Owner-controlled insurance programs (OCIPs), also known as “wrap-ups,” are insurance policies taken out by a property owner during a construction or renovation project. Wrap-up policies offer numerous benefits to the insured, including cost savings, better coverage, more control, and more efficient resolution when incidents occur.
An OCIP provides a project owner with General Liability and Workers’ Compensation insurance for the entire project, ensuring that all parties involved—including the owner, general contractor, and all subcontractors—have sufficient liability coverage. Unlike the traditional construction insurance model, where each contractor or subcontractor purchases their own insurance policies to cover their liability, an OCIP covers the entire project and all the people working on it.
Project owners often purchase Builders’ Risk, Pollution, and Professional insurance in conjunction with an OCIP for additional coverage and protection. OCIPs are often used for federal or municipal infrastructure projects, transportation construction, construction on office buildings, hotels, residential buildings, and more.
OCIPs Differ from Traditional Insurance Coverage
With traditional insurance plans:
- General contractors and subcontractors each purchase their own liability policies.
- Each subcontractor must name the general contractor and developer as an “additional insured” on their policy.
- Several different insurance companies cover the project.
- After an incident, the various insurance companies may be tied up in court determining who’s responsible for covering the damages.
- Because multiple insurance companies include the property owner as the named insured, the property owner must pay a higher amount for coverage.
- All contractors and subcontractors on the job are covered by the same insurance company under the same blanket policy.
- The policyholder pays lower rates because all parties are “wrapped up” in the same policy, issued by one insurer and, therefore, litigation costs are reduced if a claim is filed.
- Claims are handled by a single administrator, so resolution is faster and easier than traditional coverage.
- An owner has more flexibility when choosing contractors. Prospective contractors don’t have to meet insurance requirements because the owner’s OCIP covers everyone working on the project. This often benefits small and/or disadvantaged contractors and their businesses.
OCIPs typically include:
- Commercial General Liability: This covers multiple liability risks, including third-party injuries and property damage caused by workers on the project.
- Workers’ Compensation: Workers’ Compensation covers lost wages and the cost of treatment associated with work-related injuries and illnesses. When included in an OCIP, it covers all enrolled contractors and subcontractors on the project.
Property owners can add additional coverage enhancements to their OCIP, including:
- Pollution Liability: This covers the costs associated with chemical spills, the emission of toxic gasses and fumes, etc.
- Builders’ Risk: This policy protects against damages to the building due to accidental fires or severe weather events during the construction project.
- Professional Liability: This covers losses/damages caused by workers’ mistakes.
- Umbrella: The liability coverage limits offered by commercial insurance policies are not always high enough to cover all potential risks. Property owners can supplement their OCIP with umbrella coverage to ensure adequate liability coverage.
What OCIPs Do Not Cover
OCIPs do not cover the following, which are the responsibility of the project’s contractors and subcontractors:
- Commercial Auto Liability: Vehicles, including specialty construction vehicles, require coverage under a commercial auto insurance policy.
- Commercial Contractors Equipment Inland Marine: This covers loss or damage to commercial property (such as tools and machinery) used on-site during construction.
- Vendors or Suppliers: This might include a materials distributor.
OCIPs simplify insurance coverage for a construction or renovation project, as all workers are “wrapped up” in one policy, with one insurance provider. This is cost-effective for the project owner, giving them comprehensive coverage at a more competitive rate. Additionally, when/if an incident occurs, an OCIP offers more effective management of losses, with faster and easier resolution because only one insurance provider is involved. Wrap-ups also offer greater peace of mind for the project owner, who won’t need to worry about the contractors’ and subcontractors’ various insurance policies and their differing coverage and limits.
Except for rolling OCIPs, which cover multiple projects, an OCIP will apply specifically to one project and one or more job sites associated with that project. Typically, this includes the project’s construction site, on-site temporary structures, and storage locations. Other locations, including the route between a job site and its associated storage location, are not covered under the OCIP.
OCIPs were originally intended to provide cost savings and administrative efficiencies for very large construction projects, but they’ve recently become more popular and widely used in construction and renovation projects of all sizes.
Jencap’s team of specialized brokers provide coverage and counsel around a variety of construction-related projects. We help companies get the coverage they need through our extensive network. Contact us to discuss your needs and we’ll provide extraordinary capabilities, knowledge, experience, and service.