September 22, 2026
By: Melissa Petersen
Wrap-insured projects (as opposed to those with the typical individualized insurance landscape) have recently appeared more frequently in construction defect litigation. A project-specific Contractor Controlled Insurance Program (CCIP) or Owner Controlled Insurance Program (OCIP) is often procured with the goal of enrolling most or all construction participants (i.e., general contractor, subcontractors, and often developer) in the wrap policy, so that all wrap participants are covered by the same insurance program. There are considerable advantages to using a wrap program as opposed to the standard dynamic where each entity is responsible for procuring its own insurance. Project-specific wrap programs often streamline risk management issues on the front end of new construction work. That said, navigating a wrap case cannot be handled with a “one size fits all” mindset. Defending a wrap case requires thoughtful coordination among the defense parties and a shared strategy aimed at the same outcome
The Benefit
Once a claim of defect is asserted on a wrap-insured project, the initial risk evaluation process is in part simplified because all major construction participants are insured by the same insurance program. In contrast, imagine a contractor installs a roof on a high-rise condominium, and a claim arises five years later. The high-rise was not constructed under a wrap program. Once it receives the claim, the roofer notifies its CGL carrier of the claim, but the insurer responds that an exclusion in the policy, such as one for condominium work or new construction, bars coverage. Not only is the roofer left without appropriate coverage relative to the work performed, but the general contractor, developer, and any others who may have been owed additional insured obligations under the roofer’s contract are left without the coverage they expected under the wrap program.
Under an OCIP or CCIP, the bad news of an unfavorable exclusion arising years after construction is much less common. Typically, the project-specific wrap program will be tailored to the relative value of the project and the work to be performed, which reduces the risk of coverage exclusions. This is not to say that an insurer cannot or will not dispute coverage when a wrap program is at play, but the concern that major construction participants will be left with zero coverage on a defect claim is reduced.
The Distinction
Defending a wrap case should involve early and frequent conversations between defense counsel and the insureds to reduce infighting and promote a unified effort toward a favorable outcome. This is easier said than done. Careful attention must be paid to avoid contradictory defense opinions and arguments.
Because each enrolled participant is insured by the same coverage program, the realistic outcome of filing crossclaims or third-party claims against fellow wrap-insured participants can feel more academic than practical. This does not mean that an insured client must forsake its indemnity rights, nor does it water down the validity of any contractual obligations owed to the client. But whether, and how, to pursue those rights calls for careful strategy.
With each participant insured by the same program, the wrap insurers often favor settling defect claims globally (or at least globally as to the enrollees) rather than settling a claim on behalf of only select insureds. This is another reason why counsel must be conscious of the effects of finger-pointing to a fellow wrap-insured participant. While infighting may result in reduced exposure for one wrap-insured, it may lead to heightened exposure for a different insured, and result in the same level of exposure for the insureds collectively in the wrap program.
Again, this does not mean that an insured should give up its fact-specific defenses, or that counsel should defend their clients with any less vigor. The stage of the claim, contractual obligations owed, role of the client, and liability assessment are just a handful of considerations counsel must address when evaluating the most effective defense for each client.
You’ve Received a Claim: Now What?
Wrap-insured construction clients should work closely with their counsel and talk early about how their defense strategy and expectations may shift because the project is wrap-insured.
Questions?
Contact GrayRobinson Attorney Melissa Petersen or a member of the Construction Team.