Construction Insurance Program Control: What an Owner should consider

It is imperative to ensure the construction construction contract is negotiated with detailed insurance requirements, including the timing and responsibility for insurance placement and the responsibility of premium and deductible payments.

For mid to large construction projects, an Owner Controlled Program  or Contractor Controlled Program on a single project basis can be procured by either the owner (OCIP) or contractor (CCIP).  Coverage is extended to the owner, construction, project manager and consultants and all contractors and subcontractors to the project. In either instance, the party placing the insurance has control over the coverage, insurance carrier, limits, cost of insurance and most importantly, the management of any project claims. The policies (which can include wrap-up liability, builders risk, pollution liability and in some cases professional liability insurance) are in place for the duration of the project or beyond the project’s completion, depending on the coverage. If neither an OCIP or CCIP are purchased and there are project related third party liability claims, the owner then relies on each contractor’s own general liability policy.  As the contractor’s liability policy  covers all of their operations, the contractor’s limit of liability can be eroded by claims from other projects.  In addition the owner must rely on the contractors to renew the policies annually and the owner has no control over the coverage, choice of the Insurer, or in the management of claims.

Each insurance carrier has their own information requirements through the OCIP or CCIP application process but generally, the following list of items will be required to secure construction insurance.  And with more information available to the insurer to understand and underwrite the risk, the insurer is better able to offer competitive terms and pricing.

It is important to give brokers/insurers ample time with which to provide competitive proposals.  Brokers typically need 45 to 60 working days prior to project start (i.e. demolition, excavation and/or shoring) to obtain the best terms.

INTECH can provide sound advice and assistance on construction insurance placements and ensure all the contracts have the proper insurance requirements and indemnifications to protect the parties appropriately.