If you are an Asset Owner, General Contractor or Construction Manager, then you are no stranger to the world of insurance. However, when procuring an insurance policy or planning a project, do you know what program is best for you? Do you know whether a wrap-up model or traditional model is more favorable? If choosing a wrap-up policy, is an owner-controlled insurance program (OCIP) preferable to a contractor-controlled insurance program (CCIP)?

All project stakeholders need to be well educated in the world of insurance if they want to protect both themselves and those around them.

This article provides an in-depth exploration of OCIP insurance, the advantages/disadvantages for various stakeholders, a comparison to CCIP insurance, and more.

Slash Owner Controlled Insurance Program (OCIP)Costs with myComply

Key Takeaways

  • An owner-controlled insurance program (OCIP) is a type of wrap-up insurance policy that is managed and held by an Asset Owner as opposed to any of the acting contractors.
  • OCIP policies offer Owners the benefits of reduced costs, higher dedicated limits, quicker enrolment, precise coverage, simplified claims handling, and broader contractor access.
  • However, OCIP insurance is not perfect. There is an increased administrative burden for Owners and some contractors may aim to take advantage of the no-fault coverage they are receiving.
  • OCIP policies offer coverage that spans a variety of otherwise independent insurance coverages, such as: general liability, workers’ compensation, excess liability, employers’ liability, professional liability, subcontractor default insurance, completed operations coverage, and more.
  • Owner-controlled insurance programs are more work for Asset Owners when compared to contractor-controlled insurance programs. However, Asset Owners unlock greater project control and may be eligible for greater coverage than what is available through a CCIP.
  • myComply is the leading solution for Asset Owners and General Contractors that are looking to secure substantial insurance reductions by implementing proactive and preventative safety measures on their construction sites. Book a demo with a product expert today to find out more!

What is OCIP?

An owner-controlled insurance program (OCIP) is a type of wrap-up insurance program that is held by the project or asset owner. OCIP insurance is designed to offer Asset Owners the ability to insure an entire project through one insurance provider, as opposed to depending on General Contractors and Subcontractors to secure their own insurance.

Learn More: Traditional vs. Wrap-Up Insurance: What You Need to Know

OCIP insurance programs also combine various types of insurance coverages into one package policy, such as:

  • General liability
  • Workers’ compensation
  • Excess liability
  • Builder’s risk
  • Professional liability
  • Subcontractor default insurance
  • Completed operations coverage
  • And more

We will explore each of these coverages in further detail below.

Advantages and Disadvantages of OCIP Insurance

When considering whether an OCIP is right for you, it is important to weigh both the benefits to you (the Owner) as well as the benefits for the General Contractors and Subcontractors that will be conducting work on the project.

Advantages of OCIP Insurance

For the Owner For Contractors
  • Reduced costs. Being that contractors typically bill Asset Owners for their insurance anyways, there are typically major savings in the bulk purchase of an OCIP.
  • Higher dedicated limits. OCIP’s carry much higher limits than what might be available to individual contractors, which protects Owners from the potential damages and claims resulting from wrongdoings.
  • Quicker enrolment. Rather than waiting on every contractor to setup their own policies, Owners can enroll in an OCIP and increase their speed-to-production dramatically.
  • Precise coverage. When contractors secure their own coverage, it can be difficult to track and ensure that each stakeholder has the appropriate coverage for their scope-of-work. With an OCIP policy, Owners can work with an insurance agent to secure exactly the coverage they need.
  • Simplified claims handling. Under an OCIP, who is at fault under a claim is much less relevant, meaning reduced litigation and more efficient claims handling.
  • Broader contractor access. Where some contractors might not be eligible for the insurance needed to conduct work on a mega project, OCIP insurance policies can open those doors, giving you a greater breadth of contractors to choose from.
  • Greater coverage. As mentioned, OCIP policies provide better coverage for every contractor involved in the project.
  • Safer projects. OCIP jobs demand certain safety procedures and loss prevention tactics that make it safer to work for contractors.
  • Simplified claims. OCIP’s, if well managed, make it easy for contractors to file claims and receive coverage. Contractors do not have to worry about being at fault either.
  • Claims are not counted against contractors. Unlike traditional insurance models where every contractor must procure their own coverage, and might enter insurance disputes regarding claims, OCIP’s are generally dispute-free.

Disadvantages of OCIP Insurance

For the Owner For Contractors
  • Additional administrative burden. With an OCIP policy, the Owner becomes responsible for managing and maintaining the program through HR, legal, admin, and more. The Owner will also be responsible for constantly ensuring that the proper safety controls and loss prevention measures are in-place on the project.
  • Risk of false claims. Being that wrap-up policies are no-fault; some contractors may try to take advantage of you (the policy holder) by claiming damages that may not have occurred on the project.
  • Less incentive for contractors to control costs. When claims do not affect contractor policies, there is less reason to be cautious and actively avoid activities that can lead to damage or loss on the project.
  • OCIP limits may not be high enough. If multiple claims from multiple sources occur and damages are high, it is possible that OCIP limits may not be enough to cover all losses.
  • Market fluctuations. There is always a risk that changes in market conditions could increase the cost of the OCIP policy and eat into the benefits derived from the program.
  • Reduced coverage. Though some contractors may gain access to more complex projects and earn better coverage under OCIP insurance, others may be left with coverage gaps or lower limits than they are used to.
  • More complex bidding. OCIP projects generally require contractors to bid with and without insurance, adding additional strain to the project bidding process.
  • Additional administrative burden. OCIP policies often come with additional reporting requirements that extend down to all contractors on the project, creating extra work for administrators.
  • Inadequate length of coverage. In construction, long after the completion of a project. Most OCIP policies will not protect contractors beyond the scope of their project contributions.
  • Risk of damage to reputation. When losses occur, contractors must rely on Owner-assigned program administrators to report these instances and secure coverage. If this is not done in a timely manner, it is often the contractor’s reputation that can be damaged with the insurance provider.

Coverage Under OCIP Construction Insurance

As mentioned above, OCIP insurance generally covers four primary insurance buckets, those being: commercial general liability, workers’ compensation, excess liability, builders’ risk, professional liability, subcontractor default insurance, and completed operations coverage. Let’s explore each of these coverages in more detail.

1. General Liability

General liability insurance or commercial general liability (CGL) is the insurance that protects the Owner’s interests under an OCIP policy. The primary provisions outlined under most general liability insurances through an OCIP program are contractual liability, personal injury liability, and property damage. Additional risk-limiting provisions may be included, but these are the primary benefits under standard general liability.

Contractors who enroll for coverage under OCIP insurance will likely have some form of general liability insurance with their existing provider. Depending on the nature of the OCIP insurance procured by the Asset Owner, the contractor might be able to reduce their existing coverage and still be fully covered for the duration of the project. However, some overlap in coverage is not necessarily a bad thing either.

2. Workers’ Compensation

Workers’ compensation insurance provides compensation to any worker that is injured while working on a construction project. Workers’ compensation covers any resulting medical bills and compensates workers for any required time away from work. Workers’ compensation is also required in most states.

Workers’ compensation is included in every OCIP insurance policy. When it is added, insurers tend to get involved in the project sponsors vetting process for contractors while also mandating certain loss prevention measures for the duration of the project. Workers’ compensation can be a source of insurance reductions for many OCIP policies if the Asset Owner can demonstrate a safety focus and a thorough contractor vetting process, resulting in lower risk scores and lower premiums.

3. Excess Liability

Excess liability is exactly as it sounds, an extension on coverage provided through general liability insurance. Having a little extra liability coverage is never a bad idea in construction, so consider excess liability necessary when crafting your OCIP policy.

4. Builders’ Risk

Builders risk insurance protects construction projects from any damages resulting from weather, vandalism, and theft. Securing builders risk coverage under the umbrella of your OCIP is necessary for all major construction projects.

5. Professional Liability

Professional liability insurance is an optional coverage that protects Asset Owners from any losses that result from the work of engineers, architects, and other design professionals. If your project is large and complex, then you may want to evaluate this coverage. That being said, most licensed design professionals will be secured under their own coverage and may not want (or need) coverage under your owner-controlled insurance program.

6. Subcontractor Default Insurance

Subcontractor default insurance provides Asset Owners with coverage in the event of a contractor that fails to complete their work on the project. This insurance covers all unforeseen expenses related to the unfulfilled work.

7. Completed Operations Coverage

Completed operations coverage is a simple add-on that extends the coverage of the owner-controlled insurance policy beyond the completion date and ideally through the statute of limitations.

CCIP vs. OCIP Insurance

An insurance type that is often confused with OCIP insurance is a contractor-controlled insurance program (CCIP). The primary difference between CCIP and OCIP insurance is the policy holder. Under a CCIP policy, the General Contractor typically holds the policy and insures all their Subcontractors under their wrap-up program, whereas the Asset Owner will hold the policy under an OCIP policy.

Here is a short video exploring some of the key differences between CCIP and OCIP insurance:

A full breakdown of CCIP vs OCIP insurance:

  OCIP CCIP
Cost Owner controlled insurance programs can result in greater insurance expenditure as top contractors can often secure discounts based on past performance. CCIPs are a more cost-effective approach when the General Contractor has a proven record of safe site operations and limited record of loss or damages. However, the opposite can also be true.
Speed-to-Policy OCIP policies can often be a little slower to production as most Asset Owners don’t have rolling policies established with their insurance providers. This means that a new OCIP needs to be negotiated for each project. General Contractors that specialize in certain project types might be able set up a rolling CCIP with their insurance provider, where minimal administrative work is required to start a new policy.
Policy Management Under an OCIP, the policy is managed by assigned program administrators that work for the Asset Owner. Under a CCIP, the policy is managed by administrators that work for the General Contractor.
Insureds Under an OCIP, the Asset Owner is the first named insured and the General Contractor, Subcontractors, and any other parties on the project are named insureds. Under a CCIP, The General Contractor is the first name insured, and the Subcontractors, plus any other parties are named insureds. Sometimes, the project owner is an additional insured, or they share named insured responsibilities with the General Contractor.
Coverage Limits OCIP policies are typically project-specific, meaning that all coverages are exclusive to that project, unlike CCIPs which are sometimes shared across multiple projects. Sometimes, CCIP coverage extends across multiple projects being worked by the contractor. This can result in lower limits for project stakeholders if there are numerous incidents on another project.
Oversight An OCIP allows the owner to take an active role in negotiating policy limits, understanding policy details, claims negotiation procedures, safety/loss prevention programs, and more. The contractor negotiates their CCIP, and the Asset Owner may not be entirely aware of the nuances of the insurance policy. Contractors should always provide detailed insurance documents to the Asset Owner and consider bringing them on as a named insured.

Conclusion

If you are an Asset Owner, an OCIP insurance policy can be a great way to reduce your risk exposure and simplify production on your projects. That being said, it’s not always easy to secure OCIP coverage from and insurance provider. Insurance providers take various factors into account when assessing your policy eligibility and determining rates for each coverage within your OCIP.

One of the best ways to improve your eligibility for OCIP insurance coverage while also reducing your perceived insurance risk is by leveraging construction technologies as component of your loss prevention program.

myComply is the leading access control solution for Asset Owners. By leveraging on-site hardware, such as smart readers and turnstiles, myComply can improve site security by tracking every worker that enters/exits a project site, while also denying access to anyone that is not certified or permitted to be on-site. This prevents loss from vandalism/theft and ensures that every worker has the necessary qualifications to be conducting safe work on the project.

If you are interested in finding out more, then book a demo with a product expert today!

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