FAQs - Page 1

What is a Controlled Insurance Program (CIP)?

A Controlled Insurance Program (“CIP”) involves the procurement by the Sponsor (Owner or General Contractor) of certain insurance policies protecting both the Sponsor and various contractors involved with the construction project rather than relying on individually purchased insurance policies. These types of programs are also commonly referred to as “Wrap-ups”. The traditional policies involved in CIP’s are Workers’ Compensation, Commercial General Liability, Excess Liability and Builder’s Risk.

The primary reasons sponsors use these programs are to attempt to reduce the insurance costs, enhance safety and claims handling and protect the sponsors’ assets by ensuring that adequate limits are provided for the owner and all participating contractors in the event of a loss.

A CIP typically will include all contractors, subcontractors and other participants in the construction project. Architects and Engineers are often included as insureds but not for coverage of their professional liability. Suppliers are generally not included, as the intent of the CIP is to include only interests of firms that have on-site labor costs.

The pros and cons of using a CIP have been debated for many years. From the viewpoint of the Sponsor, the principal advantages of a CIP are:

• Lower insurance costs
• Focused loss prevention services
• Coordinated medical treatment to handle injuries
• The Sponsor controlling the project controls the claim handling procedures, possibly avoiding some public relations problems
• Uniform, broad coverage with appropriate limits is assured without the necessity of securing certificates of insurance from many contractors involved in the project
• Increased MBE/WBE participation

Participating contractors and subcontractors exclude the project from their own regular insurance policies - because they will have coverage under the CIP policies - and credit their bids and pricing for the amount of premium saved under their Owner insurance programs.

How is a CIP advantageous to sponsors and to participating contractors and subcontractors?

It provides individual Workers' Compensation insurance and a single, high quality, high limit liability policy issued by a single insurer that includes coverage for all eligible participants as insureds.

• It allows for a coordinated worker safety program that benefits everyone involved.
It provides claims' handling that assures quality treatment of injuries at the best available price.
• It provides a unified investigation of all incidents and defense for all claims against participants. This minimizes the legal costs of investigation.
• It brings participants together as co-defendants for claims alleging construction defect.
• It does not erode the participants' other coverages needed for non- CIP work.

How will the CIP provide Workers' Compensation insurance coverage?

Each eligible contractor and subcontractor included in the CIP will receive:

• Individual Workers’ Compensation policies covering the participant’s workers at a specified project site, including:
1. 1. Assistance, if needed, in notifying participant's regular insurer of the CIP exclusion;
2. 2. Assistance, if needed, in sending payroll reports to each insurer to avoid double charges;
3. 3. Assistance in reporting and handling compensation claims; and
4. 4. Analysis of losses (if any) that may affect participant's experience modifier.
• Renewal policies at each anniversary.

How will the CIP provide Commercial General Liability insurance coverage?

Each eligible contractor and subcontractor included in the CIP will receive:

• Certificates of Insurance showing the participant as Named Insured in the CIP Commercial General Liability policy, including:
1. 1. Assistance, if needed, in notifying participant's regular insurer of the CIP exclusion;
2. 2. Assistance, if needed, in premium basis reports to each insurer to avoid double charges;
3. 3. Assistance in recording, reporting, and handling liability incidents and claims.
• The CIP Commercial General Liability policy runs through construction. Coverage for Products and Completed Operations is generally extended for 5 years after the completion of the project.