Wrap-Up Insurance and the Risk of Coverage Gaps: A Case from the Eleventh Circuit
Patrick Wielinski authored a news article, Wrap Up Insurance and the Risk of Coverage Gaps: A Case from the Eleventh Circuit, that appeared last week in the AGC of America websites and newsletters. The topic is “course of conduct exclusions” (also referred to as “builders risk exclusions”). These exclusions are inserted into most wrap-up insurance policies (OCIPs and CCIPs) on large projects that exclude coverage for defense and indemnity for property damage to the project that occurs prior to completion. The exclusions relating to property damage under the standard CGL policy that preserve coverage for many construction defects are deleted from CIPs in favor of an absolute replacement exclusion that denies coverage for all property damage that occurs prior to completion on the pretense that a builders’ risk policy is more appropriate to provide that coverage. However, in many instances, the CGL policy will provide broader coverage and a defense. Unfortunately, many risk managers and agents/brokers are unaware of the gap, believing that the insured usually wins when any exclusion is eliminated.
The article reports on the recent case out of the Eleventh Circuit applying Florida law, Liberty Surplus Insurance Corp. v. Kaufman Lynn Construction, Inc., 130 F.4th 903 (11th.Cir. 2025), in which CY submitted an amici curiae brief on behalf of the AGC of America and NAHB in support of the contractor against its CGL insurer that denied coverage under the CCIP. The major issue was whether the policy provided completed operations coverage as each individual phase was completed (because the course of construction applied). The Eleventh Circuit somewhat obtusely held that the policy did not provide coverage, contrary to the policy’s underwriting. Nevertheless, the court acknowledged the bait-and-switch aspect of the policy that the AGC and NAHB, as amici, pointed out. Unfortunately, that argument did not carry the day because the builders’ risk policy was not included in the appellate record. Thus, the construction industry has some support the next time this issue arises as more cases involving CIPs are entering the pipeline so all is not lost. A national Teams call by the AGC on this issue is being planned. The firm intends to be involved in this effort. For more information, please feel free to contact Pat Wielinski or Travis Brown.
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