Senator Harry Coates (R-OK, District 28) has introduced SB 1616, a bill to provide transparency on wrap-up insurance used on public and private partnerships. Sen. Coates introduced the bill at the request of ASA-OK.
Consolidated insurance programs, also known as “wrap-ups,” are a centralized insurance and loss control program intended to protect the project owner, prime contractor, and subcontractors under a single set of insurance policies. Wrap-up programs are a radical departure from the traditional construction insurance format, where each contractor and subcontractor individually purchases and negotiates its own insurance and risk financing programs to address liability and losses from accidents. Unfortunately, wrap-ups are too often marketed inappropriately as providing the same or better insurance coverage, at the same or lower financial risk and cost to subcontractors, as their own individual insurance programs offer. Wrap-up design is too focused on profit for program sponsors rather than providing the coverage necessary to protect subcontractors. Wrap-ups also do not provide a financial backstop for construction buyers that experience challenges arising from defective construction, injuries and other accidental loss both during ongoing construction operations and after completion.
Wrap-ups are not created with equal protection and transparency; rarely are they as comprehensive and coordinated as implied. In fact, many wrap-ups offer inadequate and limited coverage, often employ burdensome procedures for subcontractors that can significantly amplify exposure to risk, increase administrative costs and paperwork, and generate problematic outcomes.
Passage of SB 1616 which will require proper transparency and financial protection when wrap-ups are used will allow Oklahoma's subcontractors the ability to manage their insurance needs and risk in a manner economically beneficial to themselves, the general contractors, and the owners.
