Controlled Insurance Programs (also known as CIPs or Wrap-up insurance) are growing in popularity because they allow owners or general contractors to control and protect their business and/or project under one policy in which every subcontractor enrolls. The advantage: a uniform safety program for a safer construction site and less finger-pointing among subcontractors if an accident occurs.
There are two types of CIPs: Owner Controlled (OCIP) and Contractor Controlled (CCIP), the difference being who is purchasing and administering the policy, called the program’s sponsor. The policy covers all subcontractors, who back out their insurance costs in their bids, reducing their price in exchange for the coverage provided. It is a relatively simple concept but can be cumbersome to execute.
What is usually included in CIP coverage?
The lines of coverage that are typically enrolled are:
- Builders’ Risk
- Contractor Default Insurance
- General Liability
- Pollution Liability
- Professional Liability
- Umbrella/Excess Liability
- Workers’ Compensation
What is typically excluded?
The CIP sponsor has discretion over whether to include certain subcontractors in the policy. Subcontractors can be excluded for several reasons, including:
- Performing higher-risk work, such as demolition or blasting
- Providing services that do not include direct on-site labor
- Working on-site, but not for a significant amount of time
- The value of the contract is too small
- In some states, certain trades are not eligible
How does this insurance fill a coverage gap?
There can be hundreds of contractors and subcontractors performing individual labor on a large project. Relying on their individual policies creates a significant level of risk, due to anything from a subcontractor’s policy having inadequate limits, to lapses in coverage. CIPs are designed to eliminate such gaps.
As a subcontractor, CIP projects are excluded from your standard insurance policy. When enrolling in a CIP, you should request a copy of the policy as a named insured.
When might claims arise?
Claims can arise on a CIP-managed project just as easily as on projects where subcontractors are self-insured. CIPs are designed to eliminate finger pointing between contractors because everyone on the jobsite has the same policy. The difference is that you will be at the mercy of the program sponsor and the policy in which you are enrolled. You may find it difficult not having control, or a voice in the claim process, or even have a copy of the policy if you don’t specifically request it.
What are the implications of not having coverage?
If for some reason, a subcontractor is excluded from the project CIP and one of their workers is injured on the job, the subcontractor’s Worker’s Compensation policy would respond to the claim. If the injured worker decides to sue the CIP sponsor for an unsafe workplace, then the contract between the CIP sponsor and the subcontractor would determine who would cover the incident.
How does a policy work and how long should you carry coverage?
Subcontractors should require coverage for as long as the project is in process. Do not forget to note the extent of the policy’s Completed Operations coverage.
How do I get the right amount of coverage?
The CIP will have predetermined limits which generally provide more than sufficient coverage for the project.
A subcontractor working under a CIP can determine their costs by using the estimated payroll for the job, contract/bid amount, and providing their current insurance policy rates. Keep in mind, the CIP policy costs will not factor into or add any further cost to your individual coverage policies.
What happens if the situation changes (Your company grows, for example?)
As your company takes on more commercial or public sector work, it is likely you will be involved in projects requiring a CIP.