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Spring 2015 // Journal of American Law 23 unique ethical and contractual obligations to each client or insured under the program since one policy insures all of the project contractors. Te Insurance Broker and Wrap-Up Administration Wrap-ups are negotiated and underwritten for a particular project and tailored for the needs of the owner. Te forms are unique, and the endorsements are crafed to meet specif- ic needs. In the liability insurance context and in particular completed operations coverage for defect claims, there are no standard forms or approaches to CIP or wrap-up cover- age. Te broker's role, therefore, is critical to the process as he or she assumes responsibility to the client—the policy- holder—to get the right coverage for the right price. 1 Wrap-ups may be tailored in unconventional ways for risks aside from a typical "ground up" project. For example, developers that begin the project with traditional insurance for an apartment complex later may decide to convert to condominiums and obtain a wrap-up policy for the defect exposure. 2 A lender that takes a deed in lieu of foreclosure may obtain a wrap-up for the completion of construction and the defect exposure. Te broker must understand the policies and make sure that coverage is available for the risks presented. In an environment with no standard forms, this is an important undertaking. Unlike a broker, the insurance company sells a product and attempts to estimate the cost of insuring the project under its existing policy forms. Te price depends on the insurer's experience with that product, the size and location of the project, and many other characteristics de- pending on the insurer. However, an insurer rarely makes any promises or assurances that the product is other than what is written in the policy (or the binder). As one expert witness said in deposition, "Te broker's role is to accurately describe and understand the needed coverage, and the in- surance company underwriter's job is to put a price on the coverage it is willing to provide. Te broker then decides whether to purchase it." Te broker represents the insured, but how far does the duty extend? Are they a guarantor that everything is covered unless they disclose otherwise? Under California law, the starting point of the analysis is that the insurance broker has a limited duty to assure that coverage is appropriate for an insured. 3 Te broker must use reasonable skill to obtain the specifcally requested coverage or advise that the requested coverage is not available. If the broker advises the client that 1 In a contractor controlled insurance program (CCIP), the general contractor will be the broker's contact and the client. For consistency, however, we will refer to the owner as the client. 2 Many contractors' policies will cover commercial risks, such as apartments, but exclude residential exposures, such as condomini- ums. Tus, an owner could be lef with no coverage for possible construction defects if he changes from apartments to condos afer construction but before they are sold. See for example: http:// contractorsinsurance.org/beware-residential-exclusion/. 3 Jones v. Grewe, 189 Cal. App. 950 (1987). the coverage will meet certain requirements, the broker can be held liable if the coverage falls short of those representations. However, the duty ends when the policy is issued. As an example, if an insurer becomes insolvent afer a policy is issued, a broker has no duty to inform a client of the issue unless he expressly assumes that duty. Tis is an important point in the ever-changing world of construction insurance. 4 In the context of wrap-up insurance, to whom the statements are made, what is represented before the policy is issued, and how much detail is given all impact the potential liability of the insurance broker. Te frst and most obvious concerns for the broker are identifying the broker's client and determining what duty, if any, the broker owes to wrap-up participants aside from the owner or sponsor. In California, for work that commenced construction afer January 1, 2009, the owner, builder, or gen- eral contractor must disclose to the enrolled subcontractors the policy limits, scope of coverage, basis of deductibles, and whether other projects are included in the same program, which could impact the available insurance for the partic- ular project. 5 Tough no cases have addressed the situation, it is logical that the courts will fnd that a broker assumed a duty to make the required disclosures properly to the sub- contractors if he undertakes to do so. Since under California law an insurance broker may breach his duty to clients to procure insurance if "the broker assumes an additional duty by either express agreement or by 'holding himself out' as having expertise in the given feld of insurance being sought by the insured," 6 a broker must assure that the required dis- closures are accurate or face a potentially unforeseen liability to subcontractors. One court imposed liability for a coverage gap on a bro- ker that provided a proposal to a prospective client when the client requested "replacement coverage." 7 Logically, a cer- tifcate of insurance given to enrolled subcontractors could have similar requirements, notwithstanding the typical dis- claimers. Tere may be pressure on the broker to disclose prematurely or incompletely the terms of the insurance that would be germane to the subcontractors. For example, when the contractors are being enrolled in the wrap-up, the policy may not be bound in fnal form. An owner also may pressure a broker not to fully disclose retentions or other "proprietary" aspects of the wrap-up program. Tis pressure on the broker could lead to situations where the actual in- surance that a subcontractor gets is diferent from what the broker may have represented in the certifcate or program 4 Pacifc Rim Mech. Contractors Inc. v. Aon Risk Ins. Serv. W. Inc., 203 Cal. App. 4th 1278 (2012). 5 Cal. Civ. Code §2782.95(2014) for residential construction and Cal. Civ. Code §2782.96 (2014) for commercial construction and 2782.96 for commercial construction. 6 Pacifc Rim Mech. Contractors Inc. v. Aon Risk Ins. Serv. W. Inc., 203 Cal. App. 4th 1278 (4 Dist. 2012) (citing Fitzpatrick v. Hayes, 57 Cal. App. 4th 916, 927 (1997)). 7 Eddy v. Sharp, 199 Cal. App. 3d 858, 866 (Cal. App. 3d Dist. 1988).