Owner Controlled Insurance Programs (OCIPs) and Contractor Controlled Insurance Programs (CCIPs) can help reinforce the importance of safety on your project’s job site by incentivizing safety as a means to cut costs and increase profits.
In part one of this two-part series, our Knoxville construction attorneys introduced wrap-ups, OCIPs and CCIPs, and explained how increasing your project’s focus on safety can save you money. In part two, we will explore all of the ways OCIPs and CCIPs encourage safe practices in construction.
Wrap-ups allow the project owner or general contractor to cut costs when purchasing insurance. They are purchased through economies of scale on a loss-sensitive basis (e.g., a large deductible) which permits the potential for savings when you minimize claims. The sponsor of the wrap-up pays for all losses below the deductible and receives a roughly 35 percent reduction in the fixed costs.
Non-CIP projects require a fixed-cost component for insurance and a loss-funding component, which substantially increases rates. The benefits of controlling costs include reduced insurance costs, improved access for smaller contractors and subcontractors to work on projects that once barred them with steep insurance costs, flexible insurance limits, and expedited proof of insurance from a single source.
Terms and Conditions
Wrap-ups offer blanket coverage to an entire project so sponsors can rest easy that all workers are protected without any exploitable gaps in coverage. Sponsors who purchase in bulk can negotiate for greater coverage than individual contractors or subcontractors have access to. Controlling the terms and conditions ensures that your project is insured according to your needs.
The Claims Process
Uniform coverage from a single insurance carrier helps expedite and simplify the claims process. There are many reasons why consistent coverage benefits the sponsor and the project, including:
- Streamlining the claims process
- Reducing delay times
- Minimizing litigation costs by only dealing with one insurance carrier
- Influencing claims and encouraging their handling by assuming the first $250,000 or more through a large deductible program that considers every workers’ compensation and general liability claim.
Making Safety the #1 Priority
Successful wrap-ups make safety the focal point of a project to cut costs. OCIPs and CCIPs have a tendency to reduce the number of on-site accidents because they encourage safety, timely delivery, and quality production. Safe production leads to quality production, and when you factor in the cost-saving benefits of CIPs, the case for their use becomes exceedingly clear. Publishing a project safety manual to establish uniform, standardized safety requirements for all of your contractors and subcontractors is one of the keys to CIP safety. This manual can be included as part of the contract document to help reinforce accountability among contractors and subcontractors.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.