IIABNY Opposes Expanding Wrap-Ups for Public Projects

New York Gov. Andrew Cuomo’s 2016-17 fiscal year budget plan includes a proposal to expand the ability of some government entities to use owner-controlled insurance programs, also known as wrap-ups, for public works projects. But an insurance producers’ trade group warns the proposal could harm New York businesses.

The Independent Insurance Agents & Brokers of New York (IIABNY) said it is urging state lawmakers to reject the measure.

IIABNY Chair of the Board Todd Rockefeller said the proposal to expand wrap-ups will hurt New York’s small business owners.

“They will lose the freedom to choose their own insurance providers. It will leave contractors uninsured for some risks. It would reward contractors who operate unsafely. It should be rejected,” Rockefeller said.

IIABNY said Cuomo’s proposed budget would change a long-standing state policy and expand the ability of certain government entities, such as New York City Transit Authority and the Metropolitan Transportation Authority, and the New York City government to use wrap-ups for construction of bridges, tunnels and bus facilities.

In a wrap-up, the project’s owner selects and purchases the insurance for participants in the project. Rather than choosing insurance programs tailored to their own needs, the contractors must accept a program that protects the owner’s interests, IIABNY said.

IIABNY also warned that wrap-ups may leave contractors uninsured for some serious risks. For example, a bridge could collapse 10 years after its completion, and those who are injured may sue all of the contractors who built it.

IIABNY said wrap-ups often provide liability coverage to contractors for only two to five years after completion. After that, the contractors will have to pay for their legal defense and judgments on their own.

Wrap-ups also may leave contractors uninsured for auto accidents on job sites; force contractors to absorb deductibles larger than they would like; or leave contractors unprotected if the insurer cancels the wrap-up program during the project.

“New York banned wrap-ups on public construction projects for good reasons,” Rockefeller said.

“In the past, unscrupulous public officials used these programs to steer business toward their friends and campaign contributors. At a time when the public perceives widespread corruption in state government, this is exactly the wrong step to take.”

Rockefeller also said wrap-ups ignore the good safety records of some contractors. Ordinarily, these contractors pay lower insurance premiums. This gives them a competitive advantage. He said that advantage vanishes when they cannot factor their lower insurance costs into their bids.