COMPREHENSIVE INSURANCE COVERAGE FOR ALL
Purchasing power equals better coverage, which means a more comprehensive insurance policy that covers every aspect of the job site. This translates to no gaps in coverage or expired subcontractor policies.
Available insurance coverage under the OCIP/CCIP typically includes:
- Workers Compensation and Employers Liability (Injury to Employees)
- General Liability/Completed Operations (Injury to Third Parties or Third Party Property Damage)
- Excess/Umbrella Liability (Provides high limits of insurance) not additional coverage but additional limits
When appropriate the following can be included:
- Builders Risk (1st Party Property Damage to property that will become a permanent part of the project)
- Professional Liability (Covers liability arising out of architect, design, and engineering errors)
- Environmental Liability (Covers liability arising out of environmental impacts)
- Contractor Default Insurance (Covers default of subcontractor, a replacement for surety bonds)
HIGHER LIMITS OF COVERAGE
An OCIP sponsor has greater insurance purchasing power than individual contractors and subcontractors, making them better equipped to procure a quality, efficient, and cost effective insurance package for all parties engaged at the project site. Greater purchasing leverage means better coverage for the entire project and higher limits.
Why are higher limits so important?
Imagine you are the owner of a large project that experiences a heavy loss. After your subcontractors’ insurance limits have been reached, there are remaining damages. These costs fall upon you, the owner, to cover. With a wrap-up, your potential financial risk is managed more effectively. A wrap-up protects you and your project because an OCIP/CCIP offers very high limits of insurance, all 100% dedicated to the construction activities at your project site (s).
One insurance carrier for your project means quicker claim turnaround and less time spent on paperwork and cross litigation before deciding who pays for your claim. Cross litigation is a major downfall of the traditional approach to large projects. It is expensive and creates hostility in the workplace by pitting individual’s and their independent carriers against one another, and consumes an inordinate amount of time with paperwork for everyone. The only parties that stand to benefit financially from cross litigation are the insurance company that eventually wins a suit and the attorneys involved for each side. With an OCIP/CCIP your insurance provider is concerned with your claim, not trying to make money off your injury, because they are paid up front and serve everyone on the site.
For example, let’s say I get hurt on the job. I report this to my insurance carrier, but it’s actually the plumber’s fault that I got hurt. My insurance carrier then sues his insurance carrier. They, in turn, sue the insurance carrier of the guy that hired the plumber, who decides that it is the fault of the prime contractor, then the general contractor, then the owner. After all this, someone blames it on the guy who got hurt in the first place, me, and we’re back to square one. In a Wrap Up the insurance carrier services your claim and gets you back to work.
ECONOMIES OF SCALE
A large project or a combination of midsized projects will benefit financially depending on several factors, such as: location, type of construction, the construction manager, the subcontractor environment, the insurance market, and how the OCIP is purchased in the insurance market. By underwriting a large project, your insurance company spreads the risk across the large number of project employees. Two cost factors influence your financial savings, Fixed and Variable:
Fixed Costs: These costs are built into the project. Traditionally, a subcontractor includes insurance costs in his bid, then the general contractor includes their insurance, and the owner adds contingency coverage on top of that creating three tiers of insurance, paid at higher, individual rates. In a wrap-up your project saves by lowering the fixed cost portion. Due to economies of scale you can purchase a single plan for the entire project for less than the traditional cost of insurance. With a single insurance carrier you purchase your insurance in bulk, so you have more participants paying less for greater coverage.
Variable Costs: The variable portion is dependent on the amount of risk the sponsor assumes and the number of claims made over all. The higher risk might mean the sponsor covers a $250,000 deductible per claim for the overall project. This provides incentive for safety first and a strong claims management program. The safer the site, the more money the sponsor saves.
By negotiating savings to lower your Fixed costs at the outset, and accepting higher risk variables to reward low-incident sites, your project saves a great deal of expense.