OCP LIABILITY INSURANCE: what insurance coverage do I need for Residential construction liability for new construction?
If you are a homebuilder looking for liability insurance for your residential construction projects, you should know about Owners and Contractors Protective Liability Coverage, commonly known as OCP. This stand-alone policy protects the named insured’s liability arising out of bodily injury and property damage caused by the work of independent contractors.
OCP Liability Form
The complete title of this coverage form is the “Owners and Contractors Protective Liability Coverage Form—Coverage for Operations of Designated Contractors” (CG 00 09 12 07). This policy is designed to protect owners and contractors specifically for operations performed by their designated contractors. It provides a separate, dedicated policy for the party that needs protection from contractor operations.
Protective Liability Coverage
The OCP policy is typically purchased by a contractor for the benefit of another party—the named insured. While the contractor pays the premium, only the named insured receives protection under the policy. This arrangement allows project owners to have dedicated liability coverage for work being performed on their behalf by contractors, without having to rely on being added as an additional insured to the contractor’s own policy.
Limited Coverage
It is important to understand that OCP provides substantially less protection than a Commercial General Liability (CGL) policy. The OCP covers only vicarious liability—that is, liability imposed on the named insured because of the acts or omissions of the designated contractor—or liability arising from the named insured’s general supervision of the contractor’s operations. It does not cover the named insured’s own direct negligence or other broader liability exposures that a CGL policy would address.
Purpose and Use of OCP
The OCP works best as a complement to a CGL policy rather than as a substitute. It is often used as an alternative to adding additional insureds to a contractor’s policy. By purchasing an OCP, the contractor provides the project owner with their own separate policy, which can offer certain advantages over simply being listed as an additional insured on the contractor’s CGL policy.
Benefits of the OCP
There are several key benefits that make OCP coverage attractive:
- Limits: The policy limits are dedicated exclusively to the named insured. Unlike additional insured status on a CGL, where limits are shared among multiple parties, the OCP provides limits that are not diluted by other claims against the contractor’s policy.
- Other Insurance: OCP coverage is primary. There are no contribution requirements with other policies, meaning the OCP responds first without requiring the named insured to exhaust other coverage.
- Policy Cancellation: The policy requires advance written notice to the named insured before cancellation. This gives the named insured time to arrange alternative coverage if needed.
- Losses: Claims under an OCP policy usually do not affect the contractor’s future premiums. Since the policy is separate from the contractor’s CGL, losses paid under the OCP typically do not impact the contractor’s loss experience or renewal rates.
For more information about OCP Liability Insurance and how it can protect your residential construction projects, contact Rick Cline at rick@allaccessins.com or call (303) 932-1700.