The Benefits of Owners and Contractors Protective Liability Insurance
When contractors are awarded construction bids, they have to carry certain types of insurance required by the project owner. This includes standard coverages, such as:
Today, more project owners are requiring contractors to obtain OCP coverage. While not as well-known and often misunderstood, it’s important to know who’s covered in an OCP policy and how it works.
What Is OCP Insurance?
Owners and contractors protective (OCP) liability insurance helps protect project owners from certain liability claims arising out of a designated contractor's work. OCP insurance provides dedicated coverage and separate policy limits that differ from commercial general liability (CGL) insurance and other coverages.
What Is the Difference Between OCP Insurance and Commercial General Liability (CGL)?
OCP is different from CGL coverage in many ways. An OCP policy is:
- A stand-alone policy that’s project-specific
- Meant to protect one party, usually an owner or contractor
- Specifically for the operations performed for owners by a designated contractor named on the declarations page
It’s important that contractors not use an OCP policy in place of a CGL policy. Think of it as an extra measure of protection on top of CGL coverage.
Is an OCP Similar to a CGL Policy?
Adding a project owner to a CGL policy as an additional insured on professional liability means contractors can help protect them. An OCP provides coverage specifically to the project owner. So, the OCP offers narrower coverage for owners.
What Does an OCP Cover?
An OCP helps cover claims for bodily injury and property damage that can result from two possible scenarios:
- The project owner’s vicarious liability in connection with the contractor’s work
- The project owner’s acts or omissions in connection with the general supervision of the contractor
OCP Coverage Example
A property owner hires a contractor to replace the roof on a commercial building. During the project, roofing materials accidentally fall from the work area and damage vehicles parked below. The vehicle owners sue the property owner, alleging that the owner failed to properly oversee the contractor's operations.
In this situation, an OCP policy may help protect the property owner by providing defense costs and financial protection for damages arising from the contractor's work and the owner's general supervision of the project.
OCP and Contractor Coverage
Although the named contractor purchases the OCP policy, the policy does not provide protection for the contractor. Instead, it’s the project owner, or “named insured,” that the coverage applies to. An OCP helps protect the project owner from liabilities that a contractor’s work may cause.
What Does an OCP Not Cover?
An OCP policy doesn’t cover claims due to the project owner’s negligence. However, the policy can help cover this kind of claim if it’s related to the acts of “general supervision” of the contractor.
Be aware that OCP coverage is limited to liabilities during the policy period and at the jobsite listed on the declarations page.
When Is OCP Insurance Required?
OCP insurance is commonly required by project owners, municipalities, government entities, universities and commercial property owners. Contract requirements may specify OCP coverage when owners want dedicated liability protection arising from a contractor's work on a specific project.
