he term mini-wrap is also used for traditional wrap-ups that are written for a short duration.
Construction defect losses created an insurance crisis in California. Such losses as well as subsequent problems involving mold and EIFS claims led to insurers including highly restrictive clauses in general liability policies, including exclusions for defects and contractual liability.
Condominium and residential home developers, particularly those involving homeowners associations, began to feel the insurance market tighten, premiums rise, and limits drop. The crunch started with general contractors and quickly worked down to affect all levels of subcontractors. General contractors demanded coverage from their sub contractors that the subcontractors could not obtain.
The solution for the residential construction industry was a unique type of residential general liability-only wrap-up coverage sometimes called a mini-wrap.
Wrap-ups are primarily cost saving financial products that lead with Workers Compensation coverage. Their use is generally with large projects and they are characterized by high premiums, high limits and intense loss prevention and safety measures.
The mini-wrap (sometimes called a residential wrap-up), however, is a coverage driven product. It includes only general liability coverages, has low limits, applies to small to medium-size projects and incorporates standard loss prevention efforts.
While many brokers enthuse about the advantages and financial freedom of the large project wrap-ups, agents and brokers accept the mini-wrap as the only solution available. Users concede that the tool isn't ideal, but modest limits, narrow coverage and with defense coverage provided within the policy's limits are better than going without any coverage.
The construction defect issue is not going away. The coverage crisis it created has moved north and slightly east of California and markets now include Oregon, Arizona and Nevada. As condominium and home development building continues to spread the problem may expand. Mini-wraps may be the solution for similar coverage problems nationwide.