Owner Controlled Insurance Programmes
The vast majority of construction projects throughout the world are now insured on an Owner Controlled "wrap up" basis (covering all project parties), particularly where the Project involves a number of contractors/sub-contractors.
It is the Owner who tends to suffer most if the insurance programme does not protect the project assets, liabilities and potential revenues. It is natural therefore that the Owner should wish to control the insurance arrangements.
An Owner Controlled Insurance Policy (OCIP) is a combined CAR/TPL (and often DSU) insurance policy that is purchased by the Owner (or Sponsor), and covers all parties for insured perils and the Owner (should they buy DSU) for the delay in the delivery of the project. It is increasingly common for Owners to control the insurance via an OCIP, where the project is large, complex or commercially sensitive.
It is important to note that the OCIP does not release the contractor from their normal contractual responsibilities or duties. In most circumstances they would insure their own plant and equipment carry their own Professional Indemnity (PI), as well as insuring their own motor vehicles and people.
Common advantages to the OCIP approach can include:
- Cost-effectiveness. An OCIP will ensure you have the level of cover you want for the life of the project - so you know how your money has been spent and can minimise the cost of any claims. A well-constructed OCIP should avoid duplication of cover or cost
- Compliance. You know the how the policy complies with any obligations your have with banks
- Control. This is crucial. You manage any claims plus any potential threats to your reputation