Construction Project Insurance Protection: A Guide to OCIPs and CCIPs

One of the ways to manage the risk for a project is by the use of a Wrap-Up which is also known as a Controlled Insurance Program or CIP.  A CIP is comprehensive insurance program that is designed to cover all contractors and subcontractors involved in a construction project under a single insurance program.   The two methods of managing insurance for projects are an OCIP (Owner-Controlled Insurance Program) and a CCIP (Contractor-Controlled Insurance Program.  While these programs are similar in structure, they differ in who controls, purchases and manages the coverage.

What Is an OCIP vs a CCIP?

An OCIP is a consolidated insurance program purchased by the project owner or developer.  A CCIP is similar to an OCIP but is purchased and managed by the general contractor instead of the owner.  Either an OCIP or CCIP typically covers the owner, general contractor, and all enrolled subcontractors under one policy for the project’s duration. In general, CIPs are designed for large-scale construction projects and commonly include general and excess liability coverage. Workers’ compensation is also included in some cases, especially for more substantial projects. 

This has several benefits for a CIP sponsor, including satisfying lender requirements, removing the need to solely rely on Additional Insured status of subcontractors to transfer risk, providing coverage compliance for all parties involved in the project, and a single unified approach to claims handling (avoids cross litigation and “finger pointing”).

The OCIP or CCIP sponsor is responsible for paying premiums, handling deductible payments, managing claims, and ensuring all parties are enrolled (i.e. hiring a CIP Administrator). In return, subcontractors reduce their own insurance costs, as they are covered by the CIP, which can lead to the overall project to having a more streamlined insurance procurement process and often times lead to insurance cost savings.

The deciding factor between obtaining an OCIP or CCIP often comes down to who wants to control the insurance program: the owner/developer or the general contractor and the associated costs of doing so.

Why Use a CIP over a Traditional Insurance Approach?

The advantages of using a consolidated insurance program like a CIP over the traditional approach, whereby each party purchases their own insurance, are significant. These benefits can be summarized using what is often referred to as the “Four C’s”:

1. Certainty of Coverage: One of the primary advantages of a CIP is the ability to provide a consistent and often broader level of coverage for all enrolled contractors involved in the project. This eliminates coverage gaps that might occur if each contractor and subcontractor were to buy their own insurance.  Another coverage advantage of a CIP is that they often come with extended completed operations coverage, such as a 10-year or statute of repose products/completed operations extension endorsement.  With one set of policies, everyone involved—from owners to contractors and subcontractors—knows the extent of their coverage, insurance requirements are no longer an obstacle.
2. Control of Risk Management: CIPs offer a unified approach to risk management, safety, and loss handling. While each subcontractor will follow their safety guidelines and risk protocols, an overarching centralized risk management program is implemented to ensure consistent safety standards are maintained across the project.
3. Claims Management: Traditional insurance methods often lead to finger-pointing in the event of a claim, with various subcontractors potentially deflecting responsibility. Claims are streamlined under a CIP because all parties are insured under the same set of policies with a single claims adjuster.
4. Cost Avoidance: Cost savings are among the most compelling reasons to choose a consolidated insurance program. Subcontractors are required to remove their insurance costs from their bids, effectively crediting the party that purchased the CIP. Throughout a project, these savings can sometimes offset the program’s initial cost, resulting in significant cost avoidance (savings). 

CIP Opportunity?

Here are general guidelines for exploring sponsoring a CIP:

• Wood Frame or Habitational Projects: Projects with hard construction costs of $25 million or more are ideal candidates for a general liability CIP.
• Commercial or Industrial Projects: A general liability program makes sense for projects with hard costs of $75 million or more.
• Condominium Projects: CIPs may be appropriate for projects with hard costs as low as $5 million due to prevalent residential “condo conversion” exclusions in the General Liability policies of General Contractors and Subcontractors.  A CIP can be underwritten to cover the for-sale residential component of these projects.
• General Liability and Workers’ Compensation Combined Programs: These programs generally require hard costs of $200 million or more to be cost-effective.

OCIPs and CCIPs provide comprehensive, consolidated insurance solutions for large construction projects, offering key advantages such as certainty of coverage, improved risk management, streamlined claims handling, and cost avoidance. Whether an owner or general contractor controls the program often depends on individual project requirements and preferences. For projects meeting the appropriate size thresholds, these programs can be more effective and economical than traditional insurance methods, making them an increasingly popular choice in today’s construction landscape.

About the Team

Founded in 1999, McGriff’s Construction Practice has placed hundreds of construction projects of all types from coast to coast. We work with clients from preconstruction, through the life of the project, and applicable Statute of Repose. We’re highly experienced in Owner’s Interest, Owner/GC Project Specific policies, Owner’s Professional Protective Indemnity (OPPI), Contractor’s Pollution Liability (CPL), Site Pollution Liability, Builders Risk, and other construction-related insurance coverages.