Get the Ebook Now. Everything you need to know about Contractors Insurance
An owner controlled insurance program is a centralized insurance program usually procured for either specific construction projects or multiple construction contracts. The reason why general contractors and builders need to get this OCIP is because it will be able to cover all the project interests of the contractors and sub-contractors that will participate in the project. The general contractor will be able to maintain risk control and take up the management and administration of the insurance policy. The owner controlled insurance program is different from a contractor-arranged insurance program because under the latter, each individual contractor has to get his own insurance policy on different terms and conditions, limits and insurance coverage. To get a qoute on an owner controlled insurance program click here.
The Main Features of Owner Controlled Insurance Program
The main features of OCIP are: it is usually under one master policy that is it covers commercial general liability workers compensation insurance for all the participants associated with a specific project. Another feature is that the participants under this insurance policy are usually the general contractors and other sub-contractors like builders, carpenters, plumbers and roofers. Another feature is that it does not cover suppliers, material dealers, vendors and contractors who handle hazardous materials like asbestos and waste. One key feature of an OCIP is that the decision making rests with the person that purchased the insurance policy who is usually the owner of the project or the general contractor.
What you Need to Know
When talking about the coverage of owner controlled insurance program when dealing with general contractors or construction contracts, there are certain things you need to know.
- The first type of coverage is Contractors All Risks (CAR): this type covers the physical damage to the permanent and temporary contract works and materials.
- The second type of coverage is Third Party Legal Liability (TPL): this type is a combination of CAR and TPL which covers third party property damage and personal injuries for which the general contractors are held responsible.
- The third type of coverage is Excess Third Party Legal Liability (XSTPL): this type of coverage provides a higher limit of indemnity where required.
- The last type of coverage is Project Wrap-up Employees’ Compensation (PWEC): this type of coverage as the name implies is procured by the employees. All workers under the project irrespective of who employed them should make sure they get this type of insurance policy.
There are obviously advantages and disadvantages of owner controlled insurance program. Let us look at the advantages first.
Advantages of an Owner Controlled Insurance Program
- It gives the owner of the policy a detailed knowledge of the project insurance cover.
- It allows for continuity and uniformity of coverage.
- It does not allow coverage gaps between multiple contracts and sub-contracts therefore gives the owner peace of mind.
- It allows for improved control of the quality of the insurance underwriters.
- Enables an improved risk and control management at the interface between the general contractor and other sub-contractors.
- It allows for consistent claims management with simplified administration of insurance.
- It allows general contractors to have full control over the cost of insurance and handle insurance risks separately.
Disadvantages of a Owner Controlled Insurance Program
- This type of coverage does not encourage multi-family construction projects.
- The owner does not have control over the general contractor’s insurance policy.
- The owner will solely be liable for losses not covered under the general contractor’s insurance.
- The owner might be subjected to complicated and expensive claims when handling procedures.
- Blames are usually allocated to individual participant insurance policies covering the same risk. For this reason, plaintiff attorneys usually exploit the weakness of several defendants who are usually general and sub-contractors irrespective of their involvement.
- In regards to general contractors and builders, they usually get uncompensated administrative costs.
- They also usually get inadequate limits of insurance. They pay increased administrative costs to establish or manage the program.
- Most times there is less risk management incentive for general contractors as their insurance claims usually have no impact on their annual premiums.
- If a contractor has an annual cover, it might overlap and carve outs can be made by the contractor.
Should I Get an Owner Controlled Insurance Program?
There are things you need to put into consideration before deciding whether or not to adopt the owner controlled insurance program when dealing with construction contracts.
If the project is to be undertaken by a private sector or public corporation, you should consider risk management, balance sheet protection, corporate governance and revenue complications for delayed operations.
Also you should only decide whether to buy this policy after you must have gone through the systematic risk management process. Any insurance company that is able to offer you risk management, and specify the risks that need specific insurance should be the one you go for.
When dealing with large and multiple contracts, you should consider OCIP especially when the owner is engaged in retail chain and other retail stores.
If you are a specialist broker working with large volume construction insurers of insurance placement activities, you need to get a wide scope of this coverage because it is cheaper than getting individual contracts by each contractor.
There are certain set of people that this OCIP is applicable to like:
- Infrastructure project owners in Europe, Middle East, North America and Asia procure this type of insurance policy. It is necessary for contractors to arrange for full project coverage alongside the owner-controlled insurance program.
- This type of insurance policy is also applicable in a very significant proportion of major world projects. It can also be applicable to private sector participation projects along with other non-governmental projects.
- It is also applicable to major retrofit programme which involves power stations, oil and gas sectors, refineries and petrochemical plants.
- Major casino projects can also apply the use of owner controlled insurance program as there is no predominant preference for a particular type of insurance program.
When relating this type of insurance policy to government agencies and corporations, there is no specific insurance program required so you can adopt the owner controlled insurance program.
If you need help with getting an owner controlled insurance policy, fill out a qoute form and someone will contact you withint 24 hours.