Client details have been anonymized to protect confidentiality.
Executive Summary
A California developer approached Kavana Insurance during the planning stages of a multi-building condominium development with a total construction value of approximately $7 million. The project involved multiple buildings, numerous subcontractors, and significant liability exposure over an extended construction schedule.
The developer’s primary question was straightforward:
“Should we insure each contractor individually, or would an Owner Controlled Insurance Program (OCIP) reduce risk and simplify administration?”
Rather than starting with insurance products, we started with the project’s risk profile.
Project Overview
Project Type
- Multi-building residential condominium development
Location
- California
Construction Value
- Approximately $7 million
Primary Concerns
- Multiple subcontractors
- Contractual risk transfer
- Workers’ compensation claims
- General liability coordination
- Completed operations exposure
- Consistent insurance requirements across all trades
The Challenge
Many developers assume requiring every subcontractor to carry insurance provides sufficient protection.
In practice, that approach often creates problems:
- Different coverage limits between subcontractors
- Coverage exclusions that vary by carrier
- Lapses in insurance during construction
- Certificate tracking failures
- Disputes over which policy responds after a loss
- Delays caused by multiple carriers investigating the same incident
None of these issues are obvious until a significant claim occurs.
Our Analysis
Before recommending an OCIP, we evaluate several questions:
- How many enrolled subcontractors are expected?
- How long will construction last?
- What trades create the greatest exposure?
- Will completed operations coverage be important after project completion?
- Does the owner have the resources to administer a wrap-up effectively?
- Can anticipated bid credits offset the cost of the OCIP?
In this case, the answers indicated that centralized insurance deserved serious consideration.
Why an OCIP Was Recommended
After reviewing the project, we concluded that an Owner Controlled Insurance Program offered meaningful advantages.
The recommendation was based on four primary factors.
1. Consistent Coverage
Every enrolled contractor would operate under the same liability program rather than dozens of unrelated policies.
2. Simplified Claims
Instead of several insurance companies disputing responsibility after an accident, claims could be handled through a coordinated program.
3. Better Risk Management
Centralized enrollment, safety expectations, payroll reporting, and claims oversight improve visibility throughout construction.
4. Long-Term Protection
Completed operations coverage can be coordinated across the entire project rather than relying on individual subcontractors to maintain insurance years after construction ends.
Important Consideration
An OCIP is not automatically the correct answer for every project.
Smaller projects often do not generate enough savings or administrative benefit to justify the additional complexity.
Every project should be evaluated individually.
What We See in the Real World
One misconception we frequently encounter is that a wrap-up exists simply to reduce insurance costs.
While savings may occur through bid credits and centralized purchasing, the larger benefit is often improved risk control.
Owners who have experienced construction claims frequently place greater value on consistent coverage, coordinated claims handling, and reduced administrative burden than on premium savings alone.
Kavana’s Perspective
Our recommendation is never based solely on project size.
Instead, we evaluate:
- Risk complexity
- Number of contractors
- Contract structure
- Owner objectives
- Administrative capabilities
- Available insurance markets
- Long-term liability exposure
The objective is to recommend the structure that provides the strongest overall protection—not simply the lowest premium.
Questions Every Developer Should Ask Before Choosing an OCIP
- How many subcontractors will be on the project?
- Will completed operations exposure extend for years after construction?
- Who will administer enrollment and payroll reporting?
- How will certificates of insurance be tracked?
- What bid credits are expected?
- Which insurance carrier is best suited for this project?
- Does the project qualify economically for a wrap-up?
These questions often determine whether an OCIP creates value.
Final Thoughts
Choosing between traditional subcontractor insurance and an Owner Controlled Insurance Program is ultimately a risk management decision, not simply an insurance purchase.
The earlier the discussion begins—ideally before subcontractor bidding—the more flexibility the owner has to structure an effective program.
At the Kavana Construction Risk Institute, we believe successful wrap-up programs begin with understanding the project itself, then designing insurance around that risk profile rather than forcing the project into a standard insurance solution.
Related read: More coverage isn’t always the right answer. See KCRI Field Notes No. 002: When Less Insurance Is the Better Recommendation for a case where a narrower insurance program was the correct call.
If you’re still weighing OCIP against a contractor-controlled program (CCIP) for your own project, try our OCIP vs. CCIP Comparison Tool.
Talk to Us
Have a project like this one? We’re happy to talk through your specific situation — no pressure, just a straight answer on what would actually make sense. Contact Kavana Insurance →