If we assume that a subcontractor is part of a CCIP, and he reduces the cost of his proposal by the amount that he thinks the WC and GL insurance would cost him, how is his premium paid? He would have to maintain both WC and GL in order to work on other projects if they happen at the same time. Can you help clear this up?
– Art, United States of America
Art, great question! When administering an OCIP/CCIP, this is a question that we encounter frequently from contractors as they are often concerned that by working at a job-site where wrap-up participation is required they will end up paying more for their insurance; however, if the program is administered fairly then the resulting impact on the contractor should be net zero – no loss, no gain. Let me explain how this works:
Regarding his standard insurance policies of worker’s compensation and general liability, generally, the subcontractor will pay their premiums up front at time of renewal based on payroll and receipt estimates for that period. At the end of the policy period, the insurance carrier will audit the subcontractor and either return or request additional premium depending if the subcontractor went under or over their policy period estimates respectively.
Since the subcontractor in question is covered under a CCIP, he will get to remove any payroll and gross receipts associated with the project from his worker’s compensation and general liability policy year totals which will reduce his premium for that specific policy period. Therefore, it will be no more or no less than he would pay for insurance on a non-wrap-up project. The insurance carriers require proof that the subcontractor was covered under a wrap-up which a CCIP certificate will be sufficient and is provided by the wrap-up administrator.
Regarding your second question, you are correct that he would need to maintain both worker’s compensation and general liability policies at the same time, not only for his work on other projects, but also if the wrap-up terminates before his work is complete as both of his policies would be primary at all times providing him on-site coverage. Hope this explanation helps.