For owners of large construction projects, deciding between an Owner Controlled Insurance Program (OCIP) and a Contractor Controlled Insurance Program (CCIP) is a critical choice with significant insurance and risk implications. Here are some key considerations to help make an informed decision:
Key Considerations
1. Cost Control
With an OCIP, the owner manages the insurance program, enabling better cost control and potential cost reductions. The owner, along with their wrap administration team, can negotiate insurance rates directly with insurers, avoiding contractor markups. In contrast, a CCIP places the contractor in charge of the insurance program, which may lead to less transparency and control over costs.
2. Coverage Consistency
An OCIP ensures uniform insurance coverage across all contractors and subcontractors involved in the project. The owner sets and controls the coverage forms, reducing potential gaps or overlaps in policies. With a CCIP, the owner relinquishes control to the contractor, increasing the risk of coverage inconsistencies.
3. Claims Management
Under an OCIP, the owner has direct control over the claims management process, allowing for better coordination and faster resolution of claims. As the first named insured, the owner can address issues promptly, minimizing delays and disputes. In a CCIP, claims management is handled by the contractor, which may lead to coordination challenges and slower claim resolutions.
4. Risk Transfer
An OCIP allows the owner to transfer risks associated with construction-related losses to the insurance program, while off-site claims remain with contractors and their respective carriers. This provides better protection against liabilities. In a CCIP, risk is partially transferred to the contractor, which could leave the owner exposed to additional liabilities.
5. Safety and Risk Mitigation
OCIPs offer owners greater control over safety and risk mitigation practices. Owners can establish consistent safety standards and requirements for all contractors. In a CCIP, safety measures are controlled by the contractor, potentially leading to inconsistencies in risk management practices.
6. Flexibility with General Contractors
An OCIP allows the owner to replace the general contractor if financial issues arise or if the contractor goes out of business. Conversely, if a CCIP is in place and the contractor defaults, replacing the insurance mid-term can be challenging and costly, leaving the owner in a difficult position.
Conclusion
Ultimately, the choice between an OCIP and a CCIP comes down to two key factors: cost and control. The decision should be based on project size, complexity, and the level of oversight the owner wants to maintain over insurance and risk management. Consulting with the insurance professionals at Swarts, Manning & Associates, along with legal experts, can help determine the most suitable insurance program for your construction project.
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