A.CRE

Owner Controlled Insurance Program (OCIP)

OCIP (Owner Controlled Insurance Program) and CCIP (Contractor Controlled Insurance Program) are broad and all-encompassing insurance policies that usually cover, at a minimum, general liability insurance, worker’s compensation, and excess liability insurance for all contractors and subcontractors on a construction project. An OCIP is sponsored and held by the owner, in contrast to a CCIP, which is sponsored and held by the contractor. The sponsor holds and is directly responsible for securing the appropriate and required insurance coverage.

Putting ‘Owner Controlled Insurance Program (OCIP)’ in Context

Case Overview

Apex Development Group, a real estate developer specializing in industrial redevelopment projects, is redeveloping the Eagle Industrial Center, a 450,000-square-foot warehouse facility in Louisville, KY. The property, previously used as a distribution center, is undergoing substantial upgrades to modernize its infrastructure, including the addition of automated racking systems, solar panels, and improved dock facilities. The redevelopment is a $25 million project expected to be completed within 18 months.

OCIP in Action

To streamline insurance coverage and reduce overall costs, Apex Development Group implemented an Owner Controlled Insurance Program (OCIP) for the project. This decision ensures that all contractors and subcontractors working on the redevelopment are covered under a single, comprehensive insurance policy. The OCIP policy includes the following key coverages:

  • General liability insurance
  • Worker’s compensation
  • Excess liability insurance

Benefits of OCIP

By implementing an OCIP, Apex Development Group achieved several benefits:

  • Cost savings: Bundling insurance under one policy eliminated the need for contractors and subcontractors to procure individual coverages, leading to reduced insurance premiums.
  • Coverage consistency: All contractors and subcontractors are covered under the same terms, minimizing potential gaps in coverage or conflicts between policies.
  • Administrative efficiency: Apex Development Group centralized risk management, simplifying the claims process and reducing administrative burden.

OCIP Considerations

Implementing an OCIP also required careful planning and management. Apex Development Group worked closely with an insurance broker to ensure the policy met local regulatory requirements and adequately covered the project’s scope and risk. Additionally, contractors were required to enroll in the program and verify their compliance with safety and reporting protocols.

Calculation Example

For a project like the Eagle Industrial Center, the cost of an OCIP policy is often calculated as a percentage of total construction costs. Assume the OCIP premium rate is 2% of the $25 million redevelopment budget:

  • OCIP Premium: $25,000,000 × 0.02 = $500,000

Apex Development Group compared this premium to the aggregate cost of contractors and subcontractors procuring individual policies, which was estimated at $750,000. By using an OCIP, the developer saved $250,000, while ensuring consistent and comprehensive coverage.

Conclusion

The use of an OCIP allowed Apex Development Group to manage risks effectively and create cost efficiencies during the Eagle Industrial Center redevelopment. This approach is particularly valuable for large-scale construction or redevelopment projects where multiple contractors and subcontractors are involved.

Frequently Asked Questions about Owner Controlled Insurance Program (OCIP)

An OCIP is a comprehensive insurance policy sponsored and held by the property owner that covers all contractors and subcontractors on a construction project. It typically includes general liability, worker’s compensation, and excess liability insurance.

The main difference is who sponsors the insurance. An OCIP is sponsored by the owner, while a CCIP (Contractor Controlled Insurance Program) is sponsored by the contractor. In both cases, a single policy provides coverage for all site contractors and subcontractors.

Key benefits of an OCIP include:

Cost savings from bundling insurance into one policy

Coverage consistency across all contractors

Administrative efficiency by centralizing risk management

Simplified claims handling and improved project oversight

Apex Development Group used an OCIP for their $25 million redevelopment of Eagle Industrial Center in Louisville, KY. The policy covered general liability, worker’s compensation, and excess liability insurance for all involved contractors and subcontractors, ensuring streamlined coverage and cost savings.

The OCIP policy cost $500,000 (2% of the $25M construction budget). This was $250,000 less than the estimated $750,000 cost if each contractor purchased individual insurance, resulting in significant savings for Apex Development Group.

Developers must ensure the OCIP meets all regulatory requirements and adequately covers the project’s risks. They must also work with brokers and enforce enrollment and safety compliance among contractors to ensure full program participation.

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