OCIP and credits given

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etimer
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OCIP and credits given

Post by etimer »

Ok to start off with yes I understand the claims efficiency, etc. that an OCIP brings to the table. My question is the credit that a subcontractor might give to an OCIP.

If the General Contractor wants to have an AI status, the subcontractors insurance company limits are still at risk. So why shouldn't the subcontractors insurance company be paid for assuming that risk. Plus the OCIP has no coverage for the Subs tools, etc. that are on the job, there is not coverage for the milled products the sub brings to the job, etc.

Most of the local agencies find the OCIP to be a PITA and everyone looses money except the OCIP provider. If it were not so you won't see attorneys promoting the idea of an OCIP and using headlines such as - "Potential Savings to the Owner".

Then there is the accounting cost to the subcontractor. Example - cabinet and millwork in the shop. The subcontractor would need to assign only certain people to the manufacturing of the custom work and keep track of the payroll and separate the payroll for the workers manufacturing for that project. More money out of the subs hands.

There is no savings to the subcontractor is it? It is all a shadow and possibly gaps of coverage. But hey derivatives were all cool until Goldman almost brought the economic world to its knees. Are OCIP the same animal, good looking for the certain few but a bad deal for many?
JohnnyLaw
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Re: OCIP and credits given

Post by JohnnyLaw »

Worked for a very large Electrical Sub for years with one hat being RM duties. The best source Subs have is an organization called the ASA or American Subcontractors Association. They have monthly meetings and main premise is 1. Pay when Paid
2. Change Orders 3. Indemnification. They will have a lobbyist for the chapters that will meet with legislature to get best shake.

Subs can review contract with GC and negotiate to redline insurance language they feel is undesirable. Have also seen where we were in a joint venture situation with another sub and purchased a project specific policy for this worksite that was OCIP. Generally speaking the OCIP projects have been involved with are larger and of course there is more competition due to the opportunity, you would have to tread lightly with this objective.
etimer
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Re: OCIP and credits given

Post by etimer »

When my client originally quoted the job, they weren't told about the OCIP. SO after awarded the job, my client was sent the OCIP paperwork. In my opinion if they had originally known that the OCIP was in place, they could have bid higher and then if awarded the work, they would have had room to give a discount.

My underwriter said this about giving a discount -

"The reason we won’t give a deductible for this add on is because by adding the entity as an additional insured we are forgoing our own ability to subrogate in the event of a claim, even as our own limits go into play should a claim occur. We are incurring more risk, and we do not give a discount for that."

I agree. If the Project Owner is an AI my clients insurance is still at risk.

This we all know --

"If you agree to name another person as an additional insured, claims made against that person will be covered
by your insurance policy as if the additional insured had purchased the insurance and paid the premium.
If you designate someone as an additional insured, your insurance carrier becomes liable for claims against the
additional insured according to the terms of the additional-insured endorsement. Depending on an
endorsement's language, an additional insured could turn to your insurance carrier for coverage even if
you did not cause a claim or loss sustained by the additional insured."

So why in the world would an insurance company give a credit when in reality they are still supplying some insurance?
JohnnyLaw
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Re: OCIP and credits given

Post by JohnnyLaw »

This must be a small job I would be curious to how much the contract price is, or is it a contract? Reason I ask is the insurance requirements in the bid packet should have indicated a OCIP. However this is a slippery slope not knowing the relationship with the GC and the client.
etimer
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Re: OCIP and credits given

Post by etimer »

They didn't originally tell my client that there was an OCIP involved. After the contract was awarded the OCIP appeared. The entire project is $65 million and my clients contract is $1.4 million.

My client never did a job with the GC before and the GC is a nationwide company. The GC is on the Forbes 500 list.
JohnnyLaw wrote:This must be a small job I would be curious to how much the contract price is, or is it a contract? Reason I ask is the insurance requirements in the bid packet should have indicated a OCIP. However this is a slippery slope not knowing the relationship with the GC and the client.
ESB
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Re: OCIP and credits given

Post by ESB »

I think there is a little misunderstanding about what the wrap ups require from an additional insured standpoint. The Subcontractor is only required to name the Owner and CM as additional insured on the Auto coverage which applies on and off site, and on the GL/Umbrella coverage for offsite operations only. The additional insured would not apply for any claims arising out of your GL operations on site if you are enrolled in a wrap up. Also, you are not submitting payroll to the OCIP or CCIP for the offsite operations so technically you are still paying your insurer for the offsite coverage and additional insured exposure.

That being said, I have many issues with Wrap Ups and the credit/deduct situation. I will admit it has gotten a little better over the years but it still puts the Subcontractor at a disadvantage in accurately pricing jobs and marketing their own insurance program. When you don't know it's going to be a wrap or the manual is not published to provide the terms of the wrap going into it, you may come up short. I am actually seeing some subs add clarifications to their bids stating if the job requires them to participate in an OCIP/CCIP then add 5% to the bid price for increased overhead. In addition, participating in wrap ups reduces a sub's exposures when they go to market their own program and they may not get credits that would have been afforded them if they were a larger account.
etimer
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Re: OCIP and credits given

Post by etimer »

The problem is that you would need to change the insurance policy description on how and when an AI can apply their rights. Talk to ISO about that one.

AI on the auto? "WHO Is" on the BAP already addresses that one. A named insured contractor under a BAP can look at the “Who Is an Insured” language to comply with contractual demands for insured status. There is a Designated Insured endorsement for the BAP but it doesn't do anything that the "Who Is" does not already address.

I think most agree that offsite payroll would not be submitted and that is an accounting issue (perhaps more like a nightmare to the bookkeeping people).

I think adding the 5% to a bid is a good idea.
ESB wrote:I think there is a little misunderstanding about what the wrap ups require from an additional insured standpoint. The Subcontractor is only required to name the Owner and CM as additional insured on the Auto coverage which applies on and off site, and on the GL/Umbrella coverage for offsite operations only. The additional insured would not apply for any claims arising out of your GL operations on site if you are enrolled in a wrap up. Also, you are not submitting payroll to the OCIP or CCIP for the offsite operations so technically you are still paying your insurer for the offsite coverage and additional insured exposure.

That being said, I have many issues with Wrap Ups and the credit/deduct situation. I will admit it has gotten a little better over the years but it still puts the Subcontractor at a disadvantage in accurately pricing jobs and marketing their own insurance program. When you don't know it's going to be a wrap or the manual is not published to provide the terms of the wrap going into it, you may come up short. I am actually seeing some subs add clarifications to their bids stating if the job requires them to participate in an OCIP/CCIP then add 5% to the bid price for increased overhead. In addition, participating in wrap ups reduces a sub's exposures when they go to market their own program and they may not get credits that would have been afforded them if they were a larger account.
dsummerbell10
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Re: OCIP and credits given

Post by dsummerbell10 »

You're right when you say it's an absolute nightmare for bookkeepers.
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