Owner-controlled insurance programs, known as OCIPs, are becoming more common on large construction projects. For contractors unfamiliar with this structure, it can be a surprise at bid time.
Understanding OCIPs before signing a contract can prevent bid mistakes, coverage gaps, and compliance issues. Here are five key points for contractors to know.
Who Buys the Insurance?
In a standard construction project, each contractor and subcontractor has their own general liability and workers’ compensation policies. However, in an OCIP, the project owner purchases a single, consolidated insurance program that covers all enrolled parties on the project site.
This program typically includes general liability, workers’ compensation, and builder’s risk under one umbrella, tied to the project address. The idea is to reduce disputes between insurers in case of a claim and allow the owner to negotiate better rates through volume.
Bid Price and Coverage Credit
Contractors must adjust their bid prices to reflect the OCIP coverage credit. Since the owner provides job-site insurance, contractors are expected to deduct the cost of those coverages from their bids. Project documents usually include an OCIP Credit Worksheet to guide this deduction.
Failing to subtract this figure can result in an inflated bid compared to competitors. If the owner audits bids and finds an error, the bid may be disqualified or adjusted without the contractor’s input. The credit calculation is based on expected payroll and subcontracted labor, so working with an insurance broker is key for accuracy.
Enrollment Process and Timeline
Enrollment in an OCIP is mandatory and has a strict timeline. All parties, including general contractors, subcontractors, and sub-subcontractors, must complete a formal enrollment process before starting work. This typically involves submitting payroll estimates, certificates from their own policies, and signed participation agreements.
Late enrollment is a common compliance issue and can create liability exposure. Contractors should treat enrollment deadlines as seriously as permit inspections to ensure workers are covered from day one.
Coverage Limitations
OCIP coverage is geographically limited to the project site. It does not cover work performed off-site, such as traveling to pick up materials or working at a staging area not listed in the policy. This is particularly important for workers’ compensation claims.
If a worker is injured off-site, the contractor’s own workers’ comp policy will handle the claim, not the OCIP. Contractors should maintain their standalone policies at proper limits to avoid coverage gaps.
Claim Reporting Rules
Under an OCIP, claim reporting follows a different protocol set by the program administrator. Incidents, including near-misses, must typically be reported within 24 hours. Missing this window can lead to claim denial, even for legitimate injuries or losses.
Contractors should ensure their crews understand the incident reporting process and have the administrator’s contact information readily available at the job site. Some OCIPs may have a dedicated hotline for reporting.
Preparation is key when dealing with OCIPs. Contractors should understand the bid credit calculation, complete enrollment on time, maintain their own policies for off-site exposures, and know how to report claims. While OCIPs can simplify claims and reduce project-wide insurance costs, they require careful attention to detail.
For contractors, consulting with an insurance broker before bidding on an OCIP project is a prudent step to ensure they are fully prepared.
