Glossary of Terms (OCIP Workers' Comp)

• Administrator
• AOE/COE
• Audit
• Builder
• Certificates of Insurance
• CIP
• Classification Code
• Construction Participant(s)
• Coverages
• Deductible(s)
• Deducts
• Experience Modification Factor
• Insured
• Payroll
• Self-Insured Retention (SIR)
• Sponsor
• Third-party Administrator (TPA)
• Wrap-up

Administrator (Definition relevant to wrap-ups only): Entity that handles the administrative services for the wrap-up. An Administrator is the collector, keeper and conveyor of information relating to the administration of the wrap-up Program.  In coordination with the wrap-up Program’s Insurance Agent/Broker, the Administrator provides all of the documents, forms, manuals and deducts needed for participation in this Program.

AOE/COE: This is a workers’ compensation claims term meaning “arising out of employment and in the course of employment” and is the basis for determining if a claim is covered by the workers’ compensation policy.

Audit: A review of financial records to determine premium and verify deduct amounts.

Builder: The entity that sponsors (obtains) the wrap-up Program. This term is used interchangeably with Owner, Developer and General Contractor.
CCIP: (see CIP) Contractors Controlled or Consolidated Insurance Program

Certificates of Insurance: This is a document that provides proof of insurance coverage required by the contractual agreements between two parties. In the case of a wrap-up, the Owner/Builder provides proof of coverage provided by the wrap-up to the Construction Participants and the Construction Participants provide proof of coverage for their operations (either on-site, off-site or both depending on the contractual requirements) to the Owner/Builder.

CIP: (a.k.a. OCIP/CCIP/wrap-up/Wrap) Controlled Insurance Program a.k.a. Consolidated Insurance Program - these are insurance programs that (with few exceptions) insure all contractors of every tier in a construction project.

These programs are also known as: Contractors Controlled Insurance Program and Owner Controlled Insurance Program; the word Consolidated is also used in place of Controlled.  Wrap-up is another term used to describe these programs because the insurance program “wraps around” or “wraps up” all the coverages under one program.

Classification Code: Workers’ compensation codes are set up to establish rates by function.  The classification code is anywhere from a four- to six-digit code number. Each state has a variation on this.  This is the start of the pricing function for establishing premium.  Examples of Classification Code functions are Clerical, Code 8810, Salespersons (Inside), Code 8742.  These codes act as the primary file where payroll, loss and severity of the exposure are examined to establish a base rate for the specific code. There are rating organizations (a.k.a. bureaus) that establish the base rate for the classification codes.  The Carriers and/or rating organizations (depending on the State) use these base rates to establish their own rates.

Construction Participant(s): This is any entity (Contractor or Subcontractor) participating in the construction of the project.

Coverages: Insurance coverage provided by an insurance policy (workers’ compensation, general liability, etc.).

Deductible(s): That portion of the claim that the insured agrees to pay. For example, if the deductible is $25,000, the insured will be obligated to reimburse the carrier $25,000 (assuming claim costs exceed $25,000) at the conclusion of the claim; subject to policy terms and conditions.

Deducts: This is a term referring to the portion of the bid that is identified as the enrolled Construction Participant’s insurance costs and which will be withheld from progress payments made by the Owner/Builder to the Construction Participant.

Experience Modification Factor: This is a factor that allows an insurer to distinguish among insureds with a similar workers’ compensation class code and similar premium size.  Experience rating is a systematic method of modifying future, or prospective, premiums by comparing the actual incurred loss experience of an individual insured to the normal expected loss experience for the class during some representative experience period in the past.

Insured (a.k.a. Named Insured): The entity that owns the policy.  In a wrap-up Program, this would be the Builder, Developer, General Contractor and all enrolled Construction Participants.
OCIP: (See CIP) Owner Controlled Insurance Program a.k.a. Owner Consolidated Insurance Program

Payroll: The term used to refer to the monies and other benefits, as defined by specific states, paid to an employee for services rendered to the employer by its employees.

Self-Insured Retention (SIR):  An SIR is a set amount of money that an insured must expend in its own defense prior to a carrier assuming financial and/or administrative control over the claim.

Sponsor: A term used to designate the owner of the wrap-up Program.  A Sponsor can be an Owner, Developer, or General Contractor.
Subcontractor (Sub): A Subcontractor is a trade contractor working under the oversight of a General Contractor. On a wrap-up Program, Subcontractors are often designated by tiers; a Tier 1 Sub is the initial Sub that contracts with the General Contractor.  If there are more construction functions, the Tier 1 Sub may contract out some of his work to another Sub. That Sub becomes the Tier 2 and so on.

Third-party administrator (TPA):  A third-party administrator (TPA) is hired by the insured (sometimes as required by the carrier) to handle the claims handling process.  Their role may include gathering incident reports, mediating disputes, and assisting in determining the relative responsibility of the parties.

Wrap-up: This is the common term to describe a CIP.  It refers to the fact that the insurance “wraps around” or “wraps up” all the insurance for a single project or projects, depending on whether it is a stand alone/specific or rolling wrap, under one Program.