Gurley: Developers Save With "Wrap" Policies



Insurance costs can elevate the price of a major development significantly when you add the costs paid by all subcontractors, but new insurance packages can help ease some of the burden by wrapping separate contractor plans into one policy. Sarasota attorney David E. Gurley, of law firm Gurley Vitale, spoke about the way such deals have changed the industry at Florida Construction Law seminar in Miami last month, where he was among 15 presenters speaking to construction experts and executives working on projects around the world. 

Gurley says that these “wrap” policies work for projects that cost $50 million or more, but can save 2 to 3 percent of total project costs, no small figure with developments of that scale. The policies get negotiated for individual projects and will cover everyone from the owners, contractors and architects to the subcontractors and even the sub-subs hired at the lowest levels of a corporate flowchart. “It prevents duplicative coverages and infighting,” Gurley says, but the policies can also be complicated to set up at first. 

But the benefits come in all forms. Most obviously, there’s a cost savings, thanks to the sheer volume purchase and also by avoiding duplicate services purchased by individual contractors’ policies.

Perhaps more importantly, when a claim does need to be filed, a single policy looks for a quick resolution rather than an assignment of blame. He used the example of if a window ended up leaking in a major condominium project. If every contractor and sub had their own policies, the companies or their representatives would expend significant energy finding out what company bore responsibility for the error. “You have five or six parties all pointing to each other saying it’s you, not me,” Gurley said. “Even when you have insurance involved, carriers want to minimize loss and look to other carriers for responsibility. When you have one policy, that doesn’t come up. It’s just how do we fix it and how do we move on.” And with projects of massive scale, some type of problem inevitably will arise. “You can’t build a $50-million project and not have a hiccup somewhere.”

But those who use “wrap” policies should also be aware they work differently than individual contractor policies, and could affect how a project comes together. Typically, “wrap” policies only cover work on-site; so contractors can’t construct something off-site and bring it in, then expect any problems to be covered. Also, workman’s compensation programs typically get covered by an administrator tied just to the project, rather than getting outsourced by insurance to an outside firm.

It all makes for a complex effort, Gurley warns. “It’s customized because of the nature of a product to a particular project, and it necessarily involves outside administrators and consultants to help design and most proficiently price the product. It’s not off-the-shelf insurance.”

Photo of David Gurley.

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