One effective way to mitigate these risks is through an Owner Controlled Insurance Program (OCIP), a specialised insurance policy purchased by the project owner to cover all contractors and subcontractors involved in the project.
While many manufacturers leave insurance arrangements to the contractor, there are significant advantages to arranging the coverage themselves. Under a construction contract, the manufacturer is typically referred to as the "Employer," and the benefits of an OCIP include:
- Control over the policy: The Employer retains full control over the insurance policy.
- Tailored coverage: The Employer, with the support of their broker, can select the most suitable insurers and policy wording, ensuring the coverage aligns with their needs rather than the contractor's preferences.
- Direct claims payment: Claims are paid directly to the Employer, eliminating delays in compensation from the contractor.
- Protection against contractor insolvency: If the contractor goes bankrupt, the OCIP remains in force, safeguarding the employer for completed work and materials yet to be incorporated. In contrast, contractor-arranged insurance ceases when the contractor stops trading, leaving the Employer uninsured for partially completed projects.
- Inclusion of additional parties: The policy can easily include other stakeholders, such as lenders, security agents, and future tenants, ensuring alignment with contract requirements. These parties are often difficult to include in contractor-arranged policies due to a lack of contractual links.
What is an OCIP?
An OCIP is a specialised insurance program designed for a specific construction project. It typically includes coverage for:
- Contract works: Covers physical damage to the works during construction.
- Terrorism: Protects against damages caused by acts of terrorism.
- Property owners liability: Provides protection for the Employer against claims from third parties for injury or property damage unrelated to the construction project. This may require separate coverage if the construction site is not part of the Employer's current location.
- Public liability: Covers liability for injury or damage caused to third parties during the construction process.
- Delay in start-up: Covers loss of profit and/or additional costs incurred due to delays caused by an insured peril. This coverage must be arranged as an extension of the project insurance and should be discussed before the project begins.
- Latent defects: Provides long-term protection (typically 10 years) against structural damage caused by hidden defects after the construction maintenance period ends. This coverage does not require proof of negligence and can be assigned to new owners if the building is sold. Gallagher has a specialist team dedicated to this type of cover.
- Non-negligent liability (6.5.1): Protects the Employer against damage to neighbouring properties caused by construction activities, even when the contractor is not negligent. This is particularly important for sites near old or listed buildings with shallow or no foundations.
With the exception of Contract Works, all other sections are optional, offering flexibility based on the project's unique requirements.
Why it matters for manufacturers
For manufacturers, construction projects represent more than capital investments—they are critical to operational growth and efficiency. Managing the risks associated with these projects requires a strategic approach, and the choice of who provides your OCIP can have lasting implications.
While purchasing an OCIP through a contractor's broker may seem convenient, it often introduces hidden risks that could jeopardise the project's success. By partnering with Gallagher, manufacturers gain access to Gallagher's specialised trusted practice group, ensuring the OCIP is comprehensive, transparent, and tailored to the company's unique needs.
This partnership not only protects the project but also safeguards the manufacturer's long-term interests. In an industry where precision and reliability are paramount, choosing Gallagher for your OCIP is not just a prudent decision—it's a strategic investment in the future of your business.
How Gallagher can help
At Gallagher, we understand the unique challenges manufacturers face when undertaking construction projects. Our team of experienced brokers specialises in designing OCIPs that provide comprehensive protection and peace of mind.
Contact us today to discover how Gallagher can assist in designing your OCIP.
