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Defining the Owner-Controlled Insurance Program

This article is part of a series discussing Owner-Controlled Insurance Programs (OCIPs).

Defining an OCIP

As stated at the outset, an OCIP is a wrap-up under which a project owner provides various insurance coverages to contractors and subcontractors. OCIPs can potentially reduce an owner’s project costs by approximately 1-2%, compared to traditional, fragmented insurance programs.

Who & What Is Included

An OCIP can be site-specific or it can be for multiple jobsites. Most OCIPs are multi-year programs with a fixed duration. For large construction projects, the most common duration is two to five years. And, the OCIP normally applies to all contractors and subcontractors performing work at the project jobsite. This jobsite is defined to include the construction site, all on-site fabrication shops, and associated material storage and laydown yards.

The insurance coverages most commonly included in an OCIP are workers’ compensation (workers’ comp), employers liability, commercial general liability (CGL), and excess/umbrella liability. In addition (but not always), an OCIP can include builder’s risk, professional liability for design professionals, and environmental liability insurance coverages. In the last few years, design liability and environmental liability insurance have been bundled by some insurance carriers to provide professional and pollution coverage. In addition, some insurers have introduced subcontractor default liability policies into the OCIP mix as an alternative to surety bonds.

Who & What Is Excluded

If the majority of a contractor’s work is performed away from the project site, the contractor may be excluded from the OCIP. The reason is simple: Limited jobsite exposure in the contractor’s contract means limited exposure to jobsite injuries/claims. An OCIP should also exclude contractors with a contract amount below a certain threshold. (Depending on the total construction costs, $25,000-$50,000 in contract value is a good rule of thumb.)

Commercial auto liability coverage is usually excluded due to the difficulty of controlling / verifying losses. If included, such coverage could negatively impact OCIP savings.

Next: How an OCIP Manages Risk

About the Author: David L. Grenieris President of C-Risk, Inc., a national risk management consulting firm providing risk management strategies and solutions to construction-industry clients. He specializes in construction, contract management, and wrap-up insurance programs.