Owner’s Interest vs. OCP vs. OCIP What is the Difference?
Construction project owners face an assortment of risks during construction on their property. Insurance products have been created to transfer these risks associated with owning a project under construction. Three common policies used to transfer these risks are an Owner’s Interest Policy, Owners and Contractors Protective (OCP) Liability Coverage, and an Owner Controlled Insurance Policy (OCIP). Learn if a wrap-up is right for your project – request a complimentary consultation here.
Owner’s Interest Policy
Owner’s Interest Liability Insurance provides general liability insurance (excess of the construction manager or general contractor’s policy) for vicarious liability the Owner can face during construction. Protection will drop down to pay covered losses that are uncollectible under the general contractor’s own policy because limits have been eroded or coverage otherwise cannot respond. The policy can be extended to provide completed operations coverage aligned with the statute of repose in the applicable jurisdiction. Also, excess policies can be purchased in order to increase the amount of Owners Interest coverage.
Today, Owner’s Interest policy pricing is on the rise, most likely due to the fact that “real” exposures exist because of unavailable or misrepresented contractor indemnification & recent case law (horizontal exhaustion). Due to this, carriers that have written these policies have paid unexpected claims.
Owners and Contractors Protective (OCP) Liability Coverage
Owners and contractors liability insurance is a limited type of insurance that applies only to a single insured party, the project owner that hires the contractor. This policy protects the owner from liability arising from the operations of an independent contractor. This coverage may also be called independent contractor insurance.
Under an OCP, the coverage promised to the named insured is very limited in its scope. The insuring agreement has two parts to consider. First, the named insured is covered only for its liability for the acts of the designated contractor, but only while the designated contractor is performing operations for the named insured at the location specified in the Declarations. Second, the named insured of an OCP is covered only for its liability arising out of its acts or omissions in the “general supervision” of the designated contractor at the location shown in the Declarations.
The OCP policy excludes coverage for bodily injury or property damage if such injury or damage takes place after the earlier of when the operation has been completed or put to its intended use by anyone other than another contractor working for the Designated Contractor on that project.
Premium for the OCP policy is typically based on the contract price between the named insured and the designated contractor (usually with a rate per $1,000 of the contract price).
Typically, there is no excess coverage purchased above an OCP, limiting the coverage to the OCP provided limits.
Owner Controlled Insurance Policy (OCIP)
Owner Controlled Insurance Programs, are insurance policies (also known as Wrap-Up Policies) taken out by the Owner of the project where construction is taking place. Instead of each individual contractor securing his/her own liability and/or worker’s comp insurance for the project, the Owner secures an OCIP that covers all construction and contractors on the project.
The premise is that the insurance will cost less to purchase it in “bulk” (covering all contractors under the same policy) than the cost of each contractor purchasing insurance on his/her own. The Owner pays for the insurance policy and the contractors are covered under that policy for that particular project, instead of each contractor being covered by insurance they have purchased themselves. The Owner then requires each contractor to identify the cost of the insurance in their bid. Once a dollar amount (insurance cost) has been determined, the Owner deducts that amount from the contractor’s bid and writes the contract net of these insurance costs.
Coverage under an OCIP can include both WC & GL. Typically, the General Liability coverage has limits that reinstate annually and have a dedicated completed operations tail. In addition, significant excess limits can be purchased with an OCIP.
An OCIP provides an owner with assurance that all contractors working on their project have sufficient coverage through the OCIP. The owner has the ultimate choice on the carrier, limits and how to handle claims.
Give us an opportunity to put together a proposal for your next project – request a complimentary consultation here.