Contractors Insurance Certificates and Endorsments

What is ‘Additional Insured’ Endorsement?

Additional insured refers to a person or organization identified as an insured under an insurance declaration, in addition to whomever the insurance policy is named to. After the endorsement is signed, that entity will enjoy same benefit similar to the named insured including the filing of claims, and will be protected under the insurance policy.

What is Certificate of Insurance?

Certificate of Insurance (COI) is a document issued by an insurer to the policy holder to certify that an insurance policy has been acquired. The certificate shows specified information regarding the insurance, such as the type of insurance coverage, the effective date of the policy and the amount of the applicable liability. However, the certificate is not a substitute to the actual policy document and it is a non-negotiable document that cannot be assigned to a third party.

What are Loss Runs?

Loss runs are reports compiled and generated by the insurance company that records a detailed history of the claims information of each policy holder. Even if a policy holder has no filed claims, a loss run report should still be generated to reflect no losses. Every insured has the right to receive a copy of loss runs report from their insurance company and this is available without any additional charges.

What is Waiver of Subrogation?

Waiver of Subrogation is a type of endorsement on an insurance policy wherein the insurer waived its right to pursue any claim and take legal actions against the responsible party for the loss suffered by an insured. For instance, the landlord of an apartment signed an agreement with his tenant stating that they would not be held liable for any damages occurred to the rental unit. If any damages occur, the landlord will file claims to his insurer for the damages incurred in his property. However, the Waiver of Subrogation will prohibit the insurance company from coming after the tenant for the damages incurred in the property.

What is Primary and Non-Contributory Wording Endorsement?

Primary and non-contributory wording endorsement is commonly used in general liability insurance policy to stipulate the order on how the insurance company will respond on multiple policies. The term primary on your insurance policy means that the insurer will pay you first in the event of a claim, and the non-contributory means that the insurer will not only pay you first but will also pay the full amount of your claim.

Owner Controlled Insurance Program (OCIP)

OCIP is an insurance coverage provided by a property owner to contractors and subcontractors during a renovation or construction project. This type of insurance coverage is generally designed for big projects whose total constructions costs exceed $5 million. It covers all the liability and possible losses that may arise during the period of the project. As the project owner is acquiring all the necessary insurance coverage for the project, contractors and subcontractors do not include the cost of individual insurance in their bids for the project.

In OCIP, all the necessary insurance coverage for the whole project, including the construction, workers’ compensation, hazard, materials, terrorist and other building-related insurance coverage are acquired by the project owner as part of a single insurance policy from a single insurance company.

OCIP also provides standardized insurance coverage with high liability limits for all the contractors and subcontractors, and this can reduce the construction costs by approximately one percent to two percent compared to traditional insurance policies acquired by each contractors and subcontractors.

Most OCIPs are multi-year coverage with fixed duration, with the most typical duration is between two and five years. This insurance coverage normally applies to all the contractors and subcontractors working on the project site, which includes the main constructions site, lay down yards, storage areas and on-site fabrication.

Advantages of OCIPs for Owners

  1. Cost. The acquisition of OCIPs can result to two to three percent bid reduction. This can be achieved through premium credits for a volume purchase of insurance coverage by project owner.
  1. Scope of Coverage. Project owner has a guaranteed wide insurance coverage for their OCIPs as compared to traditional non-OCIP policies, which an owner sets minimum insurance requirements.
  1. Improved Risk Management. With OCIP’s single insurance policy, risk control management and claim handling are greatly improved, and dispute among contractors and subcontractors are easily resolved with the limits of the insurance policy.
  1. Policy Limits. In OCIPs, project owner can provide more than $800 million in insurance coverage to contractors and subcontractors, in contrast to traditional non-OCIP policy where it can only carry less than $1 million in CGL coverage.

Advantages of OCIPs for Contractors

  1. Safety and Loss Control. The implementation of a wide risk control management program can enhance existing safety programs of the participating contractors, reducing injuries and other construction hazards to employees.
  1. Claims Management. The large management program of project owner through the OCIP can result to coordinated and easy claims handling procedures.
  1. Dispute between Contractors. By covering all of the project’s contractors, disputes and subrogation issues between insurers and contractors are eliminated. In traditional non-OCIP programs, contractors/subcontractors and project owner are represented by different insurers and lawyers, and this potential source of conflict is eliminated in the OCIP program.
  1. Higher Limits. Smaller contractors and subcontractors are allowed to participate in the projects that need higher liability limits.
  1. Small or Minority Contractors. Project owners provide insurance coverage to smaller or minor contractors who do not have the capability to secure necessary insurance coverage for bigger projects.

Disadvantages of OCIPs for Owners

  1. Administrative Burden. OCIPs increased administrative burden to the part of the project owner, and if not managed competently, it could lead to additional cost to the owner.
  1. Market Risk. Premium cost for the OCIP can increase if the insurance market hardens, which could potentially hurt the project owner.
  1. Bid Preparation. Additional costs and preparations are needed in imposing an OCIP programs, which is a time consuming and brings additional work to the project owner.

Disadvantages of OCIPs for Contractors

  1. Limited Insurance Coverage. OCIP is designed to provide insurance coverage for work performed on the project. However, this coverage is normally subject to various exclusions which could lessen the coverage to the contractor compared to what they could get in traditional insurance policies.
  1. Complicated Bidding. A complicated bidding process is required to demonstrate that the insurance coverage has been removed from the contractor’s bid price.
  1. Documentation Requirements. Projects with OCIP have more paper works and report intensive, imposing additional administrative burdens to contractors and subcontractors.