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During construction projects, project owners and general contractors can often face a significant amount of liability from the actions, omissions and general supervision of others—such as contractors and subcontractors. If they cause an injury or other damage to a third party, owners and contractors can often also be held liable. In many cases, these liabilities can be covered by obtaining an owners and contractors protective liability (OCP) policy. However, it’s important to know the advantages and disadvantages of OCP policies, as well as other coverage options that may provide more protection.
The Basics of Owners and Contractors Protective Liability Policies
Obtaining an Owners and Contractors Protective Liability policy is similar to being added as an additional insured to a commercial general liability (CGL) policy, but with some important distinctions.
For example, if a project owner wants to obtain an OCP policy to be covered for the actions of a contractor, the contractor would purchase the policy with the owner as the named and primary insured. The OCP policy would then provide coverage for the owner separate from the contractor’s CGL policy, and the two policies would have separate insurance premiums and limits.
OCP and CGL policies also have different coverages. While CGL policies are designed to cover a wide variety of liabilities, OCP policies instead have a more limited scope and are designed to supplement other policies in certain cases. Specifically, OCP policies cover the named insured for the following:
- The vicarious liability for the acts or omissions of contractors or subcontractors
- The liability for acts or omissions in the general supervision of the operations of contractors or subcontractors
The Pros and Cons of Owners and Contractors Protective Liability Policies
As a separate insurance policy, Owners and Contractors Protective Liability plans offer a number of advantages:
- OCP policies offer separate limits that are unaffected by the liability policies of contractors or subcontractors.
- Triggered losses under an OCP policy usually do not lead to increased premiums for CGL policies.
- The named insured enjoys additional benefits, such as advanced notice of plan cancellations.
Unfortunately, the limited coverage of OCP policies can also have some disadvantages:
- OCP policies will not provide coverage if the named insured is found to be solely at fault for a loss involving a contractor or subcontractor.
- The coverage for “general supervision” in OCP policies is usually left undefined and can lead to a lack of coverage.
Additional considerations before you obtain an OCP policy or are added as an additional insured to a CGL policy, you should ensure that your coverage meets the insurance requirements and provisions of your construction contract.
Call us today at 610-892-7688 or use our contact page; we can help you find the coverage you need to ensure your success.