More frequently as insurance brokers we encounter construction contracts whereby the Owner provides Builders Risk and Wrap Up Liability and the deductible, which is the responsibility of the at fault contractor can be very large in the event of a claim. Unfortunately, the deductible may be hidden in the prime contract so we recommend you obtain and read the prime contract which should also be provided to your insurance broker and your lawyer. It is not unusual to see a special deductible of $2,000,000.00 for hot tar roofers: more specifically for provincial school/college construction projects. If the hot tar roofer doesn’t have a $2,000,000.00 Difference in Deductible coverage, the general contractor may be vicariously liable so he also needs Difference in Deductible coverage for $2,000,000.00
Contractors who work on projects covered under wrap up should have:
- No wrap up exclusion in their liability program.
- Contingent wrap up with Difference in Deductible and/or Difference in Conditions.
- Note: Commercial General Liability will not respond to the deductible as it is usually deemed excess.
- Difference in Deductible adequate for the exposure.
Here is a sample wording that restricts the Difference in Deductible:
When a “wrap-up” policy contains a deductible which is greater that the deductible of this policy, this policy will pay the difference between said respective deductibles, but only with respect to liability arising out of the Named Insured’s premises or operations and only “wrap-up” deductibles that are equal to or less than $25,000.
It is very important to select an insurance broker who specialises in construction/contracting insurance because their expertise will be invaluable.
Your insurance broker should explain exposures and possible insurance solutions. This should be reviewed on an annual basis as operations and circumstances change. Don’t forget about the “Builders Risk” deductible which can also be hidden in the Prime contract. An installation floater may respond to a deductible, however please carefully check the wording and there are other insurance solutions.
