Understanding Insurance Wraps, Insurance OCIP's, Insurance CCIPS
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So you've enrolled in an OCIP! Also known as an Owner Controlled Insurance Program, or a 'Wrap policy' or a CCIP, a Contractors Controlled Insurance Program. Basically, what's happening is the developer, the owner or the prime contractor, has bought the insurance for the project.
So they're the first named insured. As you sign the contracts to enroll in the wrap, ocip or ccip you become a second named insured.
The first named insured is responsible for a few things. The first named insured is responsible to make the premium payments, there are responsible to pay any deductibles, and they're responsible for any audits.
Now, what's really cool about being a second named insurance is you have all the same rights as the first named insured. However, you are not responsible for the premium payments, you're not responsible for the audits and you're not responsible for the deductibles. “Well, then, what is everybody talking about?" At the insurance policy level.
But remember you have to sign a contract to enroll in the wrap program. That contract changes things for you a bit. By contract, when you signed up, you've agreed, that there's a deductible and let’s say that is a $25,000 per occurrence deductible. Keep in mind this is just an example you have to look at your contract for your exact information. This means that when there is an occurrence, there is a deductible of $25,000.
Now, in the agreement you've had between you and the owner of the Wrap, the first named insured, as a subcontractor, you're going to agree to be responsible for your share of the deductible. Very important, “your share”, up to the full amount of $25,000. It is again important to realize this is just an example. A contract can be very different than this example so make sure you understand your agreement or have your attorney help you to understand it! As an example: Let's just say, you're a framing contractor and you put the frame up, the house is built, and the whole thing falls to the ground because you did something wrong in your framing. It's all your fault, 100% your fault, you did the whole thing. You're out the $25,000 because it was all your fault, right?
Another example more common is there's a lawsuit brought which happens especially in housing developments, eight, nine years from now and they name 10 subcontractors; the roofer, the plumber, the sheet rock guys, the trim guys, the foundation guys, and everybody in between. Everyone gets named in this. And then it all goes and they figure out, "Okay, you're 10% at fault, you're 20%. Oh, this person's 30% of the problem was yours." And everyone gets assigned a percentage of the blame. That same percentage is your percentage of the deductible.
So it's not each of you pay up to the entire $25,000, it's each of you pay your share of whatever the deductible is.
Of course there is a second deductible that very few people talk about, but it came up the other day. Builder's risk. Here's an example. While the house is being built, let's say you're a plumber and you're sweating in the pipe and set the framing on fire. Well, that's a 100% you, there's a builder's risk deductible.
The owner of the project bought builder's risk on the property, they got a deductible, let's say, that's $10,000. Well, since it was just you caused it, you're going to be out the $10,000. So that all sounds bad somewhat, except for a couple of things. Remember this, on the owner-controlled OCIPs or CCIPs or Wrap policies, these are for the period of time to build plus the 10 years, which is the period of repose they call it in the state of California. And that means that's one policy for all this time.
If you added up what you're paying, you'd have to add up 10 years of your policies to get to that period of time that we're talking about. Secondly, the coverage is better. Things like subsidence, earth movement. Try to buy that on your own today. Thirdly, if there are 10 of you involved, there's 10 different deductibles. Each of you are going to have your own deductibles. You have them right now.
Usually they're between a $1,000, $2500 or $5,000 for subcontractors, smaller, if you guys are just doing some residential housing, those are your normal deductibles. Well, that would be 10 times whatever that is, so there's the deductible anyway. So it's not like you're getting a deductible you didn't have.
By the way, this is the least expensive way to buy the insurance. Oh, and one more thing, these aren't million dollar policies. You know how you as a sub-contractor usually have a million-dollar policy, maybe a little umbrella. These Wrap policies, these are much, much bigger policies. They come in varying sizes but they're getting enough insurance to cover the sub division. So, you're safe again that way. Lastly when there is a claim they don’t hit your loss runs, so the cost of your insurance stays low for your other work. Give me a call, 209-634-2929, Grant Davis I am happy to talk with you about your work, your contracts and your insurance needs. Thanks!