Question from a Big I Connecticut member: "I was hoping you could provide clarity for me and a client of ours. They’re a general contractor and will be taking on a project which requires an Owners and Contractors Protective Liability (OCP) policy. How would this impact our General Liability and Workers’ Compensation policies which are currently in place ? Would we include the sub costs for the project requiring the OCP as part of our GL sub costs for rating purposes? I suspect the WC payroll should include payroll associated with the OCP project, but it would feel like double dipping from a rating standpoint if we also have to include the sub costs on the GL policy. My carrier underwriter is not able to provide an answer, unfortunately. She just doesn’t know and I’ve been going back/forth for a few months trying to obtain clarity for my client."
Answer: With regard to the Workers’ Compensation payroll, the OCP coverage form (ISO form CG 00 09 04 13) has a Workers’ Comp exclusion (see SECTION I – COVERAGES BODILY INJURY AND PROPERTY DAMAGE LIABILITY, Exclusion 2.e.). Therefore, the existence of an OCP policy has no effect on the rating basis for the WC policy.
Regarding the CGL coverage, I disagree that it is double-dipping to charge for the project cost in determining the premiums for both CGL and OCP policies. It’s important to keep in mind that that your client will not be the named insured on the OCP policy. Rather, the project owner is the named insured; your client is the contractor charged with furnishing the policy. The OCP coverage form states:
Throughout this policy the words "you" and "your" refer to the Named Insured shown in the Declarations. …
SECTION I – COVERAGES
BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. …
b. This insurance applies to "bodily injury" and "property damage" only if:
(1) The "bodily injury" or "property damage" is caused by an "occurrence" and arises out of:
(a) Operations performed for you by the "contractor" at the location specified in the Declarations; or
(b) Your acts or omissions in connection with the general supervision of such operations;
(2) The "bodily injury" or "property damage" occurs during the policy period …
In this situation, coverage applies to BI and PD only if it is caused by an occurrence and arises out of operations performed for the project owner by your client.
Nowhere in the form does it say that the “contractor" (defined as “the contractor designated in the Declarations") is an insured. In this situation, the project owner is an insured and your client is not. The insurer has the “right and duty" to defend the project owner (but not your client) against a lawsuit seeking damages because of covered BI and/or PD. If your client is named as a defendant in the lawsuit, they must seek coverage and defense under the CGL policy. The project owner has coverage under your client’s CGL policy only if the policy grants additional insured coverage to the owner.
Assuming the owner is not an additional insured, this is how the coverage looks:
Since both the CGL and OCP policies will conceivably provide coverage, the insurer is justified in using the same premium basis for both.