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Controlled Insurance Programs (CIP) are becoming more and more common today but a contractor must be very careful to examine the terms and conditions of the CIP carefully as this may be their sole source of coverage. One of the most misunderstood issues is what happens when a CIP is cancelled. Virtually every CIP program has a section in the “manual” that allows for the program to be cancelled with some notice (hopefully) to the contractor. In many cases it could be a short as 30 days. What happens to the bid-deducts? Can you now submit a change order to increase your cost to Include insurance? Does the work you did prior still get coverage under the CIP? What about completed operations? To complicate matters many contractors have a “absolute wrap-up exclusion form [ISO CG 2154]. Pay close attention to the third condition in the second column that states “this exclusion applies whether or not the consolidated (wrap-up) insurance program: (3) Remains in effect” – So, when the CIP is cancelled the contractor can find themselves without ANY coverage unless they can scramble to get an exception to the exclusion.
Construction insurance coverage is very complex and OCIP/CCIP programs only add to the complexity for a contractor. We strongly suggest that you do a thoughtful review anytime you are being asked to enroll in a CIP as the decision should not be taken lightly.
If you need more information on any of the topics covered in this blog, or need help with any risk related issues please contact Albert Sica, Managing Principal, at 732.395.4251 or asica@thealsgroup.com.