When it comes to insurance needs and risk management for development projects, you want to make sure that you have all of your bases covered. Dangers and hazards are everywhere at construction sites, and it’s nearly impossible to ensure everyone’s safety 100 percent of the time.
Not only could the contractors and subcontractors working at the site suffer injuries, but someone not involved may also end up injured depending on the circumstances. In addition, the potential for inadvertent damage to your property or a neighboring property also exists. How are you going to cover everyone?
Enter the OCIP
Perhaps your development needs an OCIP, which stands for owner controlled insurance program. This general liability insurance exists to cover everyone involved in the project from you, as the property owner, down to the subcontractors. Even if someone else on the project causes damage or suffers an injury, it will eventually lead to you, so making sure that there is enough insurance to go around may prove useful.
Seasoned developers may be wondering why something that used to exist only for projects worth at least $50 million ends up on smaller projects. These days, it saves everyone time and money since only one policy exists instead of several — one policy for one project. The intent of an OCIP is to simplify the process.
Negotiating and paying for the OCIP
You and the general contractor work out the details of the policy, which the general contractor then purchases. The general contractor hires subcontractors at lower rates since they won’t need to carry their own liability insurance for the project.
The project manager is the point of contact for claims and is responsible for the payment of deductibles. Whether the subcontractor that caused the damaged in the claim pays any of the deductible is a point of negotiation when the subcontractor is hired and should be outlined in the resulting contract.
Coverage and the OCIP
At the very least, the OCIP contains workers’ compensation insurance and commercial general liability insurance, but it may also contain one or more of the following depending on the needs of the parties involved and the project itself:
- Builders risk insurance
- Umbrella insurance
- Professional liability insurance
- Pollution liability insurance
An OCIP may not contain the following types of insurance:
- Commercial property insurance
- Commercial vehicle liability insurance
- Inland marine insurance
To learn more about the advantages and disadvantages of an OCIP, along with whether it makes the most sense for your project, you may want to sit down with an attorney with experience in risk management and insurance. It would also be beneficial to have an advocate on your side when it comes time to negotiate the terms of your project’s insurance policy or policies to make sure you receive the best possible terms.