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March 21, 2018
Over the past 15-20 years, wrap up insurance policies, otherwise known as owner/general contractors controlled insurance policies (OCIP/CCIP), have become much more commonplace for insuring construction projects. Providing general liability and excess coverage, the use of these policies was driven mostly by the need to insure multi-family residential projects due to the proliferation of residential exclusions on standard general liability policies. The use of OCIP/CCIPs however, has spread to larger commercial and public projects due to some significant advantages they offer when compared to the standard method of insuring projects, which entails that every contractor provides their own insurance.
One of the most compelling reasons for OCIP/CCIP proliferation is the security received by the owner or general contractors from knowing that the coverage forms will be high quality and consistent for all contractors of all trades performing work at the project site. Should contractors who enroll in wraps rest easy trusting that OCIP/CCIPs, as broadly worded insurance policies, will take the place of their own carefully crafted insurance programs? Unfortunately, that is not always the case. Therefore, any party enrolling into an OCIP/CCIP must take great care. Careful examination and review of these policies is warranted. There are still many areas where OCIP/CCIPs may leave a contractor lacking.
OCIP/CCIPs must have adequate limits and be in effect for the period of construction through the applicable statute of limitations. Therefore, it’s important that there be sufficient limits to handle all losses during this time period. Some important questions to ask would include:
OCIP/CCIP policies, like your standard general liability policy, have many exclusions that limit or remove coverage and, in some cases, can be more restrictive than the contractor’s annual practice policy. Contractors enrolling in an OCIP/CCIP should make sure that these exclusions are acceptable for their operations. Some common examples to watch for are:
There are additional areas of concern that fall outside the standard exclusions and often get overlooked.
It is always important to remember that OCIP/CCIPs are general liability policies that can be negotiated to provide broad, project-specific coverage for all those enrolled. The examples above are certainly not exhaustive and it’s best to spend time to understand what kind of coverage you are receiving. Asking for the OCIP/CCIP handbook and a list of all forms is the best way to begin your review. Individual endorsements can then later be requested if necessary, so that the details of the coverage can be explored. An experienced construction risk management team can help aid in this process to ensure your programs are adequate for the level of coverage your organization needs.
The views and opinions expressed within are those of the author(s) and do not necessarily reflect the official policy or position of Parker, Smith & Feek. While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it.