OCIP/CCIP

Controlled Insurance Programs (CIPs) are a method of insuring the risks associated with a construction project of the owner, contractor, and subcontractors of every tier. While the most successful programs inevitably result from a joint effort of all project participants, there are practical considerations that should govern the owner’s choice between an Owner Controlled Insurance Program (OCIP) or Contractor Controlled Insurance Program (CCIP). The following side-by-side comparison will help.

Program Design

OCIP

  • OCIPs go out to Market – Multiple Carriers to consider
  • Owner sponsors the Program – First Named Insured controls who is enrolled in the program
  • Owner/Broker negotiates coverage terms and limits
  • Owner hires Broker to Market/Administer the program
  • Owner/Broker coordinates risk transfer between all OCIP documents

CCIP

  • Most likely a pre-established Rolling Program – Carrier already selected
  • Contractor sponsors the program – First Named Insured controls who is enrolled in the program
  • Contractor negotiates coverage terms and limits
  • Contractor responsible for all administration
  • Contractor responsible for consistent contractual risk transfer between all documents

Financial

OCIP

  • Owner manages losses within the deductible up to an aggregate loss value
  • Owner Retains savings within the project loss fund
  • Large deductible program – Generally pass on some portion of deductible to the contractor
  • Actual savings/losses are not known until all claims are settled – this can be up to 10 years after project close
  • Upfront payment or collateral may be required for program max loss fund

CCIP

  • Contractor retains financial risk on the project
  • Smaller to No Deductible – Pass down to trades
  • Owner can close books at the end of the project
  • Premium includes all costs (fixed and variable)
  • Owner has no risk on claims

Administration

OCIP

  • Owner / Broker decides on coverage, insurers, retentions, deductibles
  • Owner / Broker develops all insurance and contractual documentation
  • Owner hires Administrator – Generally through the Broker
  • Administrator works directly with the Contractors

CCIP

  • Contractor responsibility
  • Documentation already developed (CCIP Manual, Subcontracts, etc.)
  • Coordinated team in place (Contractor, Broker, Carrier, administrator)
  • Risk of program success lies with Contractor and Carriers

Claims Management

OCIP

  • Claims handled by a combination of Owner’s Broker and Carrier
  • Owner is directly involved in claims process
  • OCIP responsible for defense counsel qualification and selection
  • OCIP responsibilities may extend up to 5 or 10 years after project ends

CCIP

  • Generally contractor will have an In-house claims team working with carrier
  • Owner has no risk on claims
  • Pre-qualified counsel specializing in construction litigation
  • Most contractors have comprehensive Return-to-Work programs and Crisis Management protocols
  • Contractor responsible for 5 to 10 year tail period – Owner can close their books.

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