Johnny Fontenot
Senior Executive VP | National Public Entity Practice Leader
Large public sector construction projects—like stadiums, airports, and transportation infrastructure—are complex efforts involving many contractors, subcontractors, and design professionals. In 2025 alone, megaprojects accounted for $197 billion in construction starts across the United States. With such significant investments, managing risk and liability effectively is key to helping keep projects on track, on budget, and successful overall.
One of the biggest challenges public entities face is how insurance coverage is structured. Traditionally, many projects rely on contractor-provided insurance policies. But this fragmented approach can lead to coverage gaps, limited transparency, and delays in claims recovery. A growing alternative is the Owner-Controlled Insurance Program (OCIP), which centralizes insurance coverage under the project owner, offering a more coordinated and comprehensive way to manage risk.
The risks of contractor-provided insurance
Contractor-sourced insurance often may not fully address the unique exposures of large public construction projects. Here are some common challenges:
- Inadequate coverage limits: Contractors usually carry insurance policies covering multiple projects at once. This means coverage limits might not be sufficient for a single megaproject, potentially leaving owners exposed to uncovered losses.
- Lack of transparency: Insurance costs are often bundled into contractor bids, sometimes inflating project costs by as much as 20%, according to industry data. Owners may have limited insight into how these costs are structured or whether coverage matches project risks.
- Delayed claims recovery: When losses happen, owners may need to pursue claims across multiple contractors, engineers, and architects. This fragmented process can take years, delaying repairs and increasing legal and consulting expenses.
A real-world example comes from the Allen Independent School District’s $60 million football stadium in Texas. Shortly after opening, the stadium was declared unsafe due to major structural issues. Because insurance was spread across multiple contractors rather than centralized, the district was only able to recover $1.7 million in damages—far less than needed to fix the problems.
