Large construction projects are daunting even for the most experienced contractors. No matter how much you focus on safety and loss control, accidents can—and will—happen. One of your biggest concerns is making sure that everyone working on the project is properly insured, and after an accident happens is not the time to find out that they are not.
A contractor controlled insurance program (CCIP) consolidates insurance coverage for all parties on a job site into one blanket policy controlled by the general contractor. It eliminates the need for individual contractors and subcontractors to obtain coverage on their own for the covered project, and helps the general contractor know that sufficient coverage is in place for anything that goes wrong.
Contractors see CCIP insurance as a way to increase their competitiveness and minimize a project’s insurance costs, which ultimately increases profitability.
A CCIP provides commercial general liability (CGL) insurance, excess liability insurance, and/or workers’ compensation insurance for all enrolled participants that are associated with a specified construction project, under one master policy.
While owner controlled insurance programs (OCIPs) are common in the construction industry, CCIPs are becoming increasingly popular. Under an OCIP, the owner of a project sponsors the controlled insurance program. Under a CCIP, a general contractor controls the insurance program. The sponsor is in charge of securing and paying for coverage, as well as administering the program for all of the enrolled participants.
Participants typically include all contractors and subcontractors involved with onsite construction. Architects and engineers may also be covered under a CCIP, but these entities must purchase their own professional liability coverage. CCIP insurance generally will not cover vendors, suppliers or material dealers. It may also exclude contractors who handle hazardous materials.
Contractor controlled insurance programs can be purchased for individual projects or on a rolling basis, where covered projects are aggregated over a specified period.
CCIP insurance costs less than if every contractor on the job purchases the same coverage individually. Contractors and subcontractors can no longer pass along their insurance costs for the job to the general contractor. Instead, the general contractor will reduce the contract (payment) amount for each contractor or subcontractor to reflect the cost of the CCIP. All parties must agree to and accept the conditions of the CCIP contract in order to participate.
A CCIP offers numerous benefits for the general contractor, as well as for the participating contractors and subcontractors.
Claims processing is streamlined with one broad policy and one insurance carrier. The CCIP will respond to claims that arise out of construction operations, as well as completed operations for a specified period. When a contractor controlled insurance program is in place, all claims and losses are handled by the purchaser (the general contractor) through the CCIP insurance carrier.
A CCIP helps contractors avoid dealing with multiple lawyers, defendants, and insurance carriers with competing interests. Claims will be handled with one insurance company and one law firm, with little incentive for infighting among the parties.
Most CCIPs provide general liability coverage, excess (umbrella) liability coverage, and workers’ compensation coverage.
CCIPs typically only include general liability, excess liability and workers’ compensation, but additional coverage can be added. Talk with your agent or broker if you want to add pollution liability insurance, builder’s risk insurance, and even professional liability insurance to your CCIP program.
CCIP insurance is not for every contractor. In order for a CCIP to be appropriate, the contractor must be able to assume significant risk. These programs often have high deductibles, from $500,000 to $1 million per claim.
Contractor controlled insurance programs for smaller construction projects are not unheard of, but in general, projects with values between $30 and $40 million or more are better-suited for a wrap-up policy. The general contractor who initiates a CCIP must have a track record of focusing on safety, a thriving business, and high risk tolerance in order to achieve the cost savings that are possible by insuring a project with a CCIP.
The guidance of an experienced and knowledgeable insurance agent or broker is necessary for any general contractor who wishes to put a CCIP in place for a major construction project. CCIPs are complex arrangements that must be handled with diligence and care by all parties. A Trusted Choice® agent or broker near you can help you learn more about contractor controlled insurance programs, and can help you find the coverage and service you need for your project. Contact a local agent in your neighborhood today.