What Subcontractors Really Need to Know

Most commentary on Owner Controlled Insurance Programmes (OCIPs) and Joint Names insurance focuses on the benefits to employers and main contractors. But for small and medium-sized subcontractors working on these projects, the reality can be very different.

While these arrangements can open doors to larger projects, they can also introduce significant hidden risks particularly around excesses, uninsured exposures, and gaps in cover.

Our article helps explain the position in the UK construction sector and what subcontractors should be asking before stepping on site.

What is OCIP / Joint Names Insurance?

In a typical or traditional ‘set-up’ for a construction project each party (employer, main contractor and sub-contractors) arrange their own insurance for their risks, often specified in the contract conditions. Should there be an accident or loss the employer or main contractor and their insurers are usually the first in the firing line. If the accident or loss is the fault of the subcontractor they will look to seek recovery – this is subrogation. Subrogation is the insurer’s legal right to step into their policyholder’s shoes after paying a claim and recover their money from whoever actually caused the loss. Often disputes occur which can affect cashflow when margins are always in tight in construction.

 

An OCIP (or “wrap-up” policy) is a single project-wide insurance programme arranged by the employer (or sometimes the main contractor), covering multiple parties involved in the build. Similarly, Joint Names insurance, common in JCT contracts places the employer and contractor (and sometimes others) on the same policy for contract works and/or the existing structure.

 

The key features are: –

• • All insured parties are treated as one entity.

• • No subrogation between insured parties.

• • Claims are paid under a single project policy.

• • This is often presented as “simpler” and “more efficient”.

 

And for employers and main contractors it usually is.

The Benefits for Subcontractors (Yes, There Are Some)

Let’s be fair, there are advantages: –

• • Access to Larger Projects: Many major developments require participation in an OCIP or joint names structure. Without it, subcontractors may not even get a seat at the table.

• • Reduced Insurance Burden: In theory there is no need to arrange separate contract works cover which reduces the duplication of insurance costs

• • Protection from Subrogation: If something goes wrong the insurer cannot pursue you (in most cases) because you are a co-insured.

• • Cleaner Claims Process (Sometimes): One policy with one insurer should hopefully mean less finger-pointing (in theory).

The Reality: Key Risks for Subcontractors

This is where things get uncomfortable.

1. The Excess Problem (The Big One):

OCIP or project policies often carry very large deductibles/excesses of £50,000, £100,000 and sometimes significantly higher for property damage. On the Cross Rail contract in London the excess was £250,000 reducing by 50% for any sub-contract values of less than £10 Million. The Crucial point is that even though the policy is in joint names, the contract wording can push the excess down the chain.

So if your works cause damage: –

• • You may be asked to fund all or part of the excess.

• • Even if you are “insured” under the policy.

There is no automatic protection against this in the standard JCT wording.

2. You May Not Be Able to Use Your Own Insurance

This is widely misunderstood. Because you are jointly insured, your own annual policies may not respond:

• • There can be no liability claim against you (because you’re an insured party).

• • No subrogation action (the OCIP insurer can’t sue you).

Therefore, there is no trigger for your own Contract Works or Public Liability policy. The result is you can be left with a significant financial exposure with no insurance response at all.

3. Legal Position – You May Not Be Sued… But Still Have To Pay

The key UK case illustrates the principle is Norwich City Council v Harvey (1989) in which the subcontractor caused a fire through negligence. The contract placed risk on employer (with insurance). The court held the employer bore the loss even where the subcontractor was negligent.

The Interpretation is that liability may be “waived” via insurance structure but contractual arrangements can still shift financial consequences (e.g. excess).

4. Gaps in Cover Are Common

OCIP policies are not always as comprehensive as subcontractors assume. Potential gaps include: –

• • Design liability for which you still need to arrange your own Professional Indemnity Insurance.

• • Defective workmanship.

• • Non-negligent damage exclusions.

• • Off-site exposures – cover may still be needed on contract works and materials away from the site.

• • Tools, plant, or hired-in equipment – you usually need to arrange your own insurance.

 

Some OCIPs may result in reduced overall coverage compared to multiple contractor policies.

5. Loss of Control

Under joint names arrangements: –

• • You do not control the policy.

• • You may not even see the full wording.

• • Claims are often handled by the employer.

And importantly settlement decisions may prioritise the project, not you.

6. Commercial Deductions

In OCIP structures the contract values are often reduced to reflect “insurance savings”. These savings may be overstated. This means you could be taking on risk while being paid less.

The Hidden Trap: “You’re Covered” – But Not Protected

This is the key message subcontractors often miss: Being insured under a joint names or OCIP policy does NOT mean you are financially protected.

You may:

• • Avoid being sued.

• • But still be contractually liable for large excesses.

• • And unable to recover via your own insurance.

Practical Advice for Subcontractors

Before signing any contract involving OCIP or Joint Names insurance:

1. Ask One Question First:

“How much is the excess and who pays it?”
If the answer is vague – walk away or amend.

2. Seek a Cap on Excess Liability

An example approach is to limit your liability to:

• • A lower fixed amount (e.g. £5,000 to £10,000), or
  • A proportion of contract value.

3. Check Your Own Insurance Position

Speak to your broker about what cover applies, if any.

4. Request Full Policy Documentation

Do not rely on summaries. You need:

• • Full wording.

• • Schedule.

• • Excess structure.

• • Named insured parties.

5. Watch for “Flow Down” Clauses

The Main contractors often:

• • Accept risk at head contract level.

• • Then pass it straight down to subcontractors.

6. Consider Negotiating Clause Amendments

Fair positions include:

• • Excess borne by employer (policyholder).

• • Excess shared proportionately.

• • No liability where joint names insurance applies.

A Balanced View

OCIP / Joint Names works well when:

• • Risks are clearly allocated.

• • Excesses are manageable.

• • All parties understand the structure.

It becomes dangerous when:

• • Subcontractors assume they are “fully covered”.

• • Contracts push uninsured exposures down the chain.

• • Insurance advice is not taken early.

Frequently Asked Questions

Can a subcontractor be liable for an OCIP/Joint Names excess?
Yes. While you may be insured under the policy, the contract can still require you to pay the excess. A typical scenario may be a subcontractor causes a fire on site:

• • Loss: £250,000.

• • OCIP excess: £100,000.

• • Subcontractor named on policy.

Result:

• • No claim against subcontractor.

• • But contract requires them to pay the excess.

Outcome: £100,000 uninsured loss!!!

 

Will my own insurance cover an OCIP/Joint Names excess?
Usually No. Because you are a joint insured party, there may be no liability claim to trigger your policy.

 

What is a typical OCIP excess in the UK?
Commonly £50,000 to £100,000+, but can be higher on large projects.

 

Does OCIP/Joint Names insurance protect subcontractors fully?
No. It prevents claims between parties but does not prevent contractual cost allocation.

 

What should subcontractors check before signing?
Always confirm:

• • What cover gaps exist

• • Who pays the excess

• • Whether liability is capped

Final Thought

If you’re a subcontractor on a large build and someone tells you:
“Don’t worry, you’re covered under the project policy…” You should immediately respond: “Great—so who’s picking up the first £100,000?”

Obviously the bigger the overall contract the bigger the potential excess – but before you sign the contract get legal advice first. After a loss is too late.

Advice from Munro-Greenhalgh

At Munro-Greenhalgh Ltd, we work with construction companies of all sizes across Bury, Ramsbottom and Greater Manchester and our Insurer Partners to identify emerging risks and ensure appropriate protection is in place. See our Contractors & Engineering page for what we can offer contractors.

If you would like guidance on managing property risks or reviewing your insurance cover, our experienced team would be happy to help.