PF&M at a Glance

Owners and contractors protective liability coverage

CG 00 09—Owners And Contractors Protective Liability Coverage Form-Coverage For Operations Of Designated Contractor (OCP) is an unusual coverage form developed for a single, specific purpose. It covers the named insured’s liability arising out of operations performed for it by designated independent contractors. The named insured must be the owner of the property, a tenant of the property or another contractor for whom the designated contractor is performing operations. The liability protection provided is limited to the specific project or location and ends when the project is finished or operations are completed.

While the designated contractor pays the premium for this coverage, only the named insured can cancel it. This is unique because it is the only situation where the party responsible for premium payment cannot cancel. Since this provides the named insured with total control of the insurance at the job site, it is an attractive alternative to being named as an additional insured on the contractors commercial general liability coverage form.

This form provides two basic coverages—vicarious liability, which occurs when the named insured is liable for the negligent acts of another party, and exclusive fault coverage arising from the named insured’s general supervision of work being done.

The primary exposure is from vicarious liability, which usually arises out of work that is inherently dangerous; projects that impose non-delegable duties on the project owner under federal, state or local laws; or negligence of the organization in hiring incompetent contractors. OCP is an attractive alternative to coverage provided through the named insured’s CGL policy or by being a additional insured on the contractor’s general liability policy. This is because it is a separate coverage form written in the name of the person or organization to be protected, offers separate limits not affected by the project owner’s CGL coverage form and applies on a primary basis. It provides dedicated limits to the project and ensures accurate premium allocation. It is also issued to and controlled by the owner instead of the general contractor, so it is less likely that the coverage could lapse without the owner’s knowledge.

The only exclusive fault coverage a property owner has under an OCP coverage form relates to general supervision, and the common allegation against property owners is the failure to provide a safe place to work. The question is whether the allegation to provide a safe place to work is the same as general supervision. The property owner may be unhappily surprised if it is not. An important issue to consider is that “general supervision” is not a defined term and appears to be ambiguous, based on the findings of some recent court cases.

Please note that this is only a brief overview of the coverages available in this program. The PF&M Analysis from The Rough Notes Company, Inc., contains broader and more thorough evaluations and discussions of these and related subjects. Agency OnLine subscribers can refer to PF&M Section 271.4-2, CG 00 09—Owners And Contractors Protective (OCP) Coverage Form Analysis, for a detailed analysis and additional information on this and related subjects. *