Contractor Controlled Insurance Program (CCIP): Cost & Providers

A Contractor Controlled Insurance Program (CCIP) is a specific insurance policy purchased by general contractors to coordinate general liability for construction projects. Also called wrap-up insurance, CCIPs are controlled by contractors rather than project development owners. The cost for a CCIP starts at 1% of the construction costs with policy durations extending past construction completion.

CCIP programs are very complex and require an insurance partner that a general contractor can trust to truly evaluate the project risk, overall company risk, and ways to save. Every development needs insurance to get permits and fulfill contract terms with developers. CCIP covers more than builders risk insurance, so be sure to see the pros and cons of both for your next real estate development project.

Contractor Controlled Insurance Program Providers

Finding the best provider for CCIP price policies requires finding one with an appetite for the specific project risks. Some providers prefer more traditional CCIP policies that cover large developments valued at more than $50 million in construction costs, while others are tailored for smaller construction projects.

Top CCIP Providers

Four of the top CCIP insurance providers are:

1. Alliant

Alliant is a national leader in major industry insurance programs including agriculture, aviation, and petroleum companies. It offers individually-underwritten programs as well as co-brokered policies to diversify risk and effectively protect major projects. Alliant also has a Risk Control Consulting division helping to customize policies and mitigate lesser-known risks.

Alliant is a good choice for general contractors with experience in running a project with a CCIP attached. Alliant has a streamlined underwriting process for eligible projects with the only online quote and bind system for large contractor’s projects at 123OCP. This program must be written on Admitted “A” Rated Paper meeting the highest credit standards.

2. USI

USI is an international brokerage using proprietary analytics to define risks while bringing local service and innovation to major projects. USI offers insurance, financial services, and employee benefits for business owners, making it an easy choice to get everything covered under one roof.

USI is the right choice for projects that face international exposure either through owners or contractors and need protection from multiple angles. By using local resources at the project location, USI underwriters are best-able to tailor risk mitigation solutions that ultimately reduce the overall cost of insurance and risk management.

3. AIG

AIG is an international leader for commercial property coverage of all sorts. AIG offers all lines of commercial insurance but has specialized programs for contractors, builders, and real estate developers. AIG is one of the most financially stout insurance carriers in the world, giving it the ability to back projects of all sizes.

AIG is the right choice for general contractors seeking up to 10 years of uninterrupted protection with multiple projects on revolving budgets. This allows the contractor to start one project while wrapping another and amend CCIP terms without extensive new underwriting.

4. Chubb

Chubb is the largest property and casualty insurer in the world providing all lines of commercial insurance including specialty products like CCIP. Chubb products are sold through brokers and independent agents, bringing a local touch and internationally-recognized practices for risk expertise and underwriting discipline.

Chubb is the right choice for a general contractor expanding into a new market who wants the added touch of Chubb’s risk engineering services. This added layer of risk management helps tailor solutions to prevent claims. Whether a project is a mixed occupancy real estate development or a local hospital being built, Chubb sees each as an independent risk class.

What Is A Contractor Controlled Insurance Program

A Contractor Controlled Insurance Program is a tailored insurance policy covering projects under construction. A general contractor purchases the policy to protect the project, his company, and all subcontractors under one general liability policy. The developer, aka the owner, is named as an additional insured and provided protection from the policy as well.

A CCIP insurance program must be in force before construction starting to protect parties. It continues through the project and has a tail of coverage often extending years past the construction completion date. This tail is often for the same period of time as the state’s statute of repose (similar to a statute of limitations) where claims must be filed before this end date.

What CCIP Insurance Covers

Contractor Controlled Insurance Programs are written based on contract needs, sometimes with simultaneous or revolving projects with different developers. The budget and all requirements of the coverage must be addressed in the underwriting process. This means that subcontractors bid on project completion terms before the insurance carrier defines overall budget coverage.

Because the CCIP is a tailored policy underwritten for the specific needs of a general contractor involved in one or more major development projects, statements of coverage are explicitly defined with policy premiums credited or passed down. If the CCIP offers coverage in exchange for credits in bid proposals, this drives the cost of subcontractors down because they don’t need added insurance. It is also possible for the premium to be passed down, reducing subcontractors’ cost reductions.

Pros of CCIP

The advantages of having a CCIP policy covering all contractors on the project include:

• Reduce Number of Insurers: One insurance company reduces insurance gaps and extensive litigation or subrogation to determine responsible subcontractor.
• Cost Reduction: By maintaining one insurance policy, subcontractors don’t need to get their own, which in turn saves on overhead that trickles up the project budget.
• Control of Insurance: Project management maintains control of insurance with the best vantage of projecting all levels of risk.
• Adequate Limits: Assures project owners that the project is properly insured from top to bottom with every subcontractor projected.
• Larger Contractor Pool: By not requiring subcontractors to have their own insurance, project leaders can open bidding from a bigger pool of subcontractors.
• Coordinated Claims: One policy reduces the number of potential policies that need claims management.
• Minimized Subrogation: Consolidating policy coverage means there is no need for the general contractor’s insurance to subrogate to a subcontractor’s policy.

Cons of CCIP

The disadvantages of having one CCIP policy in place for a project include:

• Extended Subcontractor Negotiation Process: General contractors must add the process of pricing the insurance after the initial bid is proposed by subcontractors.
• Difficult Change Order Process: Insurance is priced on the final bids of contractors, thus a change order changes the pricing of insurance and must be approved.
• Cost of Administration: General contractor must incorporate the cost of subcontractor and CCIP cost administration to the project’s overhead.
• Potential of Insufficient Coverage: Projects that go over budget are at risk for not having the correct amount of liability insurance for major claims.
• Deduction May Not Offset Premium: Premium credits provided by subcontractors may not truly add up to savings on the overall project budget.

Pyramid of Coverage

The CCIP protects everyone from the top down in what is called the pyramid of coverage. With a CCIP, subrogation is usually waived, meaning there is no longer a need for multiple insurance companies for various contractors to argue over liability responsibility. This means the project owner, general contractor, and all listed subcontractors are protected under the policy provisions while working on the project.

There are instances where the owner, general contractor, and subcontractors still need their own insurance protection. Individual business policies provide protection if CCIP limits are exhausted or if a specific subcontractor isn’t provided coverage in the policy. Some policies are not written as no-fault policies, which mean the subcontractor could be responsible for deductibles if found liable or negligent.

Example of CCIP Coverage

For example, consider a strip mall is being built by NewMalls USA, who owns and finances the project. All Jobs General Contractor is hired to do the physical construction by hiring and overseeing various subcontractors including electrical, HVAC, plumbing, framing, foundation, and all other components of the job. The plumber’s work leads to a pipe bursting that floods not just the project, but the neighboring art studio. CCIP insurance covers the damages.

What CCIP Doesn’t Cover

Contractor Controlled Insurance Program insurance protects against general liability at the job site. However, it doesn’t offer builders risk protection regarding business assets, supplies, and materials used in the construction project; nor does it extend to business office liabilities or compensation. Note that not every subcontractor is covered under CCIP.

Certain subcontractors and providers are not covered by the CCIP insurance:

• Suppliers
• Material vendors
• Haulers
• Truckers
• Hazardous operations (blasting and demolition)

Subcontractors must be specifically identified with a budget itemized for their duties on the overall project. General contractors need to obtain a Certificate of Insurance from excluded subcontractors for the work being performed on behalf of the project.

Contractor Controlled Insurance Program Costs

Contractor Controlled Insurance Program costs often range from one to 2% of the overall construction project budget. Costs will vary depending on the size of the project, the extended tail period duration, and the number of subcontractors on the project.

CCIP costs are affected by:

• Budget: Premiums are directly tied to the overall construction cost of the project.
• Subcontractors’ Insurance: Passing liability down to subcontractors is not recommended but does reduce the overall cost of coverage.
• Deductible: Higher deductibles mean the project has higher Self Insured Retention reducing the potential payout of a claim.
• Duration of Coverage: The period of indemnity is a tail coverage that protects contractors and owners after the project is completed; the longer the period of indemnity, the costlier the coverage.
• Loss History: Companies and contractors with a history of claims will pay more for coverage and protection.

Premium Credits in CCIP

Premium credits are credits the contractor gets for maintaining the master insurance policy. The general contractor determines the cost, deductible, and any penalties for insurance and who is responsible for them. The goal with maintaining the CCIP master policy is to reduce the overhead costs to subcontractors, thus reduce the price bid on the project. These are seen as credits to the contractor.

Who CCIP Insurance Is Right For

Historically, a CCIP policy was for major developments exceeding $50 million in construction budgets. While this program is now available to all size construction projects, it isn’t always a cost-effective solution. An owner concerned with extended project liability should have a CCIP in place to protect his interests in keeping the project on schedule and budget.

According to risk management experts, IRMI, common questions to consider when purchasing a CCIP:

• Are there excluded vendors or contractors?
• What are the exact locations covered?
• Are subcontractors existing insurance agreeing to not subrogate?
• What time periods are included and excluded?
• What is the relation to general contractors and subcontractors regular insurance?
• Are there premium deductions and, if so, how are they calculated?

It is important to address these at the policy inception with existing subcontractors already having contingent contract awards in place.

CCIP and Other Business Insurance

Contractor controlled insurance programs are not all-encompassing for all types of risk. Contractors and owners may still need other insurance policies to properly protect against property loss, business interruption, and employee injuries.

Builders Risk Insurance

Builders risk insurance protects the construction site contractor from the loss of tools, materials, or structural damage during the course of construction. It pays for damages resulting from perils including fire, theft, and vandalism. Policies may extend to mobile work trailers and sheds. Some builders risk insurance policies also cover supplies while in transit.

For example, a general contractor with 10 condominiums being built returns to the job site after a long weekend and finds that someone broke into the site, took a sledgehammer to pallets of drywall and two-by-fours, and overturned a cement mixer. This is a covered loss under builders risk.

Commercial General Liability Insurance

Commercial general liability insurance covers third-party bodily injury, property damage, and related legal costs in the case of an accident. General liability insurance protects the small business from slip-and-fall accidents or other accidental claims to consumers or public property. CCIP covers the general liability on the site, but there may still be office-related claims that are not covered.

For example, if a third party such as a customer gets injured on your premises, the resulting medical bills are paid by a general liability policy. It also pays for the costs of legal defense if the claim reaches court action.

Commercial Property Insurance

Commercial property insurance protects a small business against losses due to fire, theft, and vandalism. Builders risk should cover most claims for the business property at the job site but other tools, office locations, and materials may need additional coverage. Commercial property coverage also protects furniture, computers, materials, supplies, and inventory.

For example, a general contractor who maintains a business office all year long would need commercial property insurance to cover the office building and its contents against fire, theft, and other losses.

Workers’ Compensation Insurance

Any business with employees must maintain workers’ compensation insurance to pay for costs associated with an employee injured on the job. Workers’ compensation insurance pays for medical bills, lost wages, and rehabilitative services for employees injured at work. Most general contractors hire subcontractors but may still have office support staff or maintain extended coverage for subcontracts without their own workers’ compensation insurance.

For example, a general contractor has an office clerk who gets hurt while moving a box of supplies in the site office. This becomes a workers’ compensation claim. If workers’ compensation insurance is not in place, this is the general contractor’s financial responsibility.

Commercial Umbrella Insurance

A commercial umbrella insurance policy provides extended liability coverage for liabilities including general liability, commercial auto, and workers’ compensation insurance. Insurance carriers differ on how an umbrella extends coverage for a CCIP policy. Be sure to talk to your insurance agent about the aggregate coverage.

For example, if the general liability coverage is $1 million with an umbrella of another $1 million, the company is covered for liability claims up to $2 million. A claim of $1.5 million would first be covered up to $1 million from the general liability policy with the remaining $500,000 covered by the umbrella.

Tips When Getting CCIP Insurance

Major construction developments have many moving parts and a lot of stakeholders providing input. Getting the CCIP insurance to cover all the risk gaps is imperative to the financial success of the project. As such, it’s important that small business owners take the time to prepare.

Here are three tips when getting a CCIP insurance program:

1.Solidify Subcontractors’ Contingent Contracts

Changing the coverage terms and inclusions on a CCIP isn’t as simple as calling your agent and asking for a change in deductible or extra inclusion. Inform subcontractors that bids must be firm and obtain contingent contracts upon the project greenlight. The insurance is one of the last components set in place before you break ground.

2.Confirm the Period of Indemnity for CCIP Policies

The period of indemnity protects all stakeholders and contractors for a timeframe past the project completion. Confirm how long the CCIP protects for liabilities beyond the project’s construction completion date. The period of indemnity should coincide with state statute of repose (similar to a statute of limitations) for claims to be filed.

3. Review All Insurance Coverage Needs

Major construction developments need more than just general liability coverage. Look at the overall need for builders risk, workers’ compensation, and inland marine policies. Builders risk covers business assets and materials for the project. Workers’ compensation covers employees hurt at work ― potentially even subcontractors on large projects. Inland marine will cover items in transit such as materials and supplies.

CCIP Frequently Asked Questions (FAQs)

Millions of dollars pour into real estate developments every year with tens of millions of dollars at risk in potential liability claims. Our mission is to answer your questions with the best answers possible.

What is a period of indemnity?

The period of indemnity is extended coverage for the CCIP beyond the project completion and insurance policy in-force period. It adds coverage for the project’s stakeholders development through a defined period of time, up to 10 years, for claims arising out of the development of the property.

What Is a construction insurance policy?

A Contractors’ All Risk (CAR) insurance policy combines third-party general liability as well as business property loss in one policy. Unlike traditional general liability policies, the CAR protects subcontractors for accidental injury or property damage while on the job site. CAR reduces gaps in insurance found when multiple policies exist across multiple contractors.

Is there a difference between CCIP vs OCIP?

Contractor Controlled Insurance Plan (CCIP) works the same as the Owner Controlled Insurance Plan (OCIP). The primary difference is that the OCIP is directed by the owner, even though both plans are purchased and maintained by the contractor. A general contractor may have a CCIP if he has several large development projects with different owners.

Bottom Line

There is no room for error when it comes to multimillion-dollar development and construction projects and risk mitigation. The CCIP is the primary financial protection that allows a project owner to move forward with the confidence that third-party general liability claims are covered. A project with multiple subcontractors needs this type of coverage.