Harry Griffith

In the construction contract, there will be contractual language relating to the procurement of insurance and the operation of the Owner Controlled Insurance Program. In the context of property damage claims for damage occurring to the project itself, those contracts may articulate defenses available to the enrolled contractors. Two of the most important would be the waiver of subrogation clause and the identification of builders risk insurance.|

In one unpublished decision in California, arising out of claimed construction deficiencies at a hotel/casino in Las Vegas, Nevada, the court found that the general contractor was not entitled to indemnity under the Owner Controlled Insurance Program for amounts incurred to make repairs at the request of the owner.|

The first issue that the carrier and the policyholders must address is whether the loss resulted in "covered damage.” However, with an Owner Controlled Insurance Program, the analysis with regard to the particular insured is critical. There are numerous exclusions in the commercial general liability coverage form that apply differently, depending on whether the named insured enrolled contractor is an owner, general contractor, or subcontractor.|

An Owner Controlled Insurance Program general liability policy is, in most respects, similar to the industry standard general liability policy. An Owner Controlled Insurance Program claim is analyzed by taking the same systematic approach that is used with other insurance claims. Companies and insureds alike should resist the temptation to treat the Owner Controlled Insurance Program differently and/or disregard the policy language. Only in taking consistent approaches will the insurance company make sure that the most appropriate legal and business decisions are made.|

There is a distinction in the policies, discussed in more detail in this article, between a "named insured” and an "insured.” The rights of the contractor and the application of the policy may be very different if each contractor is a "named insured” or an "insured.”|

In the context of underwriting risks associated with an Owner Controlled Insurance Program, there are four critical issues: (1) marketing, (2) determining who qualifies as named insureds under the program, (3) remembering that the policy protects the contractor rather than the owner for many claims, and (4) how the liability policy interacts with other Owner Controlled Insurance Program coverages.|

Owner Controlled Insurance Programs, or OCIPs, are the logical consequence of insurance underwriters and project owners trying to control costs and speed the resolution of construction-related insurance claims (including builders risk, workers compensation, and liability claims).|