Commercial General Contractor Insurance: Owner Contracts, Wraps and Public Work

Large commercial owners often sponsor an owner-controlled insurance program. As an enrolled GC, you typically submit a bid with insurance costs for enrolled work removed, provide payroll and subcontractor data for enrollment, follow the program's safety manual and report claims through the program administrator. Your own program stays in force for off-site operations, vehicles, tools and anything the OCIP excludes.

The details that hurt GCs are usually in the enrollment rules. Not every vendor is eligible: haulers, suppliers and some specialty trades may be excluded and must carry their own insurance under your subcontract. Coverage under the wrap may end on a schedule that differs from your contract exposure, and the annual GL policy usually needs a wrap exclusion that is drafted narrowly enough not to strip coverage from non-enrolled work.

Texas adds a statutory point. Insurance Code chapter 151 limits indemnity and additional insured requirements for a party's own negligence, but it carves out provisions in policies issued under consolidated insurance programs to the extent they list, add or delete named insureds. That interaction is worth confirming with counsel on any Texas wrap.

Owners and GCs sponsoring a program can review wrap-up programs placed by Gleason Insurance Brokers.

Ground-up commercial work starts on open land or a cleared pad. The exposures are excavation, structural erection, crane work, weather and the builders risk values that grow as the shell goes up. Insurance and bonding are sized to the full project, and the owner usually controls builders risk or a wrap on larger jobs.

Tenant improvement work happens inside an existing building, often while other tenants stay open. The GC works on property it does not own and did not build, next to occupants who can be injured or disrupted. The questions shift to damage to the existing structure, property in the GC's care, custody or control, fire watch and hot work rules, after-hours access and whether the landlord's property policy or a builders risk policy responds to the existing building.

Ask whether the GL form limits coverage for damage to property the GC is working on, and whether the landlord's lease or work letter requires additional insured status for the landlord, the property manager and the tenant at the same time. TI contracts often come from the landlord and the tenant separately, with exhibits that do not agree with each other.

Public owners require statutory bonds, and the trigger amounts vary by state. In California, Civil Code §9550 requires a direct contractor on a public works contract above $25,000 to give a payment bond before work begins, with an exception for certain state entity contracts. In Texas, Government Code §2253.021 requires a performance bond above $100,000 and a payment bond above $25,000, or above $50,000 when the governmental entity is a municipality. Arizona's A.R.S. §34-222 requires both bonds in the full contract amount on covered public building and improvement contracts.

These bonds are surety, not insurance. The performance bond protects the public owner and the payment bond protects those who supply labor and material. The GC signs an indemnity agreement with the surety. Each new public contract draws on bonding capacity, so a commercial GC moving into public work should share its pipeline with the surety before bidding a run of public jobs.

Public work also changes payroll. California Labor Code §1771 requires prevailing wages on public works above a small threshold, and higher wage rates can raise payroll-based premiums such as workers' compensation. Ask how the carrier will audit prevailing wage payroll and whether the job's payroll should be reported separately.

Under design-build, the commercial GC holds the design contract with the owner and hires the architect and engineers itself. If the design is wrong, the owner's claim comes to the GC first. Many commercial GL forms limit or exclude claims arising from professional services, so a design error that causes a loss may fall outside the GC's liability program depending on the form and endorsements.

Several tools can address the gap. The design firms carry their own professional liability, though their limits may be modest and aggregate across all their projects. A GC may consider contractor's professional liability, which can respond to the GC's vicarious liability for design and, under some forms, to rework costs. Some owners require a project-specific professional policy covering the whole design team.

Delegated design creates a smaller version of the same exposure on conventional jobs: curtain wall, fire sprinkler, steel connections and other trade-designed systems. Check whether the subcontractor's professional coverage, not just its GL, meets the subcontract's design obligations. On bonded design-build work, ask the surety how the performance bond treats design obligations.

On commercial work, the owner's contract form and any lender exhibit usually set the requirements, and tenant improvement, ground-up and design-build jobs can each change the answer. A review typically compares those requirements with the GC's program and the limits tower before the contract is signed.

These are common steps, not fixed rules. Insurers and sureties each apply their own guidelines and programs, the terms offered depend on the project and the individual risk, and coverage or bonds are subject to underwriting and to the conditions and exclusions of the forms that are issued.

• Documents: the prime contract form, the insurance exhibit, any lender exhibit and a wrap manual if the job is wrapped
• Scope: self-performed work, subcontracted share and any delegated design
• Limits: whether the exhibit calls for project excess above the annual tower
• Tenant improvement work: the lease or work letter, landlord requirements and the occupancy plan
• Surety: financial statements and work in progress for public or bonded private work
• Before signing: negotiated changes to exhibit terms the market may not offer

Commercial owners often require excess limits beyond what a GC carries on its annual umbrella, sometimes dedicated to a single project. Buying a project-specific excess layer keeps those limits from being shared with every other job and keeps a large loss on one site from eroding the GC's annual tower.

How the tower is built matters as much as the total. A follow-form excess policy generally tracks the terms of the primary policy beneath it, while a standalone or umbrella form can carry its own exclusions. Ask whether each layer follows the additional insured, primary and noncontributory and per-project aggregate terms the owner's exhibit requires, and whether completed-operations coverage continues for the same period at every layer.

Excess pricing depends on the project type, location, height, residential components, the subcontracting model and the GC's loss history. Giving the market clean contract, schedule and safety information tends to widen the options, especially on jobs with high-hazard components.