Over the last 10 years the advent of an Owner Controlled Insurance Program (OCIP) has gained popularity for many reasons. Theoretically, buying one Program for the benefit of all parties to the Project provides cost efficiency and ease of claims administration. There is reduced “finger pointing” among [contractor] insurers and “control” of the site generally improves.
OCIP’s also have a downside, the Contractors “enrolled” often give up their coverage in deference to the CIP. Having a broad “wrap up exclusion” on the contractor’s policy is not uncommon (Endorsement CG 21 54 01 96). There is often little or very superficial review of the CIP and a genuine trust that the CIP will continue through the State Period of Repose.
This brings up some very disturbing issues that need to be surfaced by the Contractor:
| 1. | Am I giving up my coverage (by virtue of an exclusion to my policy) if I enroll in the OCIP or CCIP? |
| 2. | Is the coverage being afforded in the CIP at least as broad as what the Contractor has? Who is doing the “due diligence” on the CIP coverage? |
| 3. | What assurances do I have that the coverage will, in fact, stay in effect through the Period of Repose? Is the full “period” afforded or a shorter period of time, say 3-5 years? Are the limits sufficient for all contractors on the Project? |
| 4. | How is call back coverage afforded? Will your exclusion prohibit coverage for call backs (warranty work) after substantial completion? Does the CIP cover that? You’ll be surprised how many times there is a gap where NO coverage is afforded. |
| 5. | Can the CIP be “prematurely” terminated by the Sponsor? What recourse do you have in such a situation? Would you even know (most times notification is haphazard)? |
There is an interesting article that recently appeared in Construction Executive that deals with some of the issues noted above (Const Exec OCIP’s April 2010.pdf). We strongly suggest that anyone that is considering a CIP proceed with caution and review the terms of coverage carefully to make sure you are covered. Please feel free to contact me to discuss ways to have coverage afforded even when things take an unexpected turn.
If you need more information on any of the topics covered in this blog, or need help with any risk related issues please contact Albert Sica, Managing Principal, at 732.395.4251 or [email protected].
