Risk Management: Controlled Insurance Programs
Faith Technologies’ increased and lasting presence in the large project market has resulted in increased participation with controlled insurance programs.
A controlled insurance program (CIP) consolidates coverage for contractors and subcontractors into a single insurance program. Typically, CIPs are purchased by a project owner or general contractor for an individual project which is usually greater than $100 million and consist of general liability and workers compensation insurance; however it can also include automobile and excess coverage or a builder’s risk policy. A CIP only provides coverage for work being performed on site. Once a project is complete and no additional work is being performed on site, the policy expires. Some policies may also provide completed operations coverage, meaning the insurance continues covering all property damage or injuries that may happen to a third party once contracted operations have been completed. When a CIP is issued, all contractors and subcontractors are required to supplant their individual insurance programs with the specific project’s controlled insurance program.
Replacing an insurance program with a CIP can pose a challenge on many subcontractors. Although the project owner or general contractor issuing the CIP absorbs the initial cost, each subcontractor is required to issue a credit for the amount of insurance premium that the subcontractor would have paid for their own insurance program. This credit is then subtracted from the contract value by the amount that would have been paid to the subcontractor’s insurance carrier for the same coverage. Incorporating the CIP credit into the project bid and segregating payroll to report to the insurance carrier is necessary so the subcontractor can avoid paying insurance premiums twice.
As with most situations, there are positives and negatives to a controlled insurance program. A CIP may not have the same expansive coverage that the subcontractor maintains with their personal insurance program causing gaps within insurance coverage. At Faith Technologies, we have negotiated “difference in conditions” coverage with our insurance carrier to eliminate any gaps that could exist if and when a CIP is issued. Positives to CIPs are that injuries and/or claims that occur on a project are applied to the specific project’s CIP program and not to the subcontractor’s own insurance. This assists the subcontractor with maintaining a lower claims history. Additionally, organizations, like Faith Technologies, who place a strong emphasis on safety as a core value and understand the importance of insurance coverage throughout a project and the effect on the project’s bottom line, are recognized by project owners and general contractors as reliable and trustworthy companies for their next project.
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