Whether it’s hundreds of homes or thousands of apartment units, a large real estate development project can carry great rewards – and great risk.
Wrap-up programs, which bundle several lines of insurance, help property owners and general contractors mitigate that risk with a single policy that covers an entire project. Any contractor setting foot on your site would be covered. Moreover, having a single insurance policy to cover all damage or legal liability events promotes a smoother claims handling process, reducing the potential for dispute and offering a clear route to recovery.
Insurers typically offer two types of wrap-up insurance programs – a contractor-controlled insurance program (CCIP) or an owner-controlled insurance program (OCIP).
OCIPs (and CCIPs) offer several benefits, including potential cost savings, peace of mind and streamlined claims handling, among others. We’ve broken down the 10 most common questions we hear to help you decide whether an OCIP is right for your real estate project.
1. What is an OCIP?
An OCIP, as its name implies, is an insurance program that the owner controls. The project owner is the first named insured, with the general contractor, subcontractors and others named as additional insureds.
2. What’s the difference between an OCIP and a CCIP?
While the project owner controls an OCIP, the general contractor would sponsor and control a CCIP. They are the first named insured, with subcontractors and others named as additional insureds.
3. When should an OCIP be used?
Traditionally, OCIPs have been used for large-scale commercial projects that cost $50 million or more. Today, OCIPs are becoming more common for projects of all sizes. An insurance broker can help you determine whether an OCIP is right for your project.
4. What’s covered?
Generally, an OCIP will include commercial general liability insurance – covering a wide range of liability, including third-party injuries on a worksite as well as property damage – and workers’ compensation insurance. You may also consider customizing your OCIP by adding other coverages such as pollution liability insurance, builder’s risk insurance, professional liability insurance or umbrella insurance.
5. Who is covered?
The benefit of an OCIP is that it covers the owner, general contractor, subcontractors, and all others involved in the project.
OCIPs also give project owners more flexibility when selecting contractors, because a contractor’s ability to meet minimum insurance requirements of the project is removed from the equation. As a result, the total pool of contractors available to a project owner is expanded through an OCIP.
6. What’s not covered?
OCIPs typically don’t include coverage for commercial vehicle liability, commercial property, or inland marine insurance, which covers tools and machinery while they’re moved to and from a worksite. If you select an OCIP, contractors and subcontractors bear responsibility for this coverage. Surety bonds also are not included in OCIPs or CCIPs.
7. How much will an OCIP cost?
There are several factors that influence cost, and it’s best to talk with your insurance broker to gauge the needs of your specific project. Insurers will base pricing in part on how many different contracts are being signed as part of the project, the length of the project, and how many different phases of work the project involves.
But OCIPs carry significant potential for cost-savings because they allow project owners to avoid the costs associated with contractors who would otherwise pass their insurance costs onto the owner.
8. How does an OCIP impact a contractor’s regular insurance program?
Owners and contractors should have a solid understanding of their own liability insurance and what it covers, particularly if there are any OCIP exclusions or potential gaps. While the OCIP will provide the primary coverage for a project, it’s important to talk to your insurance broker to understand how your current insurance program will coordinate with an OCIP.
9. Will it require a lot of time and management to set up and operationalize an OCIP?
There will be time needed from the owner’s team to set up the OCIP – more so than if contractors and subcontractors bring their own insurance. However, there will be time saved over the lifetime of the project because the owner won’t need to verify contractors’ certificates of insurance or work through a claims process with more than one insurer.
10. How long does OCIP coverage last?
OCIPs cover the life of a project, plus an extended completed operations period.
Ready to talk about an OCIP for your next construction project? The Mahoney Group is one of the largest independent insurance and employee benefits brokerages in the U.S. To contact us, leave a message here or call 877-440-3304.
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This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.