensure regular toolbox meetings
 GC ≠ inspect machinery on site
 GC just generally negligent
A. Property Damage/Bodily Injury
Claims Occurring During Construction

Issues:
   1. Minimizing Litigation Costs
       a. One Counsel for all Defendants?
       b. Shared Experts
       c. Limited Discovery
       d. Joint Defense Agreements
       e. Settlement Advantages
   2. Do conflicts create the need for multiple counsel?
   3. Are there defendants outside the wrap?
B. Property Damage Claims Under
the Completed Operations Coverage

Claim Scenario 2:
  Construction
  Defect/Completed
  Operations Claim
B. Property Damage Claims Under the
Completed Operations Coverage

Fact Pattern:
 Built It kicks out tenants and renovates the building
 Built It sells half of the condo units, then sells the
  project to We Own It
 Homeowners’ Association files a suit against Sells It,
  We Own It, Gump Construction, Roofs, Inc., Cool
  Pool and ABC Architects alleging construction
  defects
B. Property Damage Claims Under
the Completed Operations Coverage

   Water Damage From Leaking Roof
B. Property Damage Claims Under
the Completed Operations Coverage

Other Damage
 Inadequate pool heat
 Excessively hot units due to solar heat gain
 French limestone plaza decking deteriorating
 Business Interruption?
B. Property Damage Claims Under the
Completed Operations Coverage

Lawsuit Filed:
 Fraud against Sells It and We Own It;
 Negligence against Sells It, We Own It, Gump
  Construction, Roofs, Inc. Cool Pool and ABC
  Architects;
 Strict Liability against Sells It and We Own It; and
 Breach of Warranty against Sells It and We Own It.
B. Property Damage Claims Under the
Completed Operations Coverage

Issues:
1. Who is Insured under Wrap?
2. How do we defend claim?
3. What Policy Limitations –
   P.D./Occurrence/Business Risk Exclusion?
4. Other Sources of Contribution/Recovery
5. What is the Effect of Wrap Exclusions?
B. Property Damage Claims Under the
Completed Operations Coverage

Issues:
6. Does Indemnity Apply?
7. Can/Should we pursue non-wrap insured
    Subcontractors?
8. If We Own It Cross-complains, what impact?
9. What is covered under the Wrap/what impact
    from Policy Exclusion?
VII. Claims Adjustment Issues in the Context
of an Emergency Repair Scenario


Claims Scenario 3:
  Emergency
  Repair Scenario
VII. Claims Adjustment Issues in the Context
of an Emergency Repair Scenario


A.   Property Damage Claims: The Gas Main
     Explodes
    City has demanded that
     1.   The gas main be repaired immediately
     2.   Provisional heat and alternative housing be
          provided to the residents of building
     3.   Excavation Specialists or Gump Construction
          perform the work immediately
VII. Claims Adjustment Issues in the Context
of an Emergency Repair Scenario


A.   PD Claims: Fiber Optic Cable Line
    Possible Business Interruption Costs
    Residents making claims for loss of use of
     phone, internet and cable
VII. Claims Adjustment Issues in the Context
of an Emergency Repair Scenario


A.   PD Claims: Gas Main and Cable
    State has threatened shut down or fine
     if not repaired immediately.

 Now        What?????????
VII. Claims Adjustment Issues in the Context
of an Emergency Repair Scenario

B.   Coverage Issues
     1.     Claims adjustment issues
            a.     Coordinate repair issues with
                   the insured – who does the repair?
            b.     Avoid voluntary payment issues
                   -SIR Issues
                   -Deductible Issues
            c.     Mitigating loss and claim
                   expenses
            d.     Underwriting concerns and
                   business relationships with the insured
VIII. Conclusion


             Questions?
VIII. Conclusion

              That’s a Wrap!

								
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