What Is OCIP in Construction?

March 7, 2024

OCIP, or Owner Controlled Insurance Program, is a way for project sponsors to reduce construction costs and administrative overhead by purchasing one master insurance policy covering all tiers of contractors on the project. This article explains what an ocip is, how it differs from other types of consolidated insurance programs, and some of the pros and cons of using them on construction projects.

Many of the same issues that are encountered with traditional contractor insurance policies exist when implementing an ocip. For example, some ocip administrators apply pre-established insurance cost calculations in the form of loss charges that are added to a contractor’s bid and incorporated into the final contract price. This practice can result in contractors rewarding themselves for labor overruns and penalizing those who experience a negative financial outcome on the project. In addition, some ocip administrators require detailed documentation from contractors detailing their insurance costs including policy rates and rationale for funding deductible losses. Often, these requirements erode the available insurance funds and can create budgetary issues for contractors.

Another issue with ocips is that, unless they contain completed operations coverage, the insurer may not protect participants from damages that occur after the project is complete. This could expose the project sponsor to lawsuits and damages that may not be covered by the ocip’s limits of liability.

Finally, ocips do not typically cover third parties such as transportation providers or construction material vendors. This is because these parties are not vetted as thoroughly as on-site contractors and may not have a good track record for safety and execution of their work.

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