What Is An OCIP?

An Owner Controlled Insurance Program (OCIP) or “wrap-up program” is a coordinated insurance program for construction projects. An OCIP, unlike traditional construction insurance coverage, provides eligible participants of a construction project with general liability coverage under one policy. 

OCIP Key Features

  • Under one master policy, an OCIP covers commercial general liability and/or workers’ compensation insurance for all enrolled participants associated with a specified project.
  • Participants generally include all enrolled contractors and subcontractors of every tier involved with on-site project construction.
  • An OCIP does not cover vendors, suppliers or material dealers and may also exclude contractors who handle hazardous materials such as asbestos and hazardous waste.
  • Decision making control rests with the purchaser (who is often the project owner but can also be the general contractor).
  • Architects and engineers are often included as participants, but not for professional liability.
  • An OCIP covers the life of the project, plus an extended completed operations' period.

 

OCIP Advantages

  • Provides uniform coverage and limits of liability for all participants.
  • Eliminates owner concern that individual contractors or subcontractors may not be adequately covered.
  • Enables the owner to consolidate the insurance policies they will rely on in the future into one uniform, broad program.
  • Enables owners and contractors to mount a stronger, single-entity defense in construction defect lawsuits. Rather than many lawyers and many insurance carriers who may be manipulated into settling a lawsuit at inflated costs, an OCIP uses one insurance company and one legal firm to handle the claim.
  • Since there is no coverage for cross claims, there is less incentive for plaintiffs’ attorneys to create infighting amongst the participants.

 

Disadvantages of Traditional, Individual Coverage

  • The majority of subcontractor insurance policies exclude coverage for multi-family unit construction.
  • The owner does not have control over the coverage purchased by the general contractor and the potential impairment of insurance coverage limits on the general contractor’s insurance.
  • The owner has significant exposure to losses not covered under the general contractor’s insurance.
  • The owner could be subjected to complicated and expensive claims handling procedures.
  • Individual participant insurance policies covering the same risk become targeted in order to allocate blame and remedy a claim. Plaintiff attorneys often times exploit the weakness of multiple defendants “general and each sub, regardless of their involvement”.

 

Possible Disadvantages of an OCIP Program for Contractors and Subcontractors

  • Uncompensated administrative costs.
  • Inadequate limits of insurance.

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