What is an OCIP and how can it help you with your construction project?
An Owner Controlled Insurance Program (OCIP) is an efficient, cost-effective way to provide insurance for owners and contractors for a specific building project. Construction jobs often have a lot of liability risks, including property damage or bodily injury to the public, construction errors, and collateral damage to nearby structures. Anything can happen and when it does multiple parties typically get sued, from the framing and plumbing sub-contractors to the general contractor to the project owner. Under an OCIP all parties to the project are covered under the same general liability and workers compensation policies. One of the biggest advantages to this arrangement is that since there is only one insurance policy for all parties, costs are kept down.
- There is less legal wrangling and litigation. Ordinarily it’s typical for the various parties, all with their own insurance policies and lawyers, to end up litigating separately and between themselves to determine liability. This is not only time consuming; it eats up limits for defense costs and reduces the amount of liability coverage available to pay any judgment.
- The overall cost of a single policy vs. multiple policies, all with different limits and sometimes even terms and conditions, representing numerous parties, is typically far less expensive.
- Claims handling is faster and more efficient because it can be handled by a single administrator.
- Coverage among all parties is uniform.
- Owners can rest assured that all subcontractors are covered; no need to name the owner and general contractor on all the sub-contractor policies or add them as additional insureds.
- In the event of a claim, legal defense is stronger, again because there is no need to complicate the defense with multiple sets of counsel.
The two main policies included in an OCIP are commercial general liability, to cover a wide range of liability risks including third-party property damage and injuries, and workers compensation. Depending on the nature of the project several additional coverages may also be included:
- Pollution Liability Insurance: In the course of completing the project there may be chemical spills, emissions of toxic gases and fumes, and other pollution related incidents. Pollution liability insurance would cover lawsuits and the legal costs brought about by any resulting illnesses and injuries as well as clean-up expenses.
- Builders Risk Insurance: This is basic property insurance on the structures under construction, covering typical property insurance perils such as fire, weather events, vandalism, and in some areas, flood and earthquake.
- Professional Liability Insurance: Sometimes the architects and engineers involved in a project also team up to purchase a single professional liability policy, for efficiency and premium savings.
- Umbrella Insurance: Depending on the scale of the project, the primary general liability limits may not be high enough to cover all potential risks. It may be necessary to purchase one or even more umbrella and excess liability policies.
What’s Not Covered?
The only types of insurance not included in an OCIP are automobiles and personal property, such as tools and equipment, owned by the contractors themselves. They would be expected to provide their own insurance for these exposures.
Is an OCIP Right for Your Next Project?
In the past, OCIP was typically reserved for very large projects. (One of the first uses of OCIP was the construction of the Bay Area Rapid Transit [BART] in the San Francisco Bay Area.) But it’s now used for many much smaller and even residential building projects. If you decide to purchase an OCIP, there are a couple of things to be aware of. First, sub-contractors should notify their workers compensation carrier of their participation in the OCIP. There’s no need to pay double for workers compensation. Also, once the project wraps up, it’s a good idea to buy some extended liability coverage, so that there is still coverage even if errors were made during construction that only came to light a year or so afterwards. If you have a project coming up involving several contractors and subcontractors, please contacts us to see if an OCIP would be a good fit.