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Relating to the disclosure of certain information under a consolidated insurance program.
No significant fiscal implication to the State is anticipated.
SB 1081 would make changes to Chapter 151 (Consolidated Insurance Programs) of the Insurance Code. The Principal, otherwise known as the person who procures the insurance policy under a consolidated insurance program (CIP), must provide key information regarding CIP coverage to a person who is considering entering into it. This information must be disclosed before that person agrees to a CIP contract.
If the principal has not disclosed CIP information in a timely manner then it may not require a person to agree to the CIP contractor in order to work on that project. However, if a person elects not to participate in the program, it must obtain its own insurance.
A consolidated insurance program or controlled insurance program (CIP) is a program in which a single entity (called the principal) procures an insurance policy for a construction project. The project owner or general contractor is the principal. This insurance policy usually incorporates general liability insurance and workers’ compensation insurance for most of the parties working on a construction project.
The benefits of this type of insurance are that it allows more coverage options for construction projects and it offers lower insurance costs since these plans are typically bought in bulk. However, the author’s statement of intent says that the cost savings provided by a CIP are usually due to insufficient coverage.
This legislation would require a contractor to provide certain CIP information so that a person may compare the coverage options with their own insurance. Additionally each contractor covered by a CIP would be required to receive a copy of the policy.
It is important to note that this bill would still allow a general contractor to accept only those contractors that agree to sign on to the CIP before working on a construction project. This does not apply if the general contractor has failed to provide a contractor CIP information before agreeing to a contract. In that situation, the general contractor may not prohibit a contractor from working on the project regardless of whether the contractor agrees to the CIP. However, if that contractor does not agree to CIP then it would be required to obtain its own insurance before working on the project.
We support SB 1081 because it protects the individual liberty and property rights of a person by requiring him or her to receive notification that the project he or she is planning to work on requires agreeing to a CIP. Additionally, we support this bill because it requires the full terms of the CIP to be presented before and agreement is made. Likewise, this bill does not infringe on a general contractor’s right to prohibit persons from working on a project that do not agree to the terms of the CIP.