Depending on the size and scope of large construction projects, many owners or general contractors may opt to purchase a Controlled Insurance Program (CIP) for all contractors on the site. An owner-controlled program is known as an OCIP and a general contractor-controlled program is known as a CCIP. Both programs are generically referred to as “Wrap-Ups”. There are many considerations when working under a CIP. This article focuses specifically on workers’ compensation coverage and the audit process—critical areas contractors need to understand.
Enrolled CIP contractors can reduce their own workers compensation premium by properly allocating wages to trade classifications performed under the CIP project. To take advantage of this, most carriers require a Designated Workplace Exclusion Endorsement (WC 00 03 02) on the contractor’s workers compensation policy. Additionally, contractors must be prepared to provide documentation during the audit that clearly supports both the payroll allocated to the CIP project and the active wrap-up coverage in place during that time.
Why do carriers add the CIP exclusion endorsement?
1) To Avoid Duplicate Coverage (and Premiums): If a contractor is covered under an CIP for work at a particular site, then their regular WC policy shouldn’t also cover that work. Otherwise, two carriers are on the hook for the same exposure, and the insured might pay premiums twice.
2) To Clarify Coverage: It helps define exactly which job sites the standard WC policy does and does not cover. If there’s a claim from a designated CIP-covered site, it’s clear the CIP policy is responsible—not the regular WC policy.
3) For Underwriting Accuracy: WC premiums are based on payroll and exposure. If a large chunk of payroll is going to an CIP-covered project, that portion of the payroll for the CIP shouldn’t be factored into the contractor’s own workers compensation premium calculation.
What documentation is required at the time of audit for a CIP premium reduction?
A workers compensation auditor will provide instructions for submitting CIP information. Generally, enrolled contractors must keep track of their CIP workers compensation payroll by state and classification for all employees enrolled in a CIP project. Contractors typically report CIP payroll monthly to their CIP administrator and can easily access a payroll report for audit purposes when needed. If this reporting function is not available through the CIP administrator, be sure to keep track of it internally. Enrolled contractors must also secure a CIP certificate of insurance for the project. The insurance certificate confirms employees are covered under the CIP for the project and time period the payroll was reported. Therefore, the CIP payroll should not be included on a contractor’s own policy because separate insurance was in place.
We recommend contacting a Risk Management Consultant with experience in offsetting workers compensation premiums for CIP projects. He or she can take you through the process and offer simple tracking tools that can make this process easier for the future. Finally, since workers compensation premiums are directly correlated with the number and classification of your employees, this CIP offset can represent significant dollars for you and your business. Do not overlook this benefit.
At Rue Insurance, we are here to help you navigate the complexities of today’s insurance world. Thanks for your time. Remember to “Be Ready with Rue.”
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About the Author:
Sarah Dietz is a seasoned professional in the insurance industry with over 2 decades of experience. She is a licensed NJ insurance agent using both internal and external partnerships to achieve her client’s objectives. Sarah’s guiding principle has always been “Client First,” a mantra that she embodies in every aspect of her work. She has a reputation as a trusted advisor and advocate for her clients. Her strategic approach enables her to get the job done efficiently and effectively.
Garrett Grega joined Rue in 2023 as the Director of Marketing & Communications, bringing over 2 decades of marketing experience from various Fortune 500 companies. As Director of Marketing & Communications, Garrett is responsible for developing the external communications platform consistent with the strategic direction, strategic vision, mission, and values for Rue Insurance.
