There are optional ways to insure a construction project.  

• The traditional approach could create issues with multiple insurers, cross litigation, limit inadequacy, coverage gaps and overall higher cost to the owner. 
• Contractor Controlled Insurance Program (CCIP) approach has the general contractor place insurance coverage. The potential disadvantages to the owner include higher insurance/risk management program costs and the possible lack of transparency or control. 
• Owner Controlled Insurance Program (OCIP) allows the owner to realize savings of up to 1% to 4% of the project cost. Additionally, the owner is assured proper coverage, potential savings through volume discounts, broader insurance coverage, broad controls, higher dedicated limits of liability, the ability to contract with MBE/WBE contractors and increased control over public relations with the project. 

What Is an Owner Controlled Insurance Program?

An OCIP, commonly known as a wrap-up, creates a consolidated program that includes all insurance coverages and risk management services required for construction projects. When properly implemented, an OCIP can help reduce coverage gaps and premiums, allowing the owner increased control over program efficiency and costs.  

Under an OCIP, the owner works with the broker and provides insurance coverage, risk control and claims management for a construction project and third-party administration services. Often, contractors will include profit and overhead in the construction bid. When an OCIP is in place, each contractor must remove the insurance cost from their contract or bid. By removing that extra cost, the insurance coverage results in a more streamlined risk management program. 

Types of OCIPs 

There are traditional, single-site wrap-up insurance programs that typically cover workers’ compensation, general liability and excess liability coverages for one project site. This program provides workers’ compensation and general liability coverage, typically covered by one insurance carrier, with one or multiple carriers providing excess liability limits. This approach is more cost-efficient for larger projects (excess of $100M). 

Another effective approach for owners or developers is a General Liability OCIP. This approach provides general liability coverage for the owner sponsor and all contractors working on the project site and can be effectively executed for smaller projects ($10M) and can also be implemented for larger projects. 

In addition to the workers’ compensation, general liability and excess liability coverages provided by an OCIP, ancillary coverages can be added. These additional coverages can include builders’ risk, contractor’s pollution liability, site pollution liability and owners’ professional protective indemnity (OPPI) coverage.  

Including these coverages can benefit the owner in the following ways: 

• Overall savings due to the consolidated program 
• Assurance that proper coverage and limits are in place to help protect the owner’s interests 
• Helps protect the contractors to the extent possible 
• Volume discounts through economies of scale 
• Broader coverage, including products and completed operations, extended to the statute of repose 
• Control, claims and safety measures are consolidated and coordinated by the owner in conjunction with the broker and general contractor 
• Insurer stability – the owner directly controls the selection and quality of the insurance carrier 

OCIP in Action

An OCIP can benefit an owner in many scenarios, including post-build, as shown in the example below. 

A high-rise, hospitality coastal construction project was completed and operating for four years. After significant hurricane-force winds hit the property, it was discovered that the windows were leaking, causing considerable water damage on several floors. The window installer was no longer a viable entity.  

Because an OCIP covered the project, the damages were reported to the OCIP general liability and excess insurers under the extended products and completed operation coverage provision negotiated under the OCIP.  

In addition, it was discovered that other floors had window leakage for some time, causing the walls and flooring to develop mold, fungus and mildew. A dedicated Contractor Pollution Liability (CPL) policy, including extended products and completed operations, was also purchased as part of the OCIP. Since the general liability excluded pollutants, mold, fungus and mildew, coverage for prior damage was paid for by the CPL policy. 

Due to the extent of the damage to multiple floors and hotel rooms, the owner incurred a significant loss of business income. These losses were also covered by the general liability, excess liability and the CPL coverage negotiated as part of the OCIP.  

By having these coverages in place, the owner did not have to utilize the permanent property policy or depend on the liability coverage that an out-of-business window installation contractor may have required. 

How Brown & Brown Can Help

Brown & Brown has teams throughout the country to help provide controlled insurance program knowledge, including marketing, coverage terms, risk control and claims management.  

Our team works collaboratively with the owner, general contractor or wrap-up administrators to help negotiate optimal terms, and support overall project safety, claims management and administrative assistance.  

Property & Casualty Team