Wrap-Up Insurance Programs An Examination of Liability Exposures for Participants in California

March 19, 2015

Journal of American Law

San Francisco Partner John H. Podesta has had his article "Wrap-Up Insurance Programs An Examination of Liability Exposures for Participants in California" published in the Journal of American Law. The Journal is published quarterly by the Claims & Litigation Management Alliance and is distributed to 25,000 readers both in print and online.

Click here to read the full article.

A wrap-up program, or controlled insurance program (CIP), is an insurance program created to “wrap” all the needed insurance for a construction project into a single program. While conceptually simple, wrap-up programs present unique liability exposures for the professionals retained in connection with the procurement and administration of the project and claims handling when a loss occurs. Insurance brokers potentially have a client relationship with each contractor on the project and face liability if the coverage is not accurately and properly disclosed or is inappropriate for the project. Wrap-up administrators may assume the duty to properly account for insurance costs to enroll the contractors in the wrap-up program and possibly to oversee or coordinate safety and loss control. Uninsured losses and potentially catastrophic claims could result from negligence of either the insurance broker or wrap-up administrator.

Insurers that handle wrap-up claims must account for the fact that each contractor is a separate insured with a separate right to coverage and a right to enforce fair claims-handling statutes. Defense lawyers, who may be used to receiving assignments from the insurer and representing the insureds, must first understand and then address each potential conflict between the involved insureds and make disclosures required by state law. The lawyer could unwittingly represent parties with conflicting interests due to deductibles or inadequate limits, uncovered damages, or because of indemnity claims between the prospective clients. Depending on the circumstances, the lawyer could be subject to discipline or forced to withdraw.

This article is a survey of the concerns that could create professional liability exposures for insurance brokers, wrap-up administrators, insurer claims departments, and outside lawyers. These exposures must be identified and managed.