OWNER CONTROLLED INSURANCE PROGRAMS

By Jack C. Juan, Esq.

As Southern Nevada continues to grow, so too will the size of construction projects. If a construction project involves many prime contractors and countless subcontractors, then there will most likely be an Owner Controlled Insurance Program (“OCIP”). In short, an OCIP is a single insurance program that covers all contractors for the construction project. The property owner purchases insurance through a single consolidated program that covers multiple insureds. An OCIP can thus insure prime contractors and subcontractors through a single insurance program. Because OCIPs provide the owner with cost-saving opportunities, OCIPs will be increasingly common in Southern Nevada. When encountering an OCIP, every contractor should ask five questions.

1. Is the contractor in fact named as an insured under the OCIP?

If the contractor is not a named insured, then the contractor is not covered. Contractors should not automatically assume that they are covered. Instead, contractors should get documentary proof of coverage that the contractor is either named as a primary or additional insured under the OCIP.

2. Does the contractor have proof of payment for the contractor's share of the OCIP premium?

Contractors should keep documentary proof of its payment (and continuing payments) for its share of the OCIP cost. If a dispute arises later which is covered by the OCIP, the last thing the Contractor wants to fight about is whether it paid its share of the OCIP premium.

3. Does the OCIP cover the contractor's work, labor and materials for the project?

OCIPs are usually site specific, providing coverage for particular job sites, and time specific, providing coverage for a fixed duration. Contractors should confirm that the OCIP covers the locations and time periods for the work, labor and materials provided for the project.

4. Who pays the OCIP deductible and how much?

The OCIP deductible is never an issue until a claim or suit is filed. However, the OCIP deductible can be as high as $250,000 and the contractor could be liable for that amount. The contractor should thus know the amount of the OCIP deductible and who is responsible to pay that deductible, before it becomes an issue.

5. What does the OCIP exclude?

Contractors should know what part of the provided work, labor and materials is excluded or not covered by the OCIP. For example, OCIPs generally exclude work performed away from the job site. If the majority of a contractor's work is performed away from the job site, even though it is solely for the benefit of the project, such work, labor and materials might not be covered by the OCIP. It is thus important for the contractor to find out what part, if any, of its work, labor and materials are excluded by the OCIP.

Every contractor should ask these five questions when dealing with an OCIP. The answers to these OCIP questions will greatly affect the contractor if a dispute or lawsuit ever arises. If you have any questions regarding OCIPs or construction matters, then please call Marquis & Aurbach.