Owner Controlled Insurance Programs or OCIPs (often referred to as “Wrap-Ups”) are insurance policies taken out by a property owner where construction is taking place. OCIP plans provide blanket coverage for the contractors and subcontractors working on the project to ensure that all eligible parties have sufficient liability coverage. Rather than each individual contractor and subcontractor providing their own General Liability, Workers Compensation and Excess Liability, the project owner would provide one specific insurance policy that covers the entire project for these areas – – a wrap-up of everyone’s exposure on the project into one bundled policy.
How is OCIP insurance different from “traditional” insurance coverage?
With “traditional” 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.
- Since all parties are covered by the same insurer, litigation costs are reduced if a claim is filed. This means lower coverage rates for the policy holder.
- Claims are handled by a single administrator, so they are resolved faster and easier than with traditional coverage.
What does OCIP cover?
OCIP policies generally include Commercial General Liability and Workers’ Compensation:
- Commercial General Liability Insurance: This covers multiple liability risks, including third-party injuries and property damage caused by workers on the project.
- Workers’ Compensation Insurance: This 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.
Additional coverage options are available for property owners to add to their OCIP policy:
- Pollution Liability Insurance: This covers the costs associated with chemical spills, the emission of toxic gases and fumes, etc.
- Builders Risk Insurance: This covers damages to the building during the construction phase caused by accidental fires or severe weather events.
- Professional Liability Insurance: This covers losses/damages caused by workers’ mistakes.
- Umbrella Insurance: The liability coverage limits offered by commercial insurance policies are not always high enough to cover all potential risks. Property owners can supplement OCIP insurance with umbrella coverage to ensure adequate liability coverage.
What does OCIP not cover?
The following are NOT covered by OCIPs and are the responsibility of the project’s contractors and subcontractors:
- Commercial Vehicle Liability Insurance: Vehicles, including specialty construction vehicles, require coverage under a commercial vehicle insurance policy.
- Commercial Contractors Equipment Inland Marine Insurance: This covers loss or damage to commercial property (such as tools and machinery) used on-site.
- Vendors or Suppliers: This might include a materials distributor.
OCIPs reduce the construction cost of a project and give the project owner the risk protection they need, which may not otherwise be provided by the individual contractors.