COMPARISON OF LOSS RATIOS BETWEEN OWNER AND CONTRACTOR CONSOLIDATED INSURANCE PROGRAMS By SAMUEL SCOTT SCIALABBA A THESIS PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLOR IDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN BUILDING CONSTRUCTION UNIVERSITY OF FLORIDA 2006
Copyright 2006 by Samuel Scott Scialabba
iii ACKNOWLEDGMENTS I would like to express gratit ude to the United States Mari ne Corps for selection as the Marine Officer Instructor at the University of Florid aÂ’s NROTC Unit. Without this assignment, a degree of Master of Science in Building Constructi on and this research would not have been possible. I would also like to recognize my wonderful chocolate lab, Delta, whose animated affection and compani onship have maintained my sanity during my assignment to the University of Florid a. I should also tha nk both Steve Peterson, senior insurance analyst, and Dr. Jimmie Hinze from the Univ ersity of Florida for their incredible patience, guidance and encouragemen t during the research that culminated in this thesis.
iv TABLE OF CONTENTS page ACKNOWLEDGMENTS.................................................................................................iii LIST OF TABLES.............................................................................................................vi LIST OF FIGURES..........................................................................................................vii ABSTRACT.....................................................................................................................vi ii CHAPTER 1 INTRODUCTION........................................................................................................1 Risk Management in Construction...............................................................................1 Traditional and CIP Insurance Approach to Risk Management...................................1 Objective of the Study..................................................................................................3 2 LITERATURE REVIEW.............................................................................................4 Introduction................................................................................................................... 4 Construction Insurance.................................................................................................4 WorkersÂ’ Compensation...............................................................................................5 General Liability Insurance........................................................................................16 BuilderÂ’s Risk Insurance.............................................................................................18 Automobile Insurance.................................................................................................19 The Cost of Construction Insurance...........................................................................20 Risk Mitigation Inefficien cies and the Traditional Approach to Insurance...............22 Loss Control................................................................................................................23 Controlled Insurance Programs..................................................................................24 Prevailing Issues with CIPs........................................................................................31 3 METHODOLOGY.....................................................................................................34 Description of Research Methodology.......................................................................34 Developing the Topic.................................................................................................34 Acquire Supporting Data............................................................................................36 Validation by Literature Review and Consultation....................................................36 Assumptions, Hypotheses, Stratific ation and Statistical Analysis.............................37
v 4 DATA ANALYSIS AND RESULTS........................................................................39 The Database..............................................................................................................39 Screening and Validation............................................................................................48 Scope of Data..............................................................................................................50 Assumptions...............................................................................................................57 Hypotheses..................................................................................................................58 Outliers....................................................................................................................... 58 Analysis of Results.....................................................................................................60 5 CONCLUSIONS AND RECOMMENDATIONS.....................................................70 Summary and Conclusions of This Study..................................................................70 Recommendations.......................................................................................................77 APPENDIX A WORK CLASS CODES.............................................................................................79 B SIC CODES..............................................................................................................102 LIST OF REFERENCES.................................................................................................105 BIOGRAPHICAL SKETCH...........................................................................................110
vi LIST OF TABLES Table page 2-1 Manual compenstation rates for several st ates and classes of construction work*..21 2-2 WorkersÂ’ compensation loss ratio s by state and year for CIPS...............................31 4-1 Sample records.........................................................................................................40 4-2 Change in population sample size............................................................................49 4-3 Chi squared tests.......................................................................................................50 4-4 Frequency of loss ratios............................................................................................60 4-5 Average loss ratios (%) for all OCIPS & CCIPS (2000-2005)...............................62 4-6 Average loss ratios (%) for OCIPS by location (2000-2005)..................................62 4-7 Average loss ratios (%) for CCIPS by location (2000-2005)...................................62 4-8 Average loss ratios (%) WUSP and WUMP nationally (2000-2005)......................64 4-9 Average loss ratios (%) for normal CIPS (2000-2005)............................................65 4-10 Average loss ratios (%) for experienced CIPS (2000-2005)....................................65 4-11 Average loss ratios (%) for mandatory CIPS (2000-2005)......................................65 4-12 Aggregate loss ratios*..............................................................................................67 A-1 Work class codes......................................................................................................79 B-1 SIC Codes...............................................................................................................102
vii LIST OF FIGURES page 3-1 Methodology flow....................................................................................................35 4-1 Number of records per sub business unit.................................................................51 4-2 Number of records per special class code................................................................52 4-3 Number of records per state.....................................................................................53 4-4 Number of records per program type.......................................................................54 4-5 Number of records per policy year...........................................................................55 4-6 Number of records per SIC......................................................................................56 4-7 Number of records per customer..............................................................................57 4-8 Loss ratios per record number..................................................................................59 4-9 Average loss ratios by state (95% sample)...............................................................63 4-10 Average loss ratios by state (5% sample).................................................................63 4-11 Average loss ratios OC IP and CCIP (100% sample)...............................................64 4-12 Average loss ratios WUSP and WUMP...................................................................65 4-13 Average loss ratios by speci al class code (95% sample).........................................66 4-14 Average loss ratios by speci al class code (5% sample)............................................66 4-15 Average loss ratios by speci al class code (100% sample).......................................67 4-16 Aggregate loss ratios by location and sub business unit..........................................68 4-17 Aggregate loss ratios by program type.....................................................................68 4-18 Aggregate loss ratios by special class code..............................................................69
viii Abstract of Dissertation Pres ented to the Graduate School of the University of Florida in Partial Fulfillment of the Requirements for the Degree of Master of Science in Bu ilding Construction COMPARISON OF LOSS RATIOS BETWEEN OWNER AND CONTRATOR CONSOLIDATED INSURANCE PROGRAMS By Samuel Scott Scialabba May 2006 Chair: Jimmie Hinze Cochair: R. Raymond Issa Major Department: Building Construction The objective of this study was to compare the management efficiencies of contractor controlled insurance programs (CCIPs) with owner controlled insurance programs (OCIPs). As the most standardized, controllable and costly form of construction insurance within a typical c onsolidated insurance program (CIP), an assumption was made that workersÂ’ compensa tion loss experiences could be used as a representative measure of efficiency for a CIP. Specifically, a workersÂ’ compensation loss ratio is calculated from an insurance carriers workersÂ’ compensation premiums collected and workersÂ’ compensation claims and expenses paid out. The data collected consisted of a represen tative sample of OCIP and CCIP claims loss experience by state, worker class code, program type and premium rating plan for 227 CIP sponsors (owner or contractor) that built projects across the nation during the years 2000-2005. The data included 10,900 record s of insurance code from a single
ix national insurance carrier. Data were stratif ied and analyzed comparing average worker compensation loss ratios by state, premium rating plan and program type. Forty-two states were represented in the study and include the District of Columbia as it promulgates its own statutory workersÂ’ co mpensation laws. The three premium rating plans considered included nor mal (manual rate), experienced, as modified by an experience modification ratio (EMR), and ma ndatory. Mandatory ra ting plans are those contractually requiring compliance with safe ty and loss control programs. Finally, the average loss ratios of two CIP program type s were compared, wrap-up multiple projects (WUMP) and wrap-up single projects (WUSP). Results of the study indicate that contr actor controlled insurance programs have a lower workersÂ’ compensation loss ratio and c onsequently experience a higher efficiency in their management of loss control than do owner controlled insurance programs. Further, results of the study indicate that CIPs incorporat ing mandatory compliance with safety and loss control programs by contra ct, as well as CIPs having a past loss experience that is favorable, far exceed the efficiency of CIPs whose loss experience warrants a manual rate premium.
1 CHAPTER 1 INTRODUCTION Risk Management in Construction Construction contracting is becoming incr easingly complex and litigious in an effort to shift or mitigate risk for all part ies concerned. Owners can produce contracts that exceed five hundred pages in an attempt to place the majority, if not all, responsibility on the contractor. Conversely, contractors have resp onded in an effort at self preservation by including pages and pages of exceptions and classifications to the contract terms and conditions. Construction contra cting is not a simple pro cess. Inherent barriers to communication and ever increasing financial ri sks have seen the construction contracting business become even more difficult over the pa st twenty years. Contractors and owners have become more dependent on legal maneuveri ng for survival in an attempt to control risk. Savvy owners and contractors understand that all risk cannot be eliminated, but that it is fool-hearty, if not ne gligent, to undertake a c onstruction project without appropriately identifying risk and devel oping a streamlined program to manage and mitigate that risk. A critical facet to cons truction risk management is inarguably the development of a thorough and cost effectiv e insurance program that is evoked in a legally binding contract and speci fically addresses the risk needs of all parties for the type of construction undertaken. Traditional and CIP Insurance Approach to Risk Management The traditional approach to insurance has b een one that requires all parties to a contract (owner, contractor and subcontractor) to purchase appropriate levels of coverage
2 as called out in the contract documents th rough their own insuran ce underwriters (Pella 2005). Typically evidence of such coverage via certificate of insurance is then required of subcontractors and contract ors before construction begins . While this approach to insurance remains prevalent in the construction industry it is recognized for its inherent inefficiencies in terms of cost, administrati ve management, claims management, and gaps and overlaps in coverage. Also, it continues to be fraught with the additional litigation often necessary to settle claims disputes (Lew and Overholt 1999). Because of the rapid and ever increa sing costs of insurance, construction professionals, owners and construction insu rers have sought a more effective and efficient insurance program aimed at addres sing traditional shortcomings. A secondary approach to insurance called the consolidated insurance program (CIP) was introduced about 1960 and has seen increasing popular adop tion in construction in recent years (Lew and Overholt 1999). With a CIP each party fore goes purchasing their own insurance as is the case with the traditional method. Insuranc e is provided for all contracting parties under one consolidated insurance program provided by one insurance carrier. The controlled insurance program may be sponsored by the owner of the construction project or by the prime contractor in charge of the construction project. When the owner acquires the CIP, the insurance program is referred to as an owner controlled insurance program (OCIP). When the prime contractor ac quires the CIP, it is referred to as a contractor controlled insurance program (CCIP) (Lew and Overholt 1999). Industry experts recognize that under a pr operly applied and managed CIP, cost savings on insurance can range from 1% to 6 % of the total construction costs with the average being 2% to 3% (Peterson 20 06, Lew and Overholt 1999). Despite the
3 seemingly apparent cost savi ngs, CIPs have not been unive rsally accepted as a panacea for minimizing insurance costs. According to Pella and International Risk Management Institute (IRMI) conference proceedings, much dispute exists as to the necessary efficiency and effective control required of a CIP to realize its full potential cost savings (Pella 2005, Perkins 2005). Because the sponsor of a CIP can be the owner or prime contractor, two natural categorie s of insurance sponsorship with a CIP are created. If not properly selected and managed by the CIP sponsor (owner or contractor), no cost savings may be realized at all. Worse yet, insuran ce coverage may be inadequate to cover risks for all parties and management inefficiencies may lead to increased costs for the project (Lew and Overholt 1999). Objective of the Study The objective of this research was to determine an accurate method for measurement of CIP efficiency and obtain current industry data that appropriately facilitates this measurement so that OCIPs and CCIPs may be quantitatively compared to one another. In doing so, this research effo rt was expended to answ er a question for the construction industry as to whet her CIP efficiency is best achieved under the sponsorship of owners or that of prime contractors. Furt hermore, the research approach selected in making this comparison was to be repli cable so industry pr ofessionals could systematically analyze the efficiency of CIP management on a periodic basis.
4 CHAPTER 2 LITERATURE REVIEW Introduction The purpose of this literature review was twofold. First, it was necessary to develop an understanding of the basic concepts, terms and practices used in the insurance industry so that a foundation for meani ngful analysis of OCIPs and CCIPs was possible. Secondly, this literature review sought to establish prev ailing issues surrounding CIPs so that issues yet to be addressed by original research could be identified. To this end, the literature review will begin with an overview of construction insura nce that touches on general liability insurance, builderÂ’s risk insuran ce, excess umbrella and automobile insurance but is heavily weighted toward workersÂ’ co mpensation insurance, the most costly and controllable form of insurance on cons truction sites (Peterson 2006, Perkins 2005, Danzan 1998, Clarkson et al. 1990 ). It will then narrow and focus on a recent study of CIPs and 2005 International Risk Management Institute conference proceedings to highlight issues underlying the objective of th is study. This literature review primarily relies upon a study of subject matter books, c onference proceedings, current research papers and consultations with industry experts to prepare a foundation for the detailed statistical analysis of CIPs that follows. Construction Insurance Construction insurance is an entangled topi c. Because it represents a significant and increasing percentage of project cost, how ever, industry professionals have sought a greater understanding of its administration a nd the ability of the proper management of
5 insurance programs to impact bottom line cost s. The various kinds of insurance required by contracting parties, the underwriting proced ures, classifications and exceptions along with the calculations of premium rates and modifiers for experience make the management and control of insurance challe nging at best (Creedon 2005). On any given project requirements for vari ous types of insurance such as workersÂ’ compensation, builderÂ’s risk, general liab ility, professional liability, excess umbrella liability, automotive, bodily damage, and property a ll must be managed and underwritten in a manner that is tailored to the type of projec t undertaken and the risk mitigation needs of the parties involved. To begin any study invol ving the efficiency of management of insurance programs it is critical to have a working knowledge of the different kinds of construction insurance (Hislop 1999). WorkersÂ’ Compensation In 1917 the United States Supreme Court fi rmly established the constitutional validity of workersÂ’ compensation law and with in 17 years all states had passed workersÂ’ compensation laws. Fifty states and the District of Columb ia have workersÂ’ compensation statutes although no two states have identical laws. Each state statute reflects the specific needs of the individual st ate but there are some similar tenets among them (Palmer et al. 1996). The underlying principle of workersÂ’ compensa tion law is that the cost of industrial injuries should be borne by the consumer s of the goods and services provided by particular businesses, rather than by the individual worker who helped provide the business services. WorkersÂ’ compensation la ws provide for this by largely abandoning the common law tort system in which liability is predicated on negligence. Under workersÂ’ compensation law, empl oyers have absolute liability to fund prescribed benefits
6 to employees for occupationally incurred injuries wit hout regard to fault. The recovery of workersÂ’ compensation benefits is the injured employeeÂ’s exclusive remedy. The employee (not dependents of employees) are barr ed in most states from suing employers for damages due to injury when worker sÂ’ compensation is received (Danzan 1998, Clarkson et al. 1990). Fundamental to workersÂ’ compensation is that benefits are payable because of occupational injuries arising out of and in the course of employment. For instance, suppose an employee of a construction company is injured in a fall from a second floor while erecting structural steel members. The employee would be eligible for compensation benefits because the injury aros e out of and in the course of employment. Conversely, if the employee was pushed by a fe llow employee and fell as a result of a disagreement over unpaid debts, the employ ee would not be eligible for workersÂ’ compensation benefits because the injury di d not arise out of a nd in the course of employment (Bunni 2003, Danzan 1998, Clarkson 1990 et al.). WorkersÂ’ compensation benefits are provi ded by insurance comp anies, qualified self insurers or state workersÂ’ compen sation funds. The mo st common method of providing workersÂ’ compensation benefits is through the purchase of an insurance policy. Insurers issue policies which conform to the la ws of the state(s) shown on the policy, pay claims and assist in controlling losses. In exchange, the insurer charges the employer a premium for workersÂ’ compensation benefits and related services. Self insurance is another method of providing required benefits and is often reserved for large employers. Because of their size, large employers can accu rately predict their lo sses, set aside funds for the payment of claims and provide suitab le loss control and clai ms handling services
7 without the need of a priv ate insurer (Hinze 2001 , Gunderson and Hyatt 2000, Palmer et al. 1996). In six states, referred to as the monopolistic states , the workersÂ’ compensation program is administered by th e state itself, not private insurers. These six states are Nevada, North Dakota, Ohio, Washington, We st Virginia and Wyoming. Monopolistic state funds charge premiums, provide work ersÂ’ compensation bene fits, loss control services and claim payments. Employers in these states must obtain workersÂ’ compensation from the state funds (Hinze 2001, Palmer et al. 1996). By requiring employers to guarantee bene fits by maintaining insurance or self insuring, an injured employee is guaranteed certain benefits resulting from accidents arising out of and in the course of employ ment. These reciprocal guarantees afford the injured worker the assurance of benefits resu lting from an occupational related injury or death and provide the employer the assurance of immunity from a lawsuit under tort law (Danzan 1998, Clarkson et al. 1990). To understand who is eligible to receive protection afforded by workersÂ’ compensation laws, the definitions of employer and employee found in the specific stateÂ’s workersÂ’ compensation statues must be analyzed. Often an employer will be defined to include a sole proprietor, partnership or a corporation. As employers, they will not be able to receive benef its (although some states make provisions for sole proprietors and partnerships to elect to be covered) under workersÂ’ compensation. Instead they become the beneficiaries of tort immun ity. Employees on the other hand would be persons employed by a sole proprietor, partners hip or corporation and thus eligible to receive the benefits outlined by statute (Bunni 2003, Civitello 2000, Clarkson et al.
8 1990). However, there are persons or entities that are hired by employers who are not defined by law as employees and as such th ey may not require workersÂ’ compensation coverage. Broadly defined, independent contractors usually furnish their own materials and equipment and are paid based upon a contracted price. They do not fall under the direct supervision or control of the employer and ar e responsible for the final work product. As such, independent contractors can legally do business in some states without having to carry workersÂ’ compensation insurance. In this case, the injury of an independent contractor could result in a lawsuit seeking to deny indepe ndent contractor status by showing that the injured party was an employ ee of the prime contractor. If successful, this would result in having the insurer pa y benefits for which no premium had been collected from the employer. Consequently, an additional premium would be due the insurer from the employer when the policy expi res. To avoid this scenario, it is practice to require independent cont ractors to provide evidence of workersÂ’ compensation coverage (Perkins 2005, Borba and Appel. 1988). Subcontractors are entities working under contr act for a general contractor. A general contractor is one who has been aw arded a contract and in turn parcels out (subcontracts) parts of the cont ract to others. These subcont ractors perform the work as required by the general contractor. In most st ates, contractors are responsible only for the payment benefits to injured employees of an uninsured subcontractor. If the subcontractor does not carry workersÂ’ compensation, the genera l contractor is then obligated to provide the benefits afforded under the stateÂ’s wo rkersÂ’ compensation law. The individual
9 operating as a subcontractor woul d not be eligible fo r benefits as he/she would be treated as an independent contractor (Perkins 2005). When proof of insurance is requir ed, it is often in the form of a certificate of insurance . This document provides the ba sic policy information including: Insurers affording coverage Type of insurance (e.g. liabilit y, auto, workersÂ’ compensation) Policy numbers Effective and expiration dates Limits of insurance Conditions for coverage termination Certificates of insurance provide an outline view of the coverage provided to the insured. It confers no rights upon the certificat e holder nor can it be used to alter the coverage shown on the certificate (Perkins 2005, Civitello 2000, Cl arkson et al. 1990). There are three categories of benefits that may be payable to an injured employee: Medical expenses Disability Death WorkersÂ’ compensation pays for all medica lly necessary remedial treatment, care and attendance by a health care provider for as long as necessary to enable the injured employee to recover. All drugs, medical s upplies and devices such as wheelchairs, crutches, and other prosthetic devices are co vered. Unlike other health insurance policies, workersÂ’ compensation has no coinsuran ce provisions or deductibles which limit payment. Reimbursement of medical bills are however, based on a maximum fee schedule adopted by the state (Perkins 2005, Bunni 2003, Civitello 2000). Increasingly, many states have adopted a variety of methods in an effort to control the cost of delivering workersÂ’ compensation medical benef its. Some states have approved rules that permit employers to select coinsurance options and deductibles and in some cases, states
10 have chosen to institute mandated managed ca re statutes which fu rther contain health care costs (Kalis et al. 1997). Compensation for disability is designed to partially reimburse the injured employee for inability to perform normal work fo llowing a compensable injury. The basis for computation of the disability due is a per centage (average of 66.67%) of the employeeÂ’s weekly wage subject to a minimum and ma ximum amount determined by each state. Payments for lost wages typically are made af ter a stipulated number of days of work having been missed, usually three to seve n days. Depending on the duration of the disability, payments may be made retroactiv ely for the initial days missed. Payments are not designed to replace the full wages of the injured employee. The incentive is for the injured employee to work as soon as pract icable and receive normal wages thus permitting the discontinuance of disability payments (Gunderson and Hyatt 2000, Hislop 1999). There are four specific classi fications of disabilities: Permanent total Temporary total Permanent partial Temporary partial Permanent total disability cases involve catastrophic injuries, which render the employee unable to perform any work for the rest of their life. Examples of permanent total disability are spinal cord injuries involving severe or pa rtial paralysis, amputation of a limb, severe brain injury, severe burns ove r the body and blindness. Due to the severity of the loss, disability payments may reflect a higher payment than the normal percentage of the employeeÂ’s average weekly wage. Benefits are normally paid for life but
11 depending on the particular state, adjustments may be made for social security benefits factored into the week ly disability amount. Temporary total disability cases are the most comm on form of disability. Examples may include concussions, fractures, and muscular sprains and strains. These benefits are paid to the worker who is injured and unable to work at all while recuperating. It is recognized that the injured employee will recover from the accident and return to work after reaching maximum medical improvement (MMI). MMI refers to the date after which no further recovery or lasting improvements can be medically anticipated. Benefits are paid after the wa iting period lasting until MMI has been reached or some other state defined time limitation, whichever occurs first. Permanent partial disability involves an injury from which the injured employee will never recover but is not serious enough to prevent the employee from working at all. For example, the loss of a finger would qualify as a permanent partial disability in that the injury was permanent in duration but it would not restrict the employee from performing other types of wor k. The methods in calculating permanent partial disability benefit payments vary from state to state. Lastly, temporary partial disability is a benefit payable when the employee can return to some partial type of work but cannot perform the usua l duties required by the employer. The employee may return to work performing Â“light dutyÂ” but has not been released by a doctor from treatment nor ha s MMI been reached. Because the employee has returned to light duty, a pe rcentage (perhaps even 100%) of what was being earned at the time of the accident will be payable to the employee. Benefit payments will normally be defined by state statute.
12 The final category of compensable lo sses under workersÂ’ compensation is death benefits . In addition to burial expenses, d eath benefits pay surviving dependent beneficiaries loss of income benefits based on the deceasedÂ’s average weekly wage. State statutes define who qualifies as a depende nt beneficiary and the amounts payable for burial and loss of income (Perkins 20 05, Bunni 2003, Gunderson and Hyatt 2000, Hislop 1999, MacCollum 1995, Danzan 1998). The most common method of providing work ersÂ’ compensation benefits is through the purchase of a workersÂ’ compensation pol icy from a private insurer. The policy version commonly used is published by the NCCI, a national rate and rule making organization. The services that NCCI provides for many states include: Establishment of manual rates and rules for insurers Classification of risks based upon the type of work performed ( Work Classification Code ) A special rating program based upon an employerÂ’s past experience ( Experience Modification Rating ) Administering special insurance plans for ri sks unable to procure coverage in the regular market The policy published by NCCI consists of six parts, with Part One of the policy being workersÂ’ compensation. Here the polic y conforms to the laws of the state designated in the policyÂ’s information page. T hus, in preparation of the policy, each state for which coverage is desired should be stated on the inform ation page. Part Two of the policy, EmployerÂ’s Liability Insurance , covers the insured for liabilities arising out of the injury of an employee in the course of employment th at are not in the scope of workersÂ’ compensation coverage (N CCI Resource 2006, Hinkel 2003, Hinze 2001, ). Such liabilities include claims often referred to as Â“liability overÂ” lawsuits. This is when a
13 third party brings a claim against the insu red employer because of an injury to the insuredÂ’s employee who has filed a claim agai nst that third party. An example would be if an employee lost a finger when operating a punch press and later sued the manufacturer of the punch press because of the injury. Th e manufacturer subseque ntly would sue the employer claiming it was the employerÂ’s fa ilure to provide proper training and supervision on the punch press th at resulted in the injury and not the fault of the equipment manufacturer (Perki ns 2005, Gunderson and Hyatt 2000). Other damages covered by employers liability is loss of care and services claims, and consequential bodily injury to a spouse or other relative due to the employeeÂ’s injury. For example, the spouse of a killed employee might be covered if the spouse suffers a heart attack upon learning of the death. Â“D ual capacityÂ” suits are also covered. For instance, when a injured employee sues th e employer as a manufacturer of a product rather than as the employer of the injured, employerÂ’s liability c overs the claim (NCCI Resource 2006, Perkins 2005, Gunderson and Hyatt 2000). Part Three of the policy is the Other States Insurance and is designed to automatically provide statutory coverage in a state not named in the policy when an exposure develops under such a stateÂ’s laws. If the exposure is known or expected, it is intended that such state should be listed on the information page. Coverage under Part Three is intended only for the unexpected exposur e. Work in progress in another state on the effective date of coverage will not be c overed if the state is not listed on the page. Part Four outlines the duties of the insured in the event of a loss and Part Five provides that all premiums for the po licy shall be determined in accordance with the insurerÂ’s rules, rates and classifications (NCCI Re source 2006). The unit of exposure for which
14 workersÂ’ compensation rates are established (with few exceptions) is per $100 dollars of payroll for employees within a specified work classification code (Clarkson et al., MacCollum 1995, Levitt and Samelson 1993). Pa yroll as defined by NCCI is understood to be straightpayroll which is payroll without the inclusion of premium pay for overtime. Each risk is classified usin g one or more of the 600 plus workersÂ’ compensation classification codes maintained by NCCI. The classifi cation process is designed to apply the appropriate four digit code that best repr esents the risk according to its function or task (NCCI Re source 2006). Each code numbe r has a manual rate per $100 dollars of straight payroll. The manual rate, without EMR adjustment, is multiplied by the straight payroll or premium basis resulting in an estimated annual premium per worker classification. To determine the accuracy of the estimate, the insurer performs an audit at the expiration of the policy term to determine if additional or return premiums will be necessary. To avoid large or additional premiums after the audit, it is business practice to ensure the proper use of work classificati ons and accurate premium basis throughout the policy term. Careful monitoring of these fact ors can assist in c ontrolling cash flow (Perkins 2006, Hinze 2001, Palmer et al. 1996, Clarkson et al. 1990). Part Six, Conditions, contai ns the insurerÂ’s right to inspect the employerÂ’s workplace at any time. The purpose of the inspection is for underwriting reasons and not for safety purposes. The insurer assumes no re sponsibility for assuring a safe and healthy workplace, although the insurer may make suggestions or simply report various conditions to the employer (NCCI Website 2006, Perkins 2005, Gunderson and Hyatt 2000).
15 One method used to affect the employ erÂ’s workersÂ’ compensation insurance premium is through the use of NCCIÂ’s e xperience rating plan. The purpose of the experience rating plan is to reflect the indi vidual employerÂ’s past experience to forecast its future losses. The two influences analyzed by the plan are the employerÂ’s frequency of losses and severity of losses. While the plan c onsiders both types of losses, greater weight is given to accident frequency than to accident severity (Perkins 2005, Hinze 2001, Gunderson and Hyatt 2000, Civite llo 2000). Eligibility for the experience rating plan and other rules pertaining to the plan are f ound in NCCIÂ’s Experience Plan Rating Manual and are reserved for employers generati ng the required minimum premium during a specified period as outlined in the plans ru les. Experience rating is mandatory for all eligible employers as the result of a mathem atical formula comparing the actual losses of an employer during a given period of time, defined as the experience period , to losses which are expected based on actual studies of the work classifications involved. The result is an experience modification factor which is multiplied by the manual rate for the work classification insured to adjust the policy premium (NCCI Website 2006). An employer with an EMR of .70 would see a 30% reduction in premiums while one with and EMR of 1.70 would see a 70% increase in premiums. In the case of a reduction in premium or premium credit, employers w ith effective safety programs, claims management procedures and accident prevention efforts are able to lower their cost of workersÂ’ compensation premiums when co mpared to similar risks without good loss control measures. This experience based prem ium calculation continues for each year the insured is eligible according to the expe rience rating plan rule s (Hinze 2001, Lew and Overholt 1999, Collier 1994).
16 General Liability Insurance Although workersÂ’ compensation is typically the most controllable and expensive construction insurance, other forms of insu rance required on constr uction projects have experienced escalating costs in recent years. In addition to legally required workersÂ’ compensation, all public contract s and many private pa rties require the contractor to carry general liability insurance . General liability insurance is comprised of two main categories of coverage, bodily injury and property-damage (Hinze 2001, Kalis et al. 1997, Levitt 1993). While workersÂ’ compensa tion exists for the benefit of the contractorÂ’s employees, comprehensive genera l liability protects the contractor and indirectly the owner against possible liability to third pa rties (Kalis et al. 1997). Typical protection afforded under gene ral liability covers the following: Injury to non-workers on the site caused by omissions or commissions of the prime contractor Indirect liability which include s acts of parties such as subcontractors for whom the prime contractor is responsible Damage caused after a project is completed or accepted Damage caused by the contractorÂ’s motor vehicles Injury to employees if liab ilities result from benefits under workersÂ’ compensation being denied Liability policies do not pr ovide protection for damage to the contractorÂ’s own property (Sklar 2004, Lavers 1999). Sources of liability under th is form of insurance are varied and possible gaps and ove rlaps in coverage may exist if the same insurance carrier does not provide for all liability coverage. Li mits for a single contractor generally range from $100,000 to $1 million for each person, from $250,000 to $3 million for each
17 occurrence and from $500,000 to $5 million for the aggregate within a single policy year (Hinze 2001). There are five basic types of genera l liability coverage. The first, operationspremises liability is the source of most claims incu rred under general liability in the construction industry. Premiums are paid for this type of covera ge on the basis of straight-payroll. Operations-premises covera ge provides liability protection for third parties injured by contractor operations that are in progress (operati ons) or site condition hazards (premise) created during construction (Sklar 2004, Spon 1993). ContractorÂ’s protective liability and ownerÂ’s protective liability policies cover incidents caused by subcontractor operati ons performed for the prime contractor. Premiums are calculated based upon the subcont racted amount of work to be performed. Coverage is provided for indirect liability to the prime contract or as a result of operations of the subcontractors. When a subcontractorÂ’s insurance limits are exceeded or if there is a lapse in coverage that will not allow for payment of a claim under such a circumstance, protective liability will c over the claim (Sklar 2004, Kalis et al. 1997, Levitt and Samelson 1993). A completed operations and product liability policy takes affect when operations-premises insurance terminates. That is, completed operations and product liability provides coverage wh en all operations of the contr actor to be completed under contract are finished or when work has been put to its intend ed use. Liability that results from materials installed by the contractor th at subsequently fail and cause damage to other portions of the building would be covered under this policy. Further, if completed work by the contractor is re leased to the owner for the ownerÂ’s use and liability is
18 incurred as a result of an injury to a cu stomer due to failure of materials installed, completed operations coverage would handle this. For completed ope rations and product liability, premiums are based upon the am ount of contracted work (Hinze 2001). Contractual liability is the fourth type of genera l liability insurance and its premiums are also based on a c ontracted amount of work. It covers liability incurred as a result of contract language that passes risk and liability to the c ontractor that would normally be assumed by another party. The last kind of general liability covers exclusions and limitations. When hazards not covered by general comprehensive liability are better insured separately, insurance can be purchased to cover the ex clusions or limitations with an extended coverage policy . Additionally, umbrella excess liability coverage can be purchased to extend the limits of general liability policies and provi ded coverage when normal policy limits have been exceeded (Hinze 2001, Kalis et al. 1997, Spon 1993). BuilderÂ’s Risk Insurance BuilderÂ’s risk insurance is purchased by th e contractor, owner or subcontractor to cover the project structure it self. With builderÂ’s risk, premiums are calculated from reporting forms that identify completed work in place for a specified reporting schedule or a completed value form which assumes a steadily increasing value for the projectÂ’s work in place. A standard builderÂ’s risk policy is a basic policy th at protects projects from direct losses caused by fire and lightni ng. Coverage is also provided for vandalism, burglary, larceny and theft. Usually a policy excludes damages from flood or earthquake. Protection from wind, hail, riot, aircraft and smoke may be added at an additional cost. AllbuilderÂ’s risk policies provide broader coverage than do standard builderÂ’s risk policies and will specifically note exceptions and exclusi ons. Although not all risks are
19 covered with an all-builderÂ’s risk policy, this policy will cover materials and apparatus associated with a project prior to placement and at the jobsite. A contractorÂ’s tools and equipment may be covered as well (Hinkel 2003, Hinze 2001, Kalis et al. 1997). Automobile Insurance Conventional automobile insurance must al so be obtained by contractors to cover vehicles operating on public streets and hi ghways and is its own form of insurance separate from workersÂ’ compensation, genera l liability and builderÂ’s risk. Collision, comprehensive liability and uninsured motori st coverage needs to be provided. Many contracts require specified limits for bodily injury and property damage while state law may dictate minimum covera ge required (Hinze 2001). Myriad forms for insurance along with pol icy limits and exclusions must be considered in light of specifi c project risks. Of the various forms of insurance addressed in this literature review, it is important to note that workersÂ’ compensation typically represents the greatest insurance expense re quired for any project with significant labor (Peterson 2006). Unlike workersÂ’ compensation, other forms of insurance do not have the rigid coverage limits mandated by state stat ute. Also, workersÂ’ compensation manual rates are standardized for all insurers by NCCI (Peter son 2005, Gunderson and Hyatt 2000). Because workersÂ’ compensation applies di rectly to an employerÂ’s employees, it is more directly controllable through project lo ss control procedures, safety programs and claims management departments than is gene ral liability or other forms of insurance (Peterson 2006). With general liability, build erÂ’s risk and automobile insurance, many coverage limits, exclusions and premiums ar e negotiable with the insurer and differ from project to project. As such, general liability and other third party forms of insurance do
20 not lend themselves as directly as workersÂ’ compensation when quantitatively comparing the efficiency of loss control programs am ong contractors and owners (Peterson 2006). The Cost of Construction Insurance Research conducted in 1988 at Stanford University and the University of New Mexico indicates that although workers in every industry get hurt on the job, when compared to other industries, construction ra nks high in both freque ncy of injuries and deaths. The study further developed an inci dent rate of 15.5 injuries per 100 workers indicating that there is one chance in seve n that during a year a construction worker would suffer an injury or death. A superi ntendent supervising 12 crews of 7 workers each could expect one such injury per month (Clarkson et al. 1990). Despite the moral responsibility to develop r obust safety programs at the jobsites of a high risk industry, contractor s and owners typically find gr eater meaning in statistics that show the rates the industr y pays for insurance required to cover anticipated accidents (Bifulco 2001). The most costly form of c onstruction insurance is workersÂ’ compensation (Peterson 2006, Creedon 2005). A 2005 sampling of manual rates for wo rkersÂ’ compensation for construction activities is shown in Table 2-1. Manual ra tes for 40 states are determined by NCCI annually. Four states (California, Delaware , New Jersey, and Penns ylvania) have their own rating bureaus. In these states private insurance carriers usually compete with state operated companies. In the remaining si x states (Nevada, North Dakota, Ohio, Washington, West Virginia and Wyoming) workersÂ’ compensation insurance must be carried through a monopolistic f und of the state government. Each monopolistic state has its own rating system (Hislop 1999). Manual rates are generally stated in dollars per $100 dollars of straight payroll which excludes premium pay for overtime and includes
21 the overhead costs of the insurer for administering the program (MacCollum 1995, Clarkson et al. 1990). The manual rates given for workersÂ’ comp ensation in Table 2-1 clearly reflect the hazardous nature of construction. Furthermore, they demonstrate the difference in hazard levels among numerous work tasks or clas sifications that make up the construction process. Also, since manual rates are based on cl aims paid a year earlier, they reflect the differences in the level of benefits paid out to workers or their survivors by state (Peterson 2006). An examination of the manua l rates in Table 2-1 makes it clear that injuries to workers add substantially to the costs of construction. Fo r example, it can be seen that in California there is an add-on of 33% to wages for general carpentry. Table 2-1. Manual compenstation rates for se veral states and cla sses of construction work* Classification of Work California Florida North Carolina Carpentry, one and two family dwellings 33.29 38.40 15.93 Carpentry, general 33.29 28.32 12.78 Concrete work, bridges, culverts 18.15 23.93 18.33 Concrete work, dwellings, one and two family 9.57 26.76 6.57 Electric wiring, inside 10.45 10.16 7.55 Excavation, grading of land not otherwise classified 14.15 12.77 8.06 Lathing 11.74 13.27 9.11 Masonry 17.39 20.39 8.51 Painting and decorating 17.88 19.51 8.63 Pile driving 16.59 47.98 12.90 Plumbing 11.70 10.82 7.16 Roofing 20.20 37.58 20.82 Steel Erection, Structural 19.15 56.10 58.34 Steel Erection, not otherwise classified 25.69 32.45 17.30 Timekeeper, watchmen 3.83 17.11 5.19 Wrecking 13.65 24.68 11.28 *Rates are $100 of st raight-time payroll Abstracted From: ENR, September 2005
22 Assuming that carpenterÂ’s wages make up one th ird of the cost of construction, the cost of workersÂ’ compensation adds another 10% to the project cost. For more hazardous work classifications, these costs are even greater (NCCI Website 2006, Clarkson et al. 1990). WorkersÂ’ compensation costs alone for projects that cost $75 million or more range from 1% to 4% of the total project costs (Pella, 2005). Because work related injuries are the most predictable and c ontrollable of all cons truction losses, the opportunity to reduce insurance costs is grea test for workersÂ’ compensation coverage. (Lew and Overholt 1999). Risk Mitigation Inefficiencies and the Traditional Approach to Insurance Traditionally, parties subject to a contract (owner, contr actors, and subcontractors) obtain their own insurance coverage. Unde r the traditional method each party is responsible for obtaining their own workersÂ’ compensation insurance, builderÂ’s risk insurance, and liability insurance policies . Using this approach, the procurement of insurance is a fragmented process (Pella 2005). When each contractor acquires their own insu rance coverage and includes this cost in their bids, there will be considerable dupli cation of coverage and excess costs will be incurred by the owner. Under the traditio nal method, the owner contracts with a construction manager or gene ral contractor to build th e project. Generally, the construction manager or general contractor th en subcontracts substant ial portions of the construction work to individual subcontracti ng companies. Each level of contract requires the lower level to secure its own workersÂ’ compensation, general liability, and builderÂ’s risk insurance. The owner typi cally specifies minimum acceptable insurance coverage, terms, and limits. The owner then monitors compliance through the contract process. Under this arrangement, project pa rticipants separately negotiate individual
23 insurance policies to mitigate risks associated with their specific project roles (Federal Transit Administration 2003, Houweli ng 1999, Johnson and Tonseth 2003, Wheeler 2004). The traditional approach for obtaining insurance coverage may not be cost effective because of possible overlapping cove rage, gaps in covera ge, contractor cost markups, unrealized economies of scale, clai ms disputes, and cro ss litigation by various insurance companies over claim payments. The cost of these disparities is ultimately borne by the owner in the form of higher pr oject costs (Federal Transit Administration 2003, Johnson and Tonseth 2003). Premiums and losses are handled by the indi vidual insurers of each party (Johnson and Tonseth 2003). If any contractor has a loss, their insurance company would respond accordingly. If limits are inadequate to c over the loss, liability is generally passed up through the levels of respons ibility all the way to the owner, under the Â“deep-pocket theoryÂ” of litigation. In most cases, severa l insurance companies are involved in large losses. This leads to claims adjustment pr oblems as each insurer attempts to pass off liability to another insurer. The traditional fo rm of insurance and its inefficiencies have not provided the best solution for coverage, risk mitigation or loss control (Houweling 1999, Ron Rakich and Associates 2000). Loss Control Effective loss control pro cedures and case management can mitigate exposures to injuries and death. The use of experi enced personnel, ongoing training, proper equipment, safe work environments, safety conscience employees, incentive programs, effective communication and comprehensive claims analysis all form the basis for effective loss control (Creedon 2005). Today, medical and disability costs covered by
24 workersÂ’ compensation are major business expenses and with the increased need for highly trained and efficient workforce, proa ctive procedures to prevent losses from occurring allows an employer to divert re sources away from treat able workplace losses and reduced employee count to more efficien t business practices. Wh en losses do occur, case management focuses attention on getting the injured employee the proper treatment with the least amount of time away from work (Peterson 2005). By eliminating delays and unnecessary me dical expenses and promoting effective communication among all parties involved, eff ective case management lowers the barrier that sometimes exists between the insure r, an employer and an employee when a workersÂ’ compensation claim occurs. Responding to the role as an intermediary between the employee, the medical community, and the employer, an effective claims management program provides advice and dir ection to the injured concerning rights and privileges afforded by the workersÂ’ compensa tion law. By coordinating medical care, the claims management department, as a part of a larger loss control program, reviews the treatment and therapies prescribed by phys icians and makes recommendations when necessary to reduce inefficien cies and to contain costs. In the end, the goal of a loss control program and claims management de partment, after a loss has occurred, is the employeeÂ’s expedient return to some fo rm of modified work while undergoing a recuperation that hopefully leads to the empl oyee returning to their pre-loss employment (Creedon 2005, McIntyre and Shay 2005, Peterson 2005). Controlled Insurance Programs Recognizing a need to reduce or mana ge escalating insurance costs through effective loss control programs and to eliminat e inherent inefficiencies in the traditional approach to insurance, construction industr y professionals introdu ced the concept of a
25 controlled insurance program in the early 1960Â’s (Lew and Overholt 1999). CIPs, interchangeably referred to as wrap-ups, are not a different form of insurance. CIPs are a means of consolidating the pur chase of large quan tities of insurance through one sponsor using one insurance carrier and tying it to an efficient loss control program by means of premiums adjusted for project loss experience (Collier 1998). A controlled insurance program may be required by the owner or by the prime contractor in charge of the construction project. When the owner sponsors the controlled insurance program the insurance program is re ferred to as an owner controlled insurance program (OCIP). Alternatively, where an ow ner may not want to be responsible for administering an OCIP and running its c oordinated safety management program, a contractor controlled insurance program (C CIP) can be used in place of an OCIP (Katzman 2002). The prime contractor may be best suited to design, procure, implement, and manage a CIP. The prime contractor typica lly bears the majority of the project risks, has experience in project insurance, and is ge nerally equipped to addr ess the needs of the other major project participants (Â“WrapupsÂ” 2005). An increasing number of prime contractors are beginning to ta ke advantage of CCIPs to cont rol construction risk, reduce costs, and improve safety management. Unde r a CCIP, the prime contractor procures the insurance coverage on behalf of the subcontractors working on the construction project (Davis 2004, Palmer et al. 1996). As a contr actor or owner controls a CIP, they may expand or restrict the program as desire d (Grenier 2004, Palmer et al. 1996, USDOT 2003). Whether owner or contractor, it is th e sponsorÂ’s responsibility to procure the insurance coverage, make the insurance payments, manage the safety and loss control programs, manage claims, and administer the insurance program (Davis 2004).
26 As CIPs are used to provid e insurance coverage for the owner, prime contractor, and all tiers of subcontractor s working on the construction pr oject they typically provide workersÂ’ compensation, general liability, empl oyersÂ’ liability, excess umbrella liability, property insurance, and builderÂ’s risk insu rance. The CIP may also be expanded to include professional liabilit y, design team errors and om issions, ownerÂ’s protected liability, asbestos abatement, and environmenta l liability insurance. Automobile liability, contractorÂ’s equipment coverage, supplier and vendor coverage, and bond insurance are typically not included in the CIP (Dav is 2004, Donovan June 1999, Collier 1994, Palmer et al. 1996, Parry 1999). The owner or the prime contractor purcha ses the CIP based on a number of factors including the contractorsÂ’ safety records a nd the number of workers on the project. These factors are then used to help dete rmine the insurance rates for the CIP (Riley 1999). CIPs are typically not based on guara nteed insurance costs, such as a fixed premium computed at policy incepti on. Instead CIPs are typically retrospectively rated , which in effect is similar to a cost-plus c ontract whereby the premium paid is a function of the loss experience on the project (Pal mer et al. 1996). The CIP concept has only come into widespread use dur ing the last 10 years and is typically employed by larger contractors and owners whose project cost s exceed $50 million or whose labor costs represent 30% of the project cost (AON 2005, Davis 2004). By directly purchasing all of the necessary insurance for a construction pr oject under one master policy to protect and indemnify all of the persons involved in that project, the owner and the prime contractor can eliminate much of the complexity, doubt, co nfusion, and risk of having too little or too much insurance coverage (Collier 1994).
27 The objectives of a CIP are to ensure that proper and adequate insurance coverage exists for all participants and to reduce the total cost of insurance for a construction project (Collier 1994). Under an OCIP, wh en insurance is purchased for them, contractors and subcontractors ar e asked to remove the cost of insurance from their bids. Under a CIP participants are covered at a lowe r cost and the sponsor of the CIP (owner or contractor) becomes the beneficiary of re duced construction insu rance costs (Collier 1998). CIPs further lower costs allowing the owner or prime contractor to buy insurance coverage in bulk, rather than require each contractor and subcontractor to purchase individual insurance policies (Parry 1999, Â“The StateÂ” 2003). This allows purchasers of CIPs to get volume discounts on insurance co verage through cons olidation, keep the difference on any favorable loss experiences , prevent insurance coverage gaps or redundancies, and reduce underwriting and cl aims administration expenses (Donovan November 1999, Katzman 2002). Through the proper use of a CIP, the owner and prime contractor can expect lower overall construction costs, bette r insurance coverage, a safer work site with uniform standards and coordina ted safety procedures, a reduction in cross litigation, less claims disputes, and proactive claims management to help injured workers return to work as soon as possible (Donova n June 1999, Federal Transit Administration 2003, Johnson and Tonseth 2003). On a project of any magnitude the insurance program requires extremely careful management and a robust loss control program. On large projects, the owner or contra ctor can best coordinate th is management through a CIP (Ron Rakich and Associates 2000). Because CIPs are retrospectively rated for loss experience, the sponsor of a CIP must impl ement and manage an effective loss control program in order to realize maximum bottom line savings.
28 The major advantages of CIPs are cost savings from buying insurance in bulk, cost savings from eliminating contractor markups , obtaining broader in surance coverage and higher coverage limits, eliminating duplicati on and gaps in coverage, increasing small and minority subcontractor participation, ha ndling claims more efficiently, reducing potential litigation, eliminating disputes between insurance co mpanies, enhancing workplace safety, and earning premium return s for favorable loss experiences (Â“Airport ConstructionÂ” 1998, Bowring 1999, Bradley and Stuckey 2001, Bukowski 1996, Collier 1998, Davis 2004, Ferraro 1996, Â“Forum On OCIPSÂ” 2002, Hinze 2001, Houweling 1999, Johnson and Tonseth 2003, Lew and Overholt 1999, Parry 1999, Â“Partner Controlled Insurance ProgramÂ” 2001, Ron Ra kich and Associates 2000, Schexnayder et al. 2004, Swendiman 1997, USGAO 1999, Wheeler 2004). A single EMR rating will be established fo r the entire project using a CIP. This EMR rating will typically be determined by the insurance carrier that is writing the policy (Lew and Overholt 1999). WorkersÂ’ comp ensation loss experience on a CIP project typically follows each contractor to other projects for experience modifier calculation purposes (Ron Rakich and Associates 2000). Some contractors may experience a diminished incentive to work safely because the bulk of the risk is transferred to the sponsor of the CIP. The sponsor may be e xposed to the risk of premium increases if labor costs and loss experiences exceed estimate s. These concerns can be alleviated with the implementation of aggressive safety ma nagement programs, loss control programs, and contractor safety incentives that share insurance savings (Nilss on 2003, Palmer et al. 1996). According to insurance industry offici als, CIPs can save the sponsor from 20%40% of the cost of traditional insurance policies, or from 1% to 6% of a projectÂ’s total
29 construction cost, if administered correct ly and losses are controlled (AON 2005, Bell 1998, Davis 2004, Donovan June 1999, Donovan September 1999, Donovan November 1999, Grenier 2004, Johnson and Tonseth 2003, Kit 2004, Lunch 1999, Schliesman 2001, USGAO 1999, Wheeler 2004). Public and private owners first began to use OCIPs on large-scale construction projects of $100 million or more (Bell 1998, Coniceros 1999, Grenier 2004, Houweling 1999, Lew and Overholt 1999, Nilsson 2003, OÂ’Gara 2001, OÂ’Gara 2002, Ostermiller 1998, Resnick 2000, Riley 1999, Â“Wrap-upsÂ” 2005). However, the use of CIPs on smaller construction projects of $50 million or more is becoming more prevalent as owners, contractors, brokers, and insurers gain experience an d expertise with the use of CIPs (Â“Airport ConstructionÂ” 1997, Br igance 1998, Bukowski 1996, Donovan June 1999, Donovan November 1999, Johnson and Tons eth 2003, Lew and Overholt 1999, Nilsson 2003, Ostermiller 1998, Schexnayder et al. 2004, Swendiman 1997). On smaller projects, the additional admini strative costs associated with staffing a strong loss control program generally make CIPs less cost effec tive, however, there are exceptions. Owners and developers have begun to use CIPs for the construction of condominiums and other multi-residential projects, even those co sting less than $50 million (Coniceros 1999, Grenier 2004, Nilsson 2003, Riley 1999). Th e threshold may vary depending on which types of coverage are included in the CIP, the nature and sc ope of the proj ect, insurance market conditions, and whether more than one pr oject will be insured under the CIP. In addition, certain state compensation systems have specific rules governing the use of CIPs (USDOT 2005).
30 The general baseline for determining the f easibility of entering into a CIP for a construction project is a minimum construc tion cost range of $75 million to $100 million (Dalbey 2001, Parry 1999). The most successful CIPs are those with labor costs of at least 25% to 30% of the total pr oject costs, and with a total of at least 8 to 10 specialty contractors (Lew and Overholt 1999, Â“Wrap-ups Â” 2005). CIPs are particularly well suited for labor intensive projects that generate over $2 million in workersÂ’ compensation premiums (Bukowski 1996). Loss ratios provide industry analysts with a means of comparing the success, efficiency and safety of insured projects a nd their programs to one another. There are many loss ratios common to the industry. Becau se workersÂ’ compensation is the largest component of the insurance co sts and is most directly c ontrolled by an effective loss control program, the workersÂ’ compensation loss ratio is often used as an indicator of loss experience for insurance programs (Peterson 2006). The loss ratio is a quotient which represents the level of success that the insured has had on minimizing losses (Hinze 2001). The workersÂ’ compensation loss ratio is simply the insurance companyÂ’s losses paid out in workersÂ’ compensati on claims divided by the total workersÂ’ compensation insurance premiums paid. In surance company losses deemed Â“paid outÂ” include money expended on administrative expens es to settle a claim as well as monies held in reserve to settle claims whose payouts an d expenses are ongoing or anticipated (Peterson 2006). Loss ratios of traditional insura nce programs average between 60% and 65% (Palmer et al. 1996). The national aver age of workersÂ’ compensation premiums paid out in claims for projects using CI Ps is 35% (USGAO 1999). Loss ratios on a significant number of OCIPs have historical ly averaged less than 40% when properly
31 structured and engineered, CCIPs rarely exceed a 35% loss ratio (Palmer et al. 1996, Grenier 2004). Loss ratios vary substantially by state and by year. The 1999 Mississippi construction industry expected workersÂ’ comp ensation loss ratio was 59%, well above the national average for losses using a CIP. Se veral workersÂ’ compensation loss ratios by state and year for CIPs are compared to the national average in Table 2-2. Table 2-2. WorkersÂ’ compensation lo ss ratios by state and year for CIPS State Loss Ratio Year Mississippi 59% 1999 Florida 55% 1998 Hawaii 32% 1999 Michigan 60% 1999 National Average 35% 1999 Source: Lew and Overholdt, 1999 Prevailing Issues with CIPs Recent research conducted by in 2005 a nd conference proceedings from the International Risk Management Institute (IRMI) in 2005, indicated that there may be disparity in the cost savings, safety and effi ciency of CIPs that is dependent upon whether an owner or contractor is the sponsor of the program (Pella 2005, Perkins 2005). Pella surveyed senior re presentatives from large construction firms, owner companies and their insurers to tabulate and record industr y perceptions about the cost benefits of CIPs. Eight re presentatives of constructi on companies whose companyÂ’s annual volumes were greater than $500 million were interviewed. Two of the companies constructed predominantly commercial proj ects. Two of the co mpanies constructed industrial and commercial projects and the remaining four companies constructed commercial, industrial, and transportation projects.
32 Representatives of seven owner companies with large construction projects were also interviewed. These incl uded two government agencies with public works projects, two energy companies, a pharmaceutical company, a petroleum company, and a telecommunications company. The types of f acilities typically cons tructed by the owner and contractor firms interviewed are shown below: Industrial and Commercial Transportation and Public Works Telecommunications and Commercial The number of projects completed by each of these owners and contractors in the past three years ranged from 80 to 400, w ith the average being 200. The number of projects using OCIPs complete d in the past three years ra nged from 6 to 160, with the average being 55. The number of projects usi ng CCIPs completed in the past three years ranged from 0 to 160, with the average being 67. In the same study, representatives from four insurance companies and three insurance consulting companies were interviewe d (Pella, 2005). Analys is of the interview revealed the following perceptions for the majority of those interviewed: Owners, contractors and insurers agree that the direct cost savings to be realized from a CIP benefits the CIPÂ’s sponsor the most. CCIPs provide direct cost savings for contractors and OCIPs provide direct cost saving for owners. ContractorÂ’s believed that safety perf ormance between OCIPs and CCIPs were comparable and that both were better than the traditional method. Owners felt that OCIPs produced better safety than CCIP s. Insurers believed that safety performance was roughly the same but for this to be true, OCIPs had to have contractor support and involvement in executing the safety program. Owners, contractors and insurers all rec ognized that the primary disadvantage to a CIP is the increased admini strative requirements necessary to run the loss control and safety programs that realize cost savings.
33 The most common mistakes recognized by owners, contractors and insurers when employing a CIP were a failure to unders tand the administrative requirements of a CIP and a failure to implement an effective safety program. All three groups unanimously stated that the keys to the su ccess of a CIP were contractor buy-in or suppor t in the safety program, an effective safety program and proper administration. The summary and conclusions of the st udy by Pella were that OCIPs and CCIPs, when properly managed, could realize better lo ss experiences and thus larger cost savings than the traditional approach to insurance. Further, both OCIPs and CCIPs were comparable in terms of safety and cost eff ectiveness with the only difference being which sponsor received the majority of benefits from direct cost savings (Pella, 2005). The 2005 IRMI conference proceedings echoe d many of the prevalent perceptions of PellaÂ’s study in 2005 regarding the perceive d benefits of CIPs, but also speculated on industry trends regarding the use of a CIP. Of particular inte rest was the observation that recently (2005) there has been an insurer mi gration away from favoring OCIPs. The trend is largely attributed to deteri oration in OCIP claims experiences. The proceedings further indicated that owners as sponsors were not managing the day to day safety of construction activities. The focu s of owners appeared to be the cost savings resulting from insurance credits from general contract ors and subcontractors ra ther than that from favorable loss experiences. Also, the admi nistrative burden of managing a CIP under the sponsorship of an owner was not supporte d by contractors and th at poor service to contractors and subcontractors was experien ced during claims management. As a final justification for this trend, th e conference participants reveal ed that owner exclusions in the underwriting of CIPs left gaps in coverage that exposed contract ors to risks (McIntyre and Shay 2005, Pella 2005, Perkins 2005).
34 CHAPTER 3 METHODOLOGY Description of Research Methodology The purpose of this study was to determine an accurate method for measurement of CIP efficiency and obtain current industry data that appropriat ely facilitates this measurement so that OCIPs and CCIPs may be quantitatively compared to one another. The degree of efficiency with which a CIP perf orms is a measure of the effectiveness of the loss control, safety programs and claims ma nagement associated with it. This research effort was expended to answer the question of whether CIP efficiency is best achieved under the sponsorship of owners or that of prime contractors. Figure 3-1 shows the methodology flow used during this study for both research and the writing of the thesis. While the overall process remains linear from topic to conclusion, there are many feedback loops that refine the research. Developing the Topic Realizing the critical requirement to ma nage and mitigate financial risk in the construction industry and the key roll that in surance has in accomplis hing this, a study of controlled insurance programs provided the researcher a venue to fill a void in his knowledge. The second factor that led to th e research of CIPs was the limited time constraint placed on the research er. A topic of study had to be selected that supported the researcherÂ’s timeline. A related research study had been conducted on CIPs by Pella in 2005 but that quantitative data ne cessary to complete the research had not been analyzed.
35 Figure 3-1. Methodology flow Opportunity existed to continue research on CI Ps using recently acqui red data that would strengthen or shed new light on the previous qualitative study. Final justification for the selection of the study of CIPs is an honest effort to make a meaningful contribution that clarifies or provides new insight for the construction industry. As a difficult topic to understand, a quantitative comparison of the efficiencies of controlled insurance programs and their impact on loss control, sa fety and construction costs could benefit industry professionals.
36 Acquire Supporting Data A key requirement was to obtain statistical data from an insurance carrier that was large enough and diverse enough to be representative of th e OCIP and CCIP population within the continental United States. To obt ain the data the insurance company scrubbed and recoded the privileged information of its clients and the researcher signed a nondisclosure agreement to protect both the id entity of the insura nce company and their clients. The database was provided in the form of an MS Excel spreadsheet and contained over 10,900 records of coded insurance data. Validation by Literature Review and Consultation The immediate concerns with the data we re threefold. First, did the database contain information that would yield a calculation of effici ency from which to compare OCIPs and CCIPs? Second, were the data biased or skewed in any fashion by the source provider that would render any analysis of limited value? Third, was the data a representative sampling of OCIPs and CCIPs su ch that calculations extracted through the analysis would be meaningful to the industry? Compounding the answers to these questions was the complexity and scope of the coded database. After extensive time was spent on the telephone with in surance company representati ves, a thorough understanding of the data was obtained. This included an understanding of each data field and the definition of each insurance code. This step was so critical to the res earch that an entire section following this methodology is devoted to defining, quantif ying and qualifying the insurance database. Before the validity of the provided data base could be determined, it was first necessary to understand basic in surance terminology, the types of insurance available, the calculation of premiums, loss ratio s, etc. To this end, an exte nsive literature review was
37 conducted on topics suspected as being rele vant to either understanding the data or drawing conclusions from sta tistical analysis. WorkersÂ’ co mpensation, general liability, loss ratios, experience modificat ion ratio, workerÂ’s class codes and CIPs were all topics covered in the literature revi ew that were necessary to both understand the data and validate it as representative and unbiased. The database represented workersÂ’ compen sation premiums paid and claims paid out by CIP sponsors. Each validated record (4663) showed the following information on a CIP sponsor (owner or contractor): Claims experience, and premiums paid per policy effective year Worker class code, and state in which the class code is insured Program premium rating types and adjustments for loss experience. Without a thorough literature review and consultation with experienced insurance analysts, the value of the information available to the researcher within the database would have been drastically reduced. Conference calls with insurance experts were used to develop an understanding of each category of tabular data, how they were derived, and what they meant to the insurance carrier. Assumptions, Hypotheses, Stratifi cation and Statistical Analysis Once the data were determined to be valid and without bias and when they were fully understood by the researcher, assumptions were made and hypotheses developed to set the stage for statistical analysis. It was assumed, for example, that workersÂ’ compensation, as the most costly and controlla ble construction insurance, could be used to measure the success of a CIPs loss cont rol program better than other forms of insurance. It was further assumed that worker sÂ’ compensation loss ratios could be used as a measure of efficiency for a CIP. Th e following hypotheses were then proposed:
38 H1 : The average and aggregate loss ratios of CCIPs are better than the average and aggregate loss ratios of OCIPs. H2 : The average and aggregate loss ratios fo r single projects indicate a better loss experience and higher efficiency than do the average and aggregate loss ratios of multiple projects. H3 : CIPs whose premiums are calculated at the normal rate will show a less favorable average and aggregate loss ratio a nd thus lower efficiency than those rated under another special class code. To conduct an analysis that would test th ese hypotheses, it was necessary to use a more robust statistical software package than MS Excel. One that lent itself to conducting an in-depth analysis and possessed the ability to stratify data with multiple statistical passes was the Statistical Package for the Social Sciences (SPSS). Time was spent codifying the MS Excel database and migrati ng the data to SPSS. The only slowdown to analysis at this stage was that the resear cher was not familiar with SPSS. Knowledge of the software and its function was obtained thr ough manuals, Dr. Hinze, the University of FloridaÂ’s statistical help desk and other graduate students. Finally, analysis was conducted to valid ate the proposed hypotheses. The findings were summarized, conclusions drawn and recommendations for future study made. The writing or rewriting of the thesis occurred at every level of the process as is evidenced by Figure 3-1. As mentioned earli er, the methodology selected was one that was largely linear but contained many feedback opportuni ties to further deve lop the topic after literature review or to further stratify data for additional statistical analysis.
39 CHAPTER 4 DATA ANALYSIS AND RESULTS The Database The data to conduct this study were ac quired from a single large insurance company that insures construc tion projects throughout most of the United States. As part of the nondisclosure agreement required to obt ain the insurerÂ’s data, the name of the insurer and the identity of its clients must remain confidential. The original database arrived as an MS Excel spreadsheet and c onsisted of 10952 records of coded insurance information. Each record in the database represented the workerÂ’s compensation premiums collected and workersÂ’ compensati on losses paid out for a single NCCI work class code, in a particular state for a unique customer/ client (owner or contractor). In order to clarify and proceed with an analysis it is necessary to define and summarize the meaning of each of the 19 fields that comprised a single record. Table 4-1 represents six of the 10900 records, along w ith the column headings defining the 19 fields of each. Moving from left to right, the column headings will be described in greater detail. Note that these six example records are utilized to show the different types of information in the database. Special class code: The information in the first column consisted of one of three special class codes used by the insurer. Th ese included experienced (Exp), mandatory (Man) and normal (Norm). These titles refer to different types of programs under which a client or customer can be insured. With a normal special class code , the customer is
40 insured in such a way that premiums are based upon the manual rate established by NCCI. With a normally rated program pr emiums are not adjusted for the loss Table 4-1. Sample records experience of the client. Instead, premiums are based on the loss experience of a particular work class code for that state. All normal programs with the carrier would be charged the same manual rate premium pe r work class code for a given state. With an experienced special class code premium rates are calculated differently. Because the customer is one that has a histor y of loss experience (favorable or not) the manual rate for the insurance premium is modified based upon that experience. One modification that adjusts this premium is the customers established EMR. The mandatory special class code is one whose rates are predicated on the requirement to comply with a mandatory program, such as a required safety related program. Such a program might be the require ment for a drug testing program that is required by contract. Here, a c lientÂ’s premium rate is adjusted favorably when in compliance the drug testing program. The importa nt aspect to note about the special class code is that all three indicate a different means of calculating insurance premiums charged to customers (o wners or contractors).
41 Sub business unit: There are three types of sub busin ess units in the database and each refers to the sponsor type of th e CIP record in question. The first, owner (OWN) , is an insurance record whose sponsor is an owner and whose program is considered an OCIP. The second, large commercial contractor (LCC) refers to an insurance record whose sponsor is exclusively a commercial contractor. A large contractor is one considered by the insurer to be above the mid industry average annual construction volume and whose typical project size covered with a CIP exceeds $50 million. Large residential contractor (LRC) is the third type of sub bus iness unit in the database and represents a contractor whose majority of business is in the residential market. Both LCCs and LRCs as the sponsors of CIPs re present records whose insurance programs are considered to be CCIPs. Scrubbed customer number: The insurer, in an effort to protect the confidentiality of its clients, replaced the names of all clients/customers represented in the database with a unique whole number. Thus many records will belong to customer number 23 and many other records will belong to customer number 92. Exposure state abbreviation: For each record there is a customer (contractor or owner) assuming the risk of a particular work class code that is insured. The state in which the work class code (steel worker, ca rpenter, electrician, etc.) is insured is identified by the two letter exposure state abbreviation. It is important to note that workersÂ’ compensation premiums vary from stat e to state such that steel workers insured in Alabama will be the subject to a different premium rate than steel workers insured in California or Hawaii. The original database contained informati on on 51 states and the District of Columbia.
42 Class code: Class code is simply the unique four number iden tification code assigned by NCCI as the work classificat ion code. For example, 0645 would indicate sheetrock installer, 0659 roof er and 5221 concrete worker. Only one class code belongs in each record and refers to the class code of worker being insured for a client in a specific state. A list of worker clas s codes is presented in appendix A. Program type/ major product group: The two largest program types of interest to this study are wrap up single project (WUSP) and wrap up multiple projects (WUMP) . As mentioned in the lit erature review, a WUSP is a CIP that insures only a single large project. Often, to make the use of a CIP cost efficient, multiple projects similar in scope and construction will be insu red with a CIP. When this is the case, the CIP is referred to as a WUMP. Other program types exist in the original data base. PRMP and PROJ and MISC are all types of projects in the database whose nature is uncertain. Possibly, the insurer either miscoded (MISC) the project type or a new coding system was put in place that negated the meaning of project types PRMP and PROJ. In either case, the insurer and researcher were only ce rtain that WUSP and WUMP represent CIPs. Because the other program types are in doubt, few in number, and could not be considered CIPs, they were removed fr om the database prior to analysis. Policy effective year: There are 6 policy effective years represented in the database and they range from 2000-2005. Premiums fo r workersÂ’ compensation insurance are adjusted from year to year based upon loss experience across the i ndustry as reported to NCCI. Each record in the database has onl y one policy effective year even though the work class code represented by the record may have been insured for a project lasting several years. Regardless, the premium charge d for the insurance would be that premium
43 indicated by the policy effectiv e year. Furthermore, all clai ms within a record, whether open or closed, are shown to have orig inated in the policy effective year. Claim count closed: Claim count closed is a database heading for each record that indicates the number of resolved and closed claims for each record of insured work class codes. If a claim count is closed then all cl aims for medical, lost wages etc. have been paid out or resolved by the insurer. All expe nses such as administrative fees, attorneyÂ’s fees, etc have also been paid for closed claims. Claim count open: Claim count open indicates the number of claims that are still pending for a work class code in a particular state for a certain customer. There may be claims that are ongoing and remain open long pa st project completion. In the case of an injured worker experiencing a complicated spin al injury, the claim for medical expenses and lost wages may continue for some time. Earned premium: Earned premium is simply the workersÂ’ compensation premiums collected by the insurance company per customer for each work class code insured within a particular state. Under an experienced program type, earned premium may appear as a negative number if the cu stomer has a history of favorable loss experience. This is, in effect, the same as a cr edit to the customer (debit to the insurer) on workersÂ’ compensation premiums in recogniti on for their favorable loss experience. In the case of a normal program type where no experience affects the manual rate paid for insurance premium, a negative earned premiu m would indicate a mistake or miscode on the part of the insurance carrier.
44 Full paid Loss: Full paid loss is the money paid out in claims for workersÂ’ compensation benefits such as medical and lost wages for the work class code whose record indicates either an open claim or closed claim. Full paid loss expense: Full paid loss expenses are monies spent by the insurer in the administration of a claim th at are separate from workersÂ’ compensation benefits paid out. They represent administ rative fees and overhead along with any attorneys fees required in the handling of a claim. Full loss reserve: Full loss reserve applies only to open claims. When a claim is open and the insurance company anticipates th at additional money will be paid out on a claim an estimate of those future payouts are made. That estimate is set aside as money to be spent on workersÂ’ compensation claims in th e future. It is important to note that the reserve should ideally be a cl ose approximation of the actual m oney to be spent. In the database it was noted that these reserve am ounts were generally less than the actual expenditures. Because of this, reserve money can be considered as actual money spent in the settling of a claim. In ot her words, there would be no money left over in reserve after an open claim is settled. There should not be reserve monies set aside unless there is an open claim. Full loss expense reserve: In addition to holding money in reserve for workersÂ’ compensation benefits, the insurer also estimat es the amount of money required in future administration and attorneyÂ’s fees necessary to close an open claim. This estimate, by design, is always short of the actual future expenses incurred in settling an open claim and can therefore be included in the total actual claims expenses incurred by the
45 insurance carrier. Again, there should be no reserve money set aside unless there is an open claim. Written exposure occurrence: Written exposure occurrence is the customerÂ’s (contractor or owner) best guess at the amount of workersÂ’ compensation payroll they anticipate spending on a work cla ss code within a specific stat e across all proj ects insured by a CIP. As a guess, it rarely if ever indi cates the actual workersÂ’ compensation payroll. Written exposure occurrence is updated periodically by the owner and insurance carrier to reflect any changes in workersÂ’ compensati on payroll due to changes in scope of work or work class codes required on projects. Init ially, written exposure occurrence is used by the insurer to establish a baseline for requi red workersÂ’ compensation coverage and the premium rate to be paid for coverage. Written premium: Written premium refers to the total amount of premium to be paid to the insurer for a specified amount of workersÂ’ compensation insurance coverage. As is the case with most CIPs the underwritt en risks represent retros pectively rated plans. The final premium or written premium is adju sted at the close of policy coverage to reflect total earned premium. With a retr ospectively rated pla n, earned premium is adjusted based upon loss experience. The poorer the loss experience, the higher the deductible the customer will retrospectively pay. For all records whose policy has expired and whose open claim count is zero, the writ ten premium equals the earned premium. If open claim counts remain and/or the policy has not expired, it is possible to see a written premium that is not equal to earned premiums . This is reasonable, as premium is being earned by the insurer as the pr oject continues, up to a maximum retrospectively rated written premium at policy close.
46 SIC code: The Standard Industrial Classificatio n Code (SIC) is an industry wide standard code used to delineate which industry area pertains to the record in question. For example, code 150000 is used for general construction, 160000 is highway heavy and 170000 is specialized constr uction. In this databa se the two trailing zer os are left off the code. Therefore SIC 1522 would represent genera l construction with a concentration in the 22 category. A list of SIC codes is presented in the appendix B. Record number: The record number is simply a discrete numerical tag that identifies a record in the database. A few examples help illustrate the inform ation contained in the abstracted records of Table 4-1. Referring to Table 4-1, record # 1, it can be seen that customer number 25 is a large commercial contractor that is experienced. Customer number 25 estimates workersÂ’ compensation payroll for the 0645 (sheet rock workers) work class code in the state of Oklahoma will be $126,990. As a large commercial contractor , customer number 25 is insuring the 0645 risk in OK through a CCIP. More specifically, this CCIP represents a wrap up multiple project (WUM P) program that insures many smaller but similar projects under the same policy. The polic y effective year for th e coverage of this 0645 risk in OK was 2000. The work class code 0645 has experienced $0 in losses and as suspected shows zero closed and open claims. Because customer 25 has experience (0645), it does not seem unusual to have zero losses here. In fact, because the earned premium is a negative $19,965 it is evident that customer 25 has a reco rded credit in this amount with the insurer for the favorable loss experience in the 0645 work class code. The SIC of 152200 indicates th at the 0645 are working in the general construction industry.
47 Record # 2 is a different scenario. This record represents the loss experience and insurance coverage of the work class code 0659 in New Mexico for the large commercial contractor (customer #23). The policy effectiv e year for the covera ge is 2003 and this CCIP, as record #1, is part of a WUMP. Unlike record #1 these 0659s are part of a mandatory insurance program that has prescrib ed risk control measures required either by contract or the insurance car rier in order to receive a premium other than those of experienced or normally classified programs. Mandatory drug testing, background checks or the use of a minority business enterprise are several examples of possible mandatory programs. Customer 23 has estimated the workersÂ’ compensation payroll for 0659s to be $54,233. There have been no losses for 0659s for this contractor as evidenced by $0 entry in all loss categories and the zero open and closed claim counts. The general industry category that these 0659s are working in is 170000, specialized construction. So far, for this class code, the insurer has collected $13,025 in premiums. In the case where there is a loss, refer to record # 3. Here, customer #17, a large residential contractor has insured 5221s in Mississippi with a CCIP. The contractor estimates the workersÂ’ compensation prem ium for 5221s in MS to be $524,345. The initial premium for this risk is in the norma l category and is not ad justed for experience or mandatory programs. The claim counts indica te that there is one closed claim while one claim that remains open. Thus far, the insu rer has paid $456 dollars in medical or lost time benefits and an additional $20 in the ad ministration of that claim. Further, the insurer estimates that the open claim will in cur additional benefit payments of $700 so they have placed this amount in reserve in addition to the $50 they believe will be necessary to administer the remaining claims . Premium paid to the insurer thus far is
48 $31,385, higher than the written premium of $2 9,544. Once all claims are closed and the policy is retrospectively rated for the true loss experience, the written premium will be adjusted to reflect the final earned premium. Screening and Validation The original database of 10952 records was not without flaws. It is common in the insurance industry to have a great number of miscodes for insurance records. Miscodes are a significant source of over or under ch arges for premiums (McIntyre and Shay 2005). This database is no exception. Looking at record #5 in Table 41 it is evident that despite an existing written premium there ha s been no earned premiu m collected or losses experienced. Records such as these are si mply place holders that indicate no loss experience. In cases of no earned premium a nd no losses a loss ratio of losses to premium cannot be calculated. Because this study relies on a comparison of loss ra tios, this type of record is not useful to the study. A second common miscode in this database can be found in record #6. Here a negative earned premium exists for a policy whose category is normal. By definition this is not possible as no credit to the owner or contractor can be issued under a normal program. Normal implies a straight manual rate is charged for the premium with no credit allowance for experience. It is anticipated th at a record tagged as experienced would see some credit under earned premium. Again, this type of miscode makes the record of little use to this study. Looking again at record #6 not e that there is a negative full loss paid dollar amount. This is never the case with an insurer. Claims paid by the insurer are positive dollars leaving the insurance company. There is no refu nd or return on claims money spent by
49 the insurer. This would be a third type of common miscode th at renders a record useless to this study. The final database error to impact this study is one that involves omitted information. Record #4, Table 4-1 shows a s cenario in which losse s are experienced and paid but no earned premium is collected. It is likely that the losses are valid but clearly there should be a premium collected that co vers this risk. With the omission of earned premium for records like these, a calculation of loss ratio becomes impossible as the ratio of losses to earned premium entails divi sion by zero. To eliminate erroneous or meaningless information from the study, reco rds such as these were removed from the database. The final number of meaningful reco rds remaining in the database for use in this study was 4663. Table 4-2 summarizes the re duction in data due to miscodes. Table 4-3 is a summary of two Chi Squared tests with p < 0.01. The Chi Squared tests indicate that the larger number of miscodes occurri ng in OCIPs and WUSPs (illustrated in Table 4-3) are significant. Table 4-2. Change in population sample size
50 Table 4-3. Chi squared tests Scope of Data Figures 4-1, 4-2, 4-3, 4-4, 4-5, 4-6 and 4-7 summarize the data and provide additional information that defi nes the scope of the usable database. Figure 4-1 indicates that 85.4% of the available data for this study represent OCIPs while the remaining 14.6% are CCIPs (LRC or LCC). Figure 4-2 shows that the majority (8 9.2%) of available records are those whose premiums are norma l or calculated based upon the manual NCCI rate and not adjusted for experience or manda tory programs. Although the data covers 42 states and the District of Colu mbia, Figure 4-3 indicates that five states (CA, CO, HI, TX and FL) represent 45.7% of the to tal valid records to be stud ied. As indicated by Figure 4-4, 69.7% of all records are WUMPs while the remaining 30.3% are WUSPs. The policy effective years represented by valid reco rds range from 2000 to 2005, however, Figure 4-5 clearly illustrates that the majority of the records to be considered were from policies whose effective years were 2003 and 2004 (57.5%). It is equally important to note Figure 4-6 which clearly esta blishes the general construc tion SIC (150000) as the most prevalent among the records considered in this study. Although other SICs are represented, the 150000 general cons truction SIC represents 63.7% of all records. Finally Figure 4-7 indicates that the data represent 227 customers (owner or contractors).
51 Figure 4-1. Number of r ecords per sub business unit
52 Figure 4-2. Number of reco rds per special class code
53 Figure 4-3. Number of records per state
54 Figure 4-4. Number of r ecords per program type
55 Figure 4-5. Number of records per policy year
56 Figure 4-6. Number of records per SIC
57 Figure 4-7. Number of records per customer Assumptions To conduct the proposed study many assumpti ons had to be made. The assumptions are as follows: A1 : Despite the presence of general liabil ity, builderÂ’s risk and other forms of insurance encapsulated in a CIP, workersÂ’ co mpensation insurance and its associated loss experience best represents the e ffectiveness of CIP management.
58 A2 : The workersÂ’ compensation loss ratio is an indicator of the efficiency of a CIP in terms of its loss control, safety, and clai ms management programs. For the purposes of this study, workersÂ’ compensation loss ratio is defined as the sum of full paid loss, full paid loss expense, full loss reserve, and fu ll loss expense reserve divided by earned premium. A3 : The 4663 usable records in this study are a representative sample of the entire population of CIPs within the United States. A4 : The loss ratios of OCIPs and CCIPs in the states of TX, CA, CO, HI , FL and PA (52.1% of all records consid ered) represent a trend of lo ss experience between other states whose records are fewer in number. Hypotheses The three hypotheses considered and tested in this study and are listed below: H1 : The average and aggregate loss ratios of CCIPs are better than the average and aggregate loss ratios of OCIPs. H2 : The average and aggregate loss ratios of WUSPs indicate a better loss experience than do the average and a ggregate loss ratios of WUMPs. H3 : CIPs whose premiums are calculated at the normal rate will show a less favorable average and aggregate loss ratio th an those rated under another special class code. Outliers Before testing the several hypotheses of this study, the data considered were analyzed for the presence of outliers that might skew the results of any true measure of loss ratios. To facilitate identification of outliers , a scatter plot (Figure 4-8) was created in SPSS to plot the workersÂ’ compensation loss ra tio for each record considered. Figure 4-8
59 indicates that the vast majo rity of all records have lo ss ratios from 0% to 200% with outliers from 200% to 40000%. Figure 4-8. Loss ratios per record number A frequency analysis (Table 4-4) was c onducted in SPSS to take a closer look at the data. Table 4-4 shows that 71.5% of all records have loss ratios of 0%. Figure 4-8, however, shows that despite 71.5% of all reco rds having an actual loss ratio of 0%, the average loss ratios for cont ractors and owners range from 147% to 364%. Table 4-4 makes clear that loss ratios beyond 95% cumu lative frequency increase exponentially by orders of magnitudes in the thousands. In ot her words, 5% of the workersÂ’ compensation loss ratios are moving the mean loss ratios for owners and contractors away from 0% and
60 toward the range of 147% to 364%. Five perc ent of the sample population greatly affects the entire population. Table 4-4. Frequency of loss ratios Rather than discard the 5% as outliers repr esenting large or catastrophic losses, it was decided to look at loss ratios above a nd below a 95% cumulative frequency for both OCIPs and CCIPs. By doing this it might be possible to compare OCIP and CCIP loss ratios in a category that repr esents large losses (5% of th e sample population) to those representing routine losses ( 95% of the sample population). Analysis of Results The first SPSS analysis conducted was to te st hypothesis H1. Ta bles 4-5, 4-6, 4-7 and 4-8 summarize the results of each stat istical pass. Table 4-5 captures the national
61 average loss ratios of OCIPs and CCIPs co mbined at the 95%, 5% and 100% sample population. Tables 4-6 and 4-7 represent th e average loss ratios of OCIPs and CCIPs individually at the national level and within the six states (TX, CO , FL, CA, PA and HI) that represent 52.1% of the sample populat ion. Figures 4-9, 4-10 and 4-11 graphically depict the information presente d in Tables 4-5 through 4-7. The second SPPS analysis conducted was de signed to answer hypothesis H2. Table 4-8 displays the results of an analysis that compares the national average loss ratios by program type; WUMP or WUSP. Records sorted by program type were also stratified by state (TX, HI, FL, CO and CA). Figure 4-12 gr aphically illustrates th e data contained in Table 4-8. The results of the third SPSS analysis are summarized by Tables 4-9, 4-10 and 411. The information contained in these tables is geared toward answering hypothesis H3. All three tables provide average loss ratio re sults for OCIPs and CCIPs when stratified by special class code. Three special class codes are considered; normal, experienced and mandatory. Figures 4-13, 4-14 and 4-15 graphica lly depict the information presented in Tables 4-9 through 4-11. Because of the large reduction in records due to miscodes, three paired Student T Test were run to assess the significance of the statistical analysis conducted. The three T Tests considered the loss ratios of OCIPs and CCIPs, WUSPs and WUMPs and program types (Normal, Experienced and Mandatory). The three paired Student T Tests indicate that the difference in loss ratios were st atistically significance at p < 0.018. In other words, the chance that the analysis results were a random occurrence was 0.018. Further, the results of all analysis were obtained with 95% confidence.
62 Additional analysis was conducted which c onsidered the aggregate loss ratios for the sample population by sub business unit, pr ogram type and special class code. Rather than average loss ratios within categories, the aggregate loss ratio is a single calculation representing the ratio of the summation of all losses to the summation of all premiums. Table 4-12 and Figures 4-16 through 4-18 encap sulate the analysis of aggregate loss ratios for the sample population. Table 4-5. Average loss ratios (%) for all OCIPS & CCIPS (2000-2005) Table 4-6. Average loss ratios (%) for OCIPS by location (2000-2005) Table 4-7. Average loss ratios (%) for CCIPS by location (2000-2005)
63 Figure 4-9. Average loss ra tios by state (95% sample) Figure 4-10. Average loss ra tios by state (5% sample)
64 Figure 4-11. Average loss ratios OCIP and CCIP (100% sample) Table 4-8. Average loss ratios (%) WUSP and WUMP nationally (2000-2005)
65 Figure 4-12. Average loss ratios WUSP and WUMP Table 4-9. Average loss rati os (%) for normal CIPS (2000-2005) Table 4-10. Average loss ratios (%) for experienced CIPS (2000-2005) Table 4-11. Average loss ratios (%) for mandatory CIPS (2000-2005)
66 Figure 4-13. Average loss ratios by special class code (95% sample) Figure 4-14. Average loss ratios by special class code (5% sample)
67 Figure 4-15. Average loss ratios by special class code (100% sample) Table 4-12. Aggregate loss ratios* *PA has no records of CCIPs. The loss ratios for PA CCIPs are n\a.
68 Figure 4-16. Aggregate loss ratios by location and sub business unit Figure 4-17. Aggregate loss ratios by program type
69 Figure 4-18. Aggregate loss ra tios by special class code
70 CHAPTER 5 CONCLUSIONS AND RECOMMENDATIONS Summary and Conclusions of This Study The first hypothesis of this study, H1, stat ed that there is no difference in the average loss ratios between OCIPs and CCIPs. Looking at all OCIPs and CCIPs on a national level, Figure 4-11 conf irms that there is a differe nce and that H1 must be accepted. Specifically, the average national lo ss ratio of OCIPS to CCIPS is 2.27:1 for 100% of the sample population studied. Looki ng only at five percent of the sample population representing the highest loss ratios, this research finds the same 2.27: 1 ratio of OCIPs to CCIPs. Further analyses revealed that 6.7% of OCIP records had loss ratios greater than 50% while only 5.4% of CCIP records did. Reco gnizing that the loss history of 5% of the sample population drives this rati o, it is necessary to look at the typical loss ratios of 95% of the sample population. Le ss catastrophic and more routine losses are represented within 95% of th is population. Looking at the na tional average loss ratio of OCIPs and CCIPs in this region yields a 1.15: 1 OCIP to CCIP loss ratio. Regardless of the size of the sample population examined, CCI Ps have more favorable loss experiences than do OCIPs. This statement is supported in the aggregate loss ratio analysis. In the aggregate the OCIP to CCIP loss ratio is 1.44:1 in favor of CCIPs having a more favorable loss experience. Table 4-6 and 4-7 indicate that there is some variation to this national trend. Observing six states representing the largest number of records in the database (TX, CA, HI, CO, PA and FL), the same comparison of OCIP to CCIP loss ratios is made. It is
71 important to note that all records in PA we re OCIPs and a comparison to CCIPs was not available. In three of the remaining five states, the CCIP loss ratio was less than the OCIP loss ratio. In one state, Colorado, the loss ratios were tied. In Hawaii, however, the CCIP loss ratio far exceeded the OCIP loss ratio. Although the trend of more favorable loss experiences for contractors continues ther e is some variation by state. This same trend for the five most represented states in this study holds true whether considering moderate losses represented by 95% of th e sample population or severe losses representing only 5% of the sample population. The aggregate loss ratio analysis supports the idea that loss experiences vary by state but with a continuing trend supporting a more favorable loss experience for CCIPs. Examining six states in the aggregate (PA ex cluded) four of five show OCIPs having a higher aggregate loss ratio than CCIPs. The exception, as with th e average loss ratio analysis, is Hawaii. It is important to note that 95% of th e sample population whether OCIP or CCIP has favorable loss experiences. In compar ison to the typical 35%-50% expected loss ratio for any CIP, 95% of the sample populati on of CIPs in this study had an average loss experience of 3.09% (Tables 4-6 and 4-7). It is the remaining 5% of the sample population of CIPs whose loss experiences cr eate an adverse averag e loss ratio for the entire sample population. The experience of the 5% is so bad in fact, that it drives the entire samples loss ratio to an average 261.84% . Comparing this to the expected 35%50% and it is obvious that only a very few members (5%) of the CIP population are causing poor loss experiences for the industry. When comparing the loss ratios of OCIPs to CCIPs in this study, however, the outcome is the same when considering, 100%, 95%
72 or 5% of the sample population. CCIPs have a better average loss ra tio and thus a more favorable loss experience than do OCIPs. The aggregate loss ratio is perhaps a more accurate indicator of CIP performance than is an average loss ratio that is swayed so heavily by 5% of the sample population. The national aggregate loss ratio for OCIPs is 14.0% while that of CCIPs is 9.70%. The aggregate measure indicates that compared to the expected national average of 35% to 50% for CIP loss ratios, the sample populati on considered in this study is performing better. Whether considering the average loss ratio or aggregate lo ss ratio, CCIPs have more favorable loss experiences than OCIPs. If the workersÂ’ compensation loss ratios meas ured in this study are indicators of the efficiency of a CIP in terms of its safety, loss control and claims management programs, then contractors certainly appear to be more efficient and better su ited to manage a CIP. Two plausible explanations alluded to in the literature review may be the reason for this trend. First, there has been a migration away from OCIPS because of recent unfavorable loss experiences (McIntyre and Shay 2005). It may be that owners pursue the use of a CIP as an alternate form of insurance ma nagement primarily because it saves them money by excluding contractor markups on in surance. Realized savings through the volume purchase of large amounts of insuranc e may also be appealing to the owner. None of this is necessarily bad unless it blinds the sponsor of a CIP to the requirement to effectively manage the safety, loss contro l and claims management program. Because CIPs are retrospectively rated, any unfavor able loss experience may well negate an ownerÂ’s savings from bulk purchasing and remo val of contractor markups. It is further probable in an OCIP scenario, that contractors lose motivatio n to be involved in safety
73 programs that require management, money and time because the owner may not share cost savings on insurance with them and the owner has assumed the majority of the risk as the sponsor and purchaser of a CIP. It is imagined that this scenario is further compounded when owners are not physically pr esent on the jobsite to manage the day to day safety aspects of the job. Historically, a co mpetent contractor is in the best position to do this as his presence on site and familia rity with construction means and methods lend themselves to the safe and efficient manage ment of safety and loss control programs. The second hypothesis for this study, H2, is concerned with the program type under which a CIP is implemented. The two specific ty pes considered in this study are wrap-up multiple project (WUMP) and wrap-up single pr oject (WUSP). H2 stated that the average loss ratio of a WUSP would be more favorable than that of a WUMP. Table 4-8 and Figure 4-12 supports the acceptance of H2, how ever, Table 4-12 and Figure 4-17 do not. In all instances of average loss ratios, whether 100%, 95% or 5% of the sample population of WUMPs and WUSP s across the nation, WUSPs have a lower average loss ratio than do WUMPs. In fact, the averag e loss ratio of WUMP to WUSP in both the 100% and 5% categories is approximately 16: 1 (Table 4-8). The 95% sample population appears more reasonable however, with a rati o of 1.62: 1. In either case, WUSPs appear more efficient in terms of controlling loss through effective use of safety programs and claims management. This is not the case when considering the aggregate loss ratios of WUSPs and WUMPs. In the aggregate WUSPs have a lo ss ratio of 18.10% which is higher than the 12.0% loss ratio of WUMPs. To account for this discrepancy is it necessary to consider two factors. First, the averag e loss ratio is a measure largel y and easily skewed by 5% of
74 the sample population. Secondly, the Chi Square d Test conducted in conjunction with the analysis indicated that the disproporti onate number of WUSPs miscoded and deleted compared to WUMPs is significant. Considerin g this, it appears that the aggregate loss ratio is a more accurate reflection of CIP pe rformance. Giving the aggregate loss ratio more credence, it appears that although WUMPs and WUSPs have very close loss experiences, WUMPs outperform WUSPs by a f actor of 1.51:1. For reasons discussed below, however, the comparison of effici ency for WUSPs and WUMPs were largely inconclusive. One plausible reason for this trend lies in the difference in nature between WUMPs and WUSPs. Because WUMPs cover multiple pr ojects of similar construction for their sponsors, it is likely that the average prem ium collected for insuring a multiple project drives the loss ratio of WUMPs lower. With a single project, average premiums collected are smaller and any loss experienced would have greater weight in influencing the aggregate loss ratio than with a WUMP. In fact, a quick analysis of the average premiums collected revealed that averag e collected premium fo r a WUSP is $107,919 for the sample population. Compared to a $157,600 average premium collected per WUMP it is evident that a 1.46:1 ratio of WUMP average premium to WUSP average premium. This closely resembles the 1.51:1 performan ce ratio of WUMPs to WUSPs. It is the difference in average premium collected that influences the loss ratios of WUMPs and WUSPs. Because of this, the comparison of efficiency between WUSPs and WUMPs was inconclusive. The third hypothesis addressed the categor ization of CIPs (OCIP or CCIP) into special class codes. The special class code s discussed in this st udy identify CIP records
75 based upon the way in which premium rates are calculated for a customer. The three special class codes considered are normal (m anual rate), experienced and mandatory. H3 stated that CIPs whose premiums are calcu lated at the normal rate will show a less favorable loss experience than those rated und er another special cla ss code. Tables 4-9, 410 and 4-11 organize and present the informati on gathered from an analysis of average loss ratios based upon special class code. Figur es 4-13, 4-14 and 4-15 graphically display and summarize data from the tables by per centage of sample popul ation (95%, 5% and 100%). One interesting observation involve s mandatory programs. For 100% of the sample population, mandatory programs e xperienced zero losses. Following closely behind were experienced programs whose comb ined average workersÂ’ compensation loss ratio for OCIPs and CCIPs is 18.43% for 100% of the sample population. Not only do mandatory and experienced programs exceed th e average expected loss ratios (35%-50%) they clearly are lower than the loss experiences of normal programs. On average, Table 4-5 shows that normal programs (OCIPs and CCI Ps combined) have an average loss ratio of 372.26% for 100% of the sample population. The 95% sample population loss ratio for normal CIPs appears better at 4.2% until it is compared to a 0% loss ratio for the mandatory and experienced CIP categorie s in the same 95% sample population. The aggregate loss ratio anal ysis parallels and supports observation in the average loss ratio analysis. In the a ggregate, mandatory programs still have a 0% loss ratio. Experienced records show a 0.98% loss rati o while normal records have a 13.66% loss ratio. No matter whether the average loss ratios or aggregate loss ra tios are considered, CIP program types, in order of favorable loss experience are: mandatory, experience then normal.
76 Although the disparity in perf ormance and loss control effi ciency appears large, the trend is not unexpected. With a CIP whose rates fall in th e mandatory category, programs that support a loss control effort are required to be implemented. Drug testing, background checks, site specific safety plans, worker orientation, on site safety managers, and so on, may all be required under a manda tory program. Because these programs are not optional and because they directly imp act safety and loss experience, it should be expected that their loss experience is better th an other programs that do not require such measures. Considering the experienced category, it is expected that the average loss ratio is better than the normal category. Unde r and experienced rating plan, insurance premiums are reduced because of favorable past loss experiences. There is reason to believe that workers and sponsors who have a hi story of performing safely in the past are likely to do so again. In the case of a normally rated CIP, the insure r is covering a risk whose propensity to work safely and manage loss is largely unknown. As such, sponsors of a CIP in this category are charged the manua l or normal rate for premiums as detailed by NCCI. It is expected that not all of th ese unproven customers or workers will perform safely. Thus, a higher average loss ratio for normally rated CIPs does not appear unusual. In conclusion, this study finds that contra ctors have had a more favorable workersÂ’ compensation loss experience from 2000-2005 when sponsoring a CIP. Because of this, it is inferred that the majority of contract ors are more efficient in managing loss control and safety programs than are owners. Further, wrap-up projects are a more efficient form of CIP than are single projects in terms of managing loss control and safety programs. Finally, those CIPs whose cont ractual obligations require mandatory programs designed to enhance safety and manage loss are safer and typically have a be tter loss experience.
77 As of 2005, this researcher finds that the best CIP program will be a WUMP or WUSP managed by a competent contractor who is requ ired by contract to incorporate mandatory safety programs. Recommendations The largest difficulty encountered during this study was the id entification and the elimination of the large number of miscodes contained in the sample database. Despite this setback, the process of anal ysis undertaken for this project remains solid in its ability to measure the performance of CIPs across many categories. It is recommended that future studies be conducted in a similar fa shion using larger databases whose miscodes are minimal. Doing so is likely to yield more accurate results that more closely represent the current state of CIP performance. For insurers, it is paramount to maintain a consistent form of quality assu rance in coding the loss experiences of CIPs if analyses like the one conducted in this study are to produce accurate and meaningful insights for the industry. For the construction industry, it is recommended that close scrutiny of the management abilities and motivations behind the sponsorship of a CIP be undertaken for any project where the use of a CIP is likely. St rong consideration for a contractorÂ’s ability to manage safety and loss control programs on site during day to day operations should not be overlooked. At a minimum, owners shoul d consider sharing wi th contractors any savings gained from the favorable loss expe rience that employs a CIP. Contractor participation and proactive involvement in the loss control program is critical to success when employing a CIP. Insurers and underwriters of CIPs should r ecognize that of all the unfavorable loss experiences encountered when a CIP is empl oyed, 5% of those insured are responsible
78 for loss ratios that exceed 35% to 50%. Resources should be devoted to retrospectively determine the behavioral characteristics and pr actices of the 5% so that they might be screened or managed more effectively. It is recommended that future studies be conducted following the procedure outlined in this research involving a much larg er database that is free from miscodes. By using a larger database it will be possible to consider other performance aspects in terms of the efficiency of CIPs. Some proposed studies are as follows: S1 : An analysis of loss ratios by work cl ass code could determine those industry trades that represent the highest risk. S2 : An analysis of loss ratios for every state to determine if there is consistency of loss ratios across states. S3 : An analysis of loss ratios by SIC code may reveal which construction industries have more favorable loss experiences. S4 : Repeating this study with data that were not miscoded and were much greater in number would narrow the error associated with any loss ratio average and provide a more accurate measurement of loss ratio for CI Ps. The incorporation of a larger database in this study would provide su fficient numbers of records to analyze the performance of CIPs within each state, acro ss policy effective years and w ithin classes of contractor (LRC and LCC). S5 : An analysis that stratified the market share of the insurer in each state to determine if insurance coverage was representative of constr uction volume for that state.
79 APPENDIX A WORK CLASS CODES Table A-1. Work class codes. Work Class Codes Class Value Description Prem Type 0000 #N/A Missing 0005 Farm Prod:Christmas Trees ** Normal 0006 Artificial Insemin:Other Az,Mn,Ok** Normal 0011 Flower Growing Normal 0013 Brush And Weed Sprayi ng-By Contractor Normal 0016 Farm Prod:Apples Normal 0029 #N/A Missing 0032 Loss constant premium Normal 0037 Farm Prod: Pumpkins Normal 0038 Feed Yards Normal 0042 Landscape Gardening-All Operations Normal 0043 Loss constant for classifications su bject to US Longshoremen's and Harbor Workers' Compensation Act Mandatory 0045 Orchard Work-Nut Crops-P runing With Hand Normal 0048 For transactions involving re trospective surcharge Mandatory 0050 Farm Machinery Operation & Drivers Normal 0051 #N/A Missing 0055 Agriculture:Chick, Squab Or Fish Normal 0056 Differences between standard premium and the final premium under the comprehens ive rating plan Mandatory 0057 Waiver charges of the retros pective rating plan Discretionary 0059 For reporting disease experience in connection with abrasive or sand blasti ng (losses only) Normal 0061 Flat policy charge for unin sured subcontractors Mandatory 0063 Premium discount-stock carr ier discount pl an PremDisc 0064 Premium discount-nonstock ca rrier discount plan PremDisc 0065 For reporting disease experience in connection with incidental foundries-steel (losses only) Mandatory 0066 For reporting disease experience in connection with incidental foundries-nonf errous metals (losses only) Mandatory 0067 For reporting disease experience in connection with incidental foundries-iron (losses only) Mandatory 0068 Premium produced by the flat charge for an additional medical coverage Mandatory 0069 Foreign voluntary compensation (company use only) Discretionary 0076 Premium credit under tr ansition program Mandatory 0077 Premium surchargeÂ—assign ed risk plan Mandatory
80 Table A-1. Continued. Class Value Description Prem Type 0083 Farm: Cattle Or Livestock Raising Noc & Drivers Normal 0088 Aircraft Oper-Passenger-0088 ** Normal 0098 Exclusive state or federal coverage Normal 0101 Cogeneration fuel recoveryÂ—bituminousÂ—state occupational disease Normal 0106 Christmas Tree Harvesting ** Normal 0111 Strike duty in connection with code 7720Â—detective or patrol agencies (except New Jersey) Normal 0112 Strike duty in connection with code 8755Â—labor unions Normal 0113 Farm Prod:Fish Hatcheries Normal 0120 Additional premium fo r coverage B Mandatory 0123 Additional premium for coverage B, limita tion of $2,500,000 pe r accident Mandatory 0127 Surcharge applies for silicious glaz ing or enameling operations in c onnection with other manufacturing operations Mandatory 0133 For reporting supplemental disease experience in connection with asbest os exposure (not available in CA, NY, and WI) Mandatory 0147 Premium credit under pulpw ood transition program Mandatory 0148 Premium debit under pulpwood transition program Mandatory 0153 Lawn or Shrub Spraying Normal 0156 For reporting disease experience in connection with code 1005-coal mining-surfa ce (losses only) Mandatory 0157 For reporting disease experience in connection with code 1009-coal mining-surface auger mining (losses only) Mandatory 0158 For reporting disease experience in connection with code 1005-coal mining-NOC (losses only) Mandatory 0159 For reporting exposure and premium for disease coverage for former coal mine operators where there is liability under the Federal Coal Mine Health and Safety Act Mandatory 0161 For reporting experience of insureds exposed to coal workers pneumoconiosis with substantial underground coal mine exposure Mandatory 0162 For reporting disease experience in connection with Pennsylvania coal truckmanÂ—Class 810 where there is liability under the federal Coal Mine Health & Safety Act Mandatory 0164 For reporting disease experience in connection with any classification other than coal mining where there is liability under the federal Coal Mine Heal th & Safety Act (lo sses only) Mandatory 0174 Connecticut special compensation or excess sp ecial compensationÂ—additional premium Mandatory 0175 Insurance guarantee fund surcharge or asse ssmentÂ—not subject to expe rience rating Mandatory 0176 Supplemental disease loading for abrasive wheel manufacturing Class 513 Mandatory 0179 For reporting supplemental disease experience in c onnection with exposure NOC (not available in CA, NY, and WI) Mandatory 0181 Cogeneration fuel recoveryÂ—anthracit eÂ—federal occupational disease Normal 0182 Cogeneration fuel recoveryÂ—bituminou sÂ—federal occupational disease Normal 0251 Irrigation, Drainage Or Reclamation Work Normal 0277 Assigned Risk Adjustment Pr ogram (ARAP) premium Mandatory 0281 Book Publishing Normal 0311 Cabinet Mfg. Normal 0388 Aggregate excess insurance (special stat call) Mandatory 0407 Pipe Or Tube Mfg. Normal 0411 Structural Steel Fabrication Normal 0413 Ornamental Railings Normal
81 Table A-1. Continued. Class Value Description Prem Type 0415 Boiler or Tank Mfg. Shop Only Normal 0445 Metal Mfg. NOC Normal 0454 Sheet Metal Shop Normal 0461 Bacteria Prod For Sewage Disposal Plants Normal 0473 Electrical Apparatus Mfg. Normal 0487 Instrrument Mfg. Normal 0511 Concrete Products Mfg. Normal 0581 Excavation-N.O.C.-Inc.Emp<$22 Normal 0601 Road/Street Construction Normal 0602 Road/Street Subsurface Normal 0603 Sewer Construction Normal 0605 Railroad Construction or Main tenance Non-Elevated Normal 0607 Drilling NOC & Drivers Normal 0608 Concrete Work Slab/Yard Normal 0609 Coffer Dam / Caisson Normal 0611 Pile Driving Normal 0617 Gas, Steam, Water Main Normal 0645 Sheet Rock Installation Normal 0646 Furniture or Fixture Installation Normal 0647 Insulation Work NOC & Drivers Normal 0648 Carpentry Finished Wood Normal 0649 Ceiling Installation Suspended Acoustical Grid Type Normal 0651 Carpentry, Noc Normal 0652 Carpentry Detached Dwellings Normal 0653 Masonry, Noc Normal 0654 Concrete Construction Normal 0655 Iron Or Steel Erection Normal 0656 Electric Light or Power Line Construction Normal 0657 Rigging Normal 0658 Door Installation Metal Normal 0659 Roofing Normal 0660 Fire Alarm Installation Normal 0661 Electrical Contractor Normal 0663 Plumbing, Noc Normal 0664 Heating & Air Conditioning Normal 0665 Grist Mill Normal 0666 Machine Shop, Noc Normal
82 Table A-1. Continued. Class Value Description Prem Type 0667 Asphalt Works Normal 0668 Tile, Stone, Mosaic Or Terrazzo Normal 0669 House Furnishing Install Normal 0670 Millwright Normal 0673 Millwright Normal 0675 Sheet Metal Installation Normal 0675 Auto Haulaway Or Driveaway-& D ** Normal 0676 Bioler Install And Repair Normal 0677 Railroad Operation Normal 0718 Aircraft operation for reporting passe nger seat surcharge and crash losse s to employees ot her than member of crew Normal 0721 For reporting nonratable portion of rate for Code 7405 (not available in MN) Mandatory 0745 Waterworks Normal 0753 Agricultural Implement Stores-Not Farm Normal 0755 Electrical Utilities Normal 0757 For reporting nonratable portion of rate for Code 4758 Mandatory 0758 For reporting nonratable portion of rate for Code 4759 Mandatory 0759 For reporting nonratable portion of rate for Code 4761 Mandatory 0761 For reporting nonratable portion of rate for Code 7323F (not available in GA, MA, and MN) Mandatory 0763 For reporting nonratable portion of rate for Code 4766 Mandatory 0766 For reporting nonratable portion of rate for Code 4767 Mandatory 0767 For reporting nonratable portion of rate for Code 4770 (not available in LA and MN) Mandatory 0770 For reporting nonratable portion of rate for Code 4773 (not available in LA and MN) Mandatory 0773 For reporting nonratable portion of rate for Code 4774 (not available in LA and MN) Mandatory 0774 For reporting nonratable portion of rate for Code 4775 (not available in LA and MN) Mandatory 0775 For reporting nonratable portion of rate for Code 4776 (not available in LA and MN) Mandatory 0776 For reporting nonratable portion of rate for Code 4779 (not available in LA and MN) Mandatory 0779 For reporting nonratable portion of rate for Code 7250 Mandatory 0790 For reporting nonratable portion of rate for Code 4799 (not available in LA and MN) Mandatory 0799 Trucking, Noc Normal 0811 Warehousing Normal 0813 Contractors Equipment Servicing Normal 0814 Auto Body Repair Normal 0815 Limousine Services Normal 0817 Warehouses-Field Bond ed Warehouses Normal 0855 Expense constant (rev ised program) Mandatory 0860 Expense constant (rev ised program) Mandatory 0889 Reduction in premium that is not the result of th e application of modificati on USL&HW Act Discretionary
83 Table A-1. Continued. Class Value Description Prem Type 0900 Premium Discount PremDisc 0901 Domestic Workers-Inside Normal 0908 Inservants Occasional Normal 0909 Outservant Occasional Normal 0912 Flower Assembling Artificial Normal 0913 Locksmiths Normal 0916 Additional premium waiver of subrogation Mandatory 0922 Household Goods Dealer Normal 0924 Short-rate penalty prem ium (countrywide) Mandatory 0925 Premium credit for claims deductible coverage (credit not subject to experience rating)Â—$4,000 deductible Deductible 0926 Second injury fund surcharge Mandatory 0930 Uninsured employers fu nd surcharge Mandatory 0931 New Jersey Plan surcharge amount applicable when volu ntary coverage is rejected by an employer insured in the plan Mandatory 0935 Premium resulting from the application of the New Jersey Plan Rating Program Mandatory 0936 Premium resulting from the application of the New Je rsey Plan Premium Rating Ad justment Program Mandatory 0937 New Jersey retrospective premium fo r policies voluntarily wri tten under a retrospective rating program Mandatory 0941 Elevator Inspection Normal 0942 Clerical Office Employee Normal 0945 Security & Investigation Normal 0951 Architects Normal 0952 Physicians Normal 0953 Hospital All Employees Normal 0954 Bldg. Operation Normal 0955 Garbage Works Normal 0957 Premium credit for medical deductible coverage (credit not subject to experience rating)Â—$2,500 deductible Deductible 0961 Premium credit benefit deductibleÂ—$500 deductible Deductible 0971 Fire Patrol Normal 0972 Maritime (company use only) Normal 0980 Additional premium required to balance to risk minimum premium (e xcept USL&HW non-"F" codes) Normal 0985 OrchardsÂ—nut crops (c ompany use only) Normal 0986 Binder premiu m (company use only) Mandatory 0990 Minimum premium charge for U.S. longshoremens an d harbor workers coverage endorsement for non-"F" codes Mandatory 0991 For reporting premium credit resulting from a flat decrease on aggregate premium earned on outstanding policies Mandatory 0992 Additional or refund prem ium due to change in experience modification Experience 0993 For reporting premium resulting from flat increase for law amendment on aggregate premium earned on outstanding policies after effectiv e date of amendment Mandatory 0994 For reporting USL&HW total premium Mandatory 0995 Cleaner Debris Removal Normal
84 Table A-1. Continued. Class Value Description Prem Type 0997 Coal Mining-Surface & Drivers Normal 0998 Cogeneration fuel recoveryÂ—anthraciteÂ—traumatic Normal 0999 Cogeneration fuel recoveryÂ—anthraciteÂ—state occupational disease Normal 1005 Cogeneration fuel recoveryÂ—bituminousÂ—traumatic Normal 1021 Caves-Excavation Of New Areas Normal 1022 Feldspar Mining-& Drivers(1164) -Nc Normal 1023 Blast Furnace Operation & Drivers Normal 1024 Asphalt Works & Drivers Normal 1164 Mining Subsurface Normal 1165 Mining Above Surface Normal 1320 Oil or Gas Lease Operator Al l Operations and Drivers Normal 1438 Quarry-Cement Rock-Surface Normal 1463 Lime Mfg-Quarry-Surface-& Drivers Normal 1605 Stone Crushing-Includi ng Construction Normal 1624 Clay Milling-& Drivers Normal 1654 Marble Cutting Or Polishing Normal 1655 Die Casting Mfg Normal 1701 Carpet Cleaning-& Drivers Normal 1710 Carpet Cleaning & Drivers Normal 1741 Flint, Spar or Silica Grinding & Drivers Normal 1747 Bark Peeling In Connect With Log ** Normal 1803 Barking Mills Normal 1809 Stone Cutting Normal 1925 Box Or Box Shook Mfg Normal 2581 Building Mfg.-Por table-Wood Normal 2585 Auto Trailer Mfg.-Home Type ** Normal 2702 Barrel Assem Normal 2710 Airplane Subassemblies Mfg.-Wood Normal 2737 Sash Door Mfg Normal 2759 Steel Making-Electric Furnaces Normal 2797 Automobile Trailer Mfg. Normal 2802 Lead Works-Sheet Normal 2812 Pipe Or Tube Mfg.-Other Than Iron Normal 2817 Box Mfg, Cigar Wood Normal 2881 Bridge Crane Structural Support Normal 2883 Reinforcing Steel Fabrication Normal 2916 Plywood Manufactuing No Log Processing Normal
85 Table A-1. Continued. Class Value Description Prem Type 2960 Pole, Post or Tie Yard & Drivers Normal 3004 Aircraft Landing Mats Mfg.-By Welding Normal 3018 Iron/Steel Fabric:Ir on-Ornamental Normal 3022 Awning Mfg.-Metal Normal 3027 Lead or Copper Milling Normal 3030 Sign Mfg-Metal Normal 3039 Coppersmith-Shop ** Normal 3040 Airplane Subassemblies Mfg.-Metal Normal 3041 Blacksmith Normal 3042 Elevator or Escalator Mfg. Normal 3060 Agricultural Tool Mfg.-Hand Normal 3064 Auto Window And Trim Moulding Mfg Normal 3066 Auto Horn Mfg.-Electric Normal 3076 Electric Or Gas Lighting Fixtures Mfg Normal 3085 Foundry Nonferrous Normal 3111 Plumbers' Supplies Mfg Noc Normal 3126 Hard Facing-Metal Part Normal 3146 Auto Parts Mfg.-Miscel laneous Stamped Normal 3179 Agricultural Machinery Mfg Normal 3180 Adding Machine Mfg Noc Normal 3188 Engine Mfg Noc Normal 3257 Wire Goods Mfg Normal 3290 Boilermaking Normal 3307 Heat Treating Metal Normal 3365 Aircraft Engine Mfg Normal 3372 Electroplating Normal 3400 Auto Jacks Mfg.-Not Stamped Normal 3507 Gear Mfg Or Grinding Normal 3560 Machinery Mfg Food processing Normal 3574 Electric Power Equipment Mfg Normal 3612 Electrical Harness Assembly Normal 3620 Electro-Physical Therapy Equipment Mfg Normal 3629 Petroleum:Oil-Refining,Distilling Normal 3632 Electrical Apparatus Installation Normal 3635 Boiler Installation Normal 3643 Air Conditioning:Co mmercial Repair Normal 3681 Automobile Mfg Or Assembly Normal
86 Table A-1. Continued. Class Value Description Prem Type 3685 Automobile Body Mfg.-Truck,Trailer Or Bu Normal 3719 Automobile,Bus:Noc Normal 3724 Millwright Normal 3726 Boiler Installation Or Repair Normal 3737 Electrical Apparatus Repair Or Servicing At Customers' Premises & Drivers (NY) Normal 3808 Glass Merchants-Including Bending Normal 3815 Boot Or Shoe Mfg-Rubber Normal 3824 Plastics Mfg:Sheets, Rods, Or Tubes Normal 4000 Cable Mfg-Insulated Electrical Normal 4021 Button Mfg Noc ** Normal 4034 Plastics-Fiber Reinforced Products Normal 4036 Plasterboard Mfg. Normal 4038 Plaster Statuary Mfg. Normal 4130 Analytical Chemist Normal 4410 Exterminator & Drivers Normal 4452 Plastic Mfg. NOC Normal 4459 Fertilizer Mfg Normal 4470 Acetylene Gas Mfg & Drivers Normal 4484 Asphalt Or Tar Distilling Or Refining Normal 4493 Linoleum Mfg. Normal 4497 Asphalt Or Tar Distilling Or Refining Normal 4511 Analytical Chemist Soil Inspection & Testing Normal 4519 Chemical/Dyestuff Rating-4805 Normal 4583 Acid Mfg Normal 4635 Acid Mfg. 1/1/98 Normal 4740 Acoustical Ceiling Installation Normal 4741 Masonry NOC Normal 4777 Masonry-Employees <$18 Noc Normal 4779 Explosives Mfg. Normal 4805 Chemical & Dyestuff Normal 4815 Chemical & Dyestuff Normal 4820 Chemical & Dyestuff Normal 4823 Chemical & Dyestuff Normal 4828 Chemical Mixing NOC & Drivers Normal 4829 Chemical Mfg NOC Normal 5020 Ceiling Installation Suspended Acoustical Grid Type Normal 5021 Iron\Steel-Structural -In The Constr. Normal
87 Table A-1. Continued. Class Value Description Prem Type 5022 Masonry NOC Normal 5027 Iron/Steel Erection: Construction Normal 5028 Burglar Guards Or Bars-Installation Normal 5037 Painting Metal Structures Normal 5038 Metal Erection Non-Structural Interior Normal 5040 Iron/Steel Erection Structure Normal 5041 Painting Structures Over Two Stories Normal 5057 Iron/Steel Erection NOC Normal 5059 Iron Or Steel: Erection--Frame Structures Not Over Two Stories In Height Normal 5067 Bridge Building Metal (MO, VA) Normal 5069 Blackboard Insta llation-Wood Normal 5070 Elevator Erection Or Repair Normal 5086 Plumbing Normal 5099 Asbestos Covering On Boilers Normal 5102 Iron/Steel Interior Normal 5103 Automatic Sprinkler Installation =>21 Normal 5107 Butane Or Shellance Units-5187 Normal 5128 Automatic Sprinkler Installation Normal 5140 Electrical within Buildings Normal 5146 Furniture or Fixture Installation Normal 5160 Elevator/Escalator Erec tion or Repair Normal 5183 Plumbing NOC & Drivers Normal 5184 Air Cond:Non Port:Ins ta Start-Up-Wi Normal 5185 Communications Cabling-Within Buildings Normal 5186 Concrete\Cement-Concre te Floor Slabs Normal 5187 Concrete-Floor Sl ab-Below $17 Normal 5188 Sprinkler Installation Normal 5190 Electrical Wiring in Buildings Normal 5191 Dam Construction-Concrete -All Operations Normal 5192 Concrete Pumping-All Operations-N.P.D. Normal 5193 Concrete Construction NOC Normal 5194 Concrete\Cement-Precast Concrete Wall Normal 5195 Concrete Private Resi d-Not Monolithic Normal 5200 Artificial Turf Installation Normal 5201 Concrete or Cement Work Floors, Driveways, Yards, or Sidewalks Normal 5203 Elevated Concrete Normal 5205 Swimming Pool Cons tr-In Ground Normal
88 Table A-1. Continued. Class Value Description Prem Type 5207 Reinforcing Steel Installation Normal 5211 Bridge Construction Under 10 Feet Normal 5212 Marble Setting-Interior Normal 5213 Concrete NOC Normal 5214 Capentry NOC Normal 5215 Concrete Work Incidental to the Construction of Private Residence Normal 5220 Cabinet Work Installation Normal 5221 Concrete Work Slab/Yard Normal 5222 Concrete Birdge or Culvert Normal 5223 Swimming Pool Constrnot Iron or steel Normal 5225 Lathing Normal 5348 Tile Work Inside Normal 5402 Wallboard Appl.-Em pl.Noc <$20 Normal 5403 Carpentry NOC Normal 5409 Glaziers-Away From Shop Normal 5429 Waterproofing -& Yard Employees, Drivers Normal 5432 Glaziers-Employees <$20 Normal 5436 Glaziers-Employees >$20 Normal 5437 Finished Wood Floors and Cabinets Normal 5443 Lathing & Drivers Normal 5445 Sheet Rock Installation Normal 5446 Camouflage Work-Painting Normal 5447 Carpet,Linoleum,Vi nyl,Asphalt Normal 5462 Glaziers Normal 5466 Fireproofing-Structural Steel Members Normal 5467 Beer Vats-Coating (5482) Normal 5470 Plastering Or Stucco-Emp <$19 Normal 5472 Plastering Or Stucco-Emp >$19 Normal 5473 Paper Hanging & Drivers Normal 5474 Painting or Paper Hanging Normal 5476 Street & Road Paving Normal 5478 Carpet, Linoleum, Vinyl, Asphalt or Rubber Floor Tile Installation Normal 5479 Insulation Work NOC & Drivers Normal 5480 Plastering NOC & Drivers Normal 5482 Air Conditioning Systems-Refrig -Az Normal 5484 Sheet Metal Work & Drivers Normal 5485 Air-Condition-Not Port-(5542) Normal
89 Table A-1. Continued. Class Value Description Prem Type 5491 Paperhanging Normal 5500 Dam Construction:Roofing 5547 Normal 5506 Street/Road Construction Normal 5507 Street/Road Subsurface Normal 5508 Street or Road Construction Rock Excavation Normal 5509 Street/Road Maintenance Normal 5515 Roofing Wage = Or > $17 Normal 5516 For use in connection with average rated risk s under the comprehensive rating plan Mandatory 5536 Heating & Air Conditioning Normal 5537 Cleaner Debris Removal Normal 5538 Sheet Metal Normal 5539 Prefabricated Metal Building Erection Normal 5542 Steel Framing--Light Gauge--Residential Normal 5545 Steel Framing--Light Gauge--Res/= Normal 5547 Aluminum Siding Inst al:Detached ** Normal 5550 Exterminator -Az Normal 5551 Roofing All Kinds Normal 5552 Carpentry Detach-Wage=Or > $19.00 Normal 5553 Salvage Operation & Inci dental Wrecking Normal 5555 Salvage Operation-No Wrecking Normal 5606 Executive Supervisor Normal 5610 Cleaner Debris Removal Normal 5613 Dam Or Lock Constr:Concrete Work Normal 5630 Dam Or Lock Constr:Earth Moving ** Normal 5631 Grading Of Land Noc & Drivers Normal 5645 Carpentry Detached One or Two Family Dwellings Normal 5650 Levee Construction-All Operations & D Normal 5651 Additional premium for increased limits under coverage B Mandatory 5697 Carpentry for Residential in CA Normal 5701 Drilling Noc & Drivers Normal 5703 Building Raising or Moving & Drivers Normal 5705 Excavation Normal 5708 Wrecking NOC Buildings Normal 5709 Street & Road Maintenance Govt Normal 6003 Pile Driving & Drivers Normal 6005 Excavation-N.O.C.-Inc.Emp>$22 Normal 6011 DAM CONSTRUCTION NOC(CA) Normal
90 Table A-1. Continued. Class Value Description Prem Type 6017 Drainage System Constr & D Normal 6018 Petroleum:Oil-Pipe Li ne Construction Normal 6039 Drilling Oil Or Gas Wells & Drivers Normal 6042 Tunneling-All Work To Completion Normal 6045 Caisson Work-All Operations Normal 6198 Foundation Preparation Work-Including Normal 6199 Subway Construc tion (6259) Normal 6204 Drilling NOC & Drivers Normal 6206 Oil or Gas Cementing Normal 6213 Oil or Gas Well Specialty Tool Operations NOC Normal 6216 Oil or Gas Lease Work NOC Normal 6217 Excavation & Drivers Normal 6218 Sewer Const-All Op-Emp >$20 Normal 6219 Gas Mains-Wage Below $19 Normal 6220 Gas Mains-Wage = Or > $19 Normal 6229 Gas Mains Or Connecti ons Construction Normal 6233 Oil & Gas Pipeline Construction Normal 6235 Irrigation Pipe Installation Normal 6251 Tunneling Pneumatic Normal 6252 Excess limitsÂ—disease coverage B Mandatory 6257 Caisson Work-Pneumatic Normal 6258 Marina Normal 6259 Ship Building Iron or Steel NOC & Drivers Normal 6260 Tunneling Pneumatic Normal 6306 Sewer Construction Normal 6307 Marine Railway Installation Normal 6308 Ship Scaling Or Painting-Ship Hulls Normal 6315 Vessels-Noc,Program I Normal 6316 Ferries-Program I Normal 6319 Gas or Water Main Normal 6325 Conduit Construction Normal 6326 Boat Livery-Program I Normal 6364 Vessels-Noc,Program Ii,Usl Act Benefits Normal 6400 Fence Erection Metal Normal 6666 Railroad Oper-Program I Normal 6704 Railroad Construction All Operations Normal 6826 Automobile Haul\Drive Loc Normal
91 Table A-1. Continued. Class Value Description Prem Type 6829 Automobile:Haulaway Or Driveaway-Long Normal 6834 Boat Building or Re pair & Drivers Normal 6843 Trucking:Parcel Delivery Normal 6854 Shipbuilding Iron or Steel NOC Normal 6872 Coal Dock Operation & Stevedoring Normal 6874 Dredging-All Types Prog Ii Usl ** Normal 7016 Banks/Trust Co:Armored Car Crews ** Normal 7019 Bus Co:All Other Empl oyees & Drivers Normal 7020 Supply Boats/Tugboats Normal 7024 Vessels NOC Tugboa ts, Supply Boats Normal 7028 Aircraft/Helicopter-Air-Car-Sch/Supp. Normal 7038 Aircraft Oper:Trans Of Per-Fl Normal 7047 Aircraft Oper-Airport Or Heliport Operat Normal 7098 Vessels Not Self-Propelled (USL&H) Normal 7133 Aircraft Operations, Noc Normal 7151 Aircraft/Helicopter Oper.:Air Car-Com Normal 7208 Trucking: NOC Drivers In Conne ction Therewith MI only Missing 7219 For reporting nonratable portion of rate for Code 7431 (not available in LA and MN) Mandatory 7222 Trucking: Oil Field Equipment Normal 7223 Gas Works-All Operati ons-Includ.Constr. Normal 7228 Gas Distributing-L.P.G. Or Natural Gas Normal 7229 Natural Gas Distribution Normal 7230 Waterworks-OperationAll Employees Normal 7231 Trucking: Mail not USPS All Employees Normal 7309 Electric Power Line Constr & Drivers Normal 7313 Electric Power Co Noc-All Employees & D Normal 7317 Stevedoring: By Hand or Hand Trucks Exclusively Normal 7327 Stevedoring: Containerized Freight & Drivers Normal 7333 Dredging All Types Normal 7337 Sanitary Or Sanitation Districts Normal 7370 Taxicab Companies All Employees Normal 7380 Telecommunications Companies Normal 7382 Telephone,Telegraph or Fi re Alarm Line Normal 7394 Wrecking & Diving Marine Normal 7398 Fire Alarm, Line & Drivers Normal 7405 Audio Or Call Box Systems Instal ** Normal 7421 Radio & Radar-Missile Tr acking Stations Normal
92 Table A-1. Continued. Class Value Description Prem Type 7422 Aircraft Operation for Employer 's Business Flying Crew Normal 7423 Pile Driving Normal 7428 Fire Patrol Or Protective Corps Normal 7431 Firemen-Paid & Drivers Normal 7445 Airport Security Screening-Contract-& D Normal 7453 Banks/Trust Co:Empl Agencies-Ct,Me Normal 7500 Railroad ConstructionAll Operations Normal 7502 Stores-Florists-Including Service Normal 7515 Coffee, Tea Or Grocery Dealer-Retail & D Normal 7520 Concessions:Hat Or Co at Check Rooms Normal 7536 Cable Installation Normal 7538 Electric Light or Power Line Construction Normal 7539 Barber Or Beauty Parlor Supply Houses Normal 7580 Construction Barric ad Rental Normal 7590 GARBAGE WORKS Normal 7600 Furniture Rental-Chairs, Coats Racks Normal 7601 Telephone,Telegraph or Fi re Alarm Line Normal 7602 Dealers Of Reinforcing Rods Normal 7605 Fire or Burglar Alarm In stallation or Repair Normal 7610 Oil Or Gas-Store Or Yard Only Normal 7611 Telephone,Telegraph or Fire Al arm Line Underground Normal 7612 Telephone,Telegraph or Fire Al arm Line Overhead Normal 7613 Feed Dealer & Local Managers, Drivers Normal 7704 Construction or Erectio n Permanent Yard Normal 7710 Building Material Dealer:Other Employees Normal 7720 Security Enforcement Normal 7723 Plywood Dealers Normal 7855 Railroad Construction or Main tenance Non-Elevated Normal 8001 JockeysÂ—per race basis Normal 8006 Breeding Farm Or Stable & Drivers Normal 8008 Warehouses-Self Storage Normal 8010 Cotton Merchants Normal 8017 Furniture Moving-Including Packing Normal 8018 Alcohol Dealers-Bulk-& Drivers Normal 8028 Air Cond:Automobile-In stallation-Service Normal 8032 Dry Goods Wholesale Normal 8044 Air Conditioning Syst ems-Automobile Normal
93 Table A-1. Continued. Class Value Description Prem Type 8058 Auto Parking Station & Drivers Normal 8106 Automobile Body Repair Normal 8107 Automobile Leasing Co :Garage Employees Normal 8111 Battery Salvaging Normal 8167 Air Cond System:NonPort-Air Flow Normal 8204 Boiler Inspection Normal 8215 Salespersons-Program Ii,Usl Act Normal 8227 Contractor Permanent Yard Normal 8232 Building Material New Dealer Yards Normal 8233 Coal Merchant & Local Managers & Drivers Normal 8234 Automobile Salespersons Normal 8235 Labor Unions-Employees Engaged Outside Normal 8236 Accountant Traveling Normal 8264 Used Paper, Bottle or Rubber Dealer & Drivers Normal 8265 Clerical Office Program Ii State Act Normal 8278 Executive Officers Noc Normal 8279 Office Normal 8290 Attorney-All Employees & Clerical, M, D Normal 8292 Homemaker Services-All Employees Normal 8293 Dentist & Clerical Normal 8350 Asylum:Professional Employees Normal 8370 Church:Professional Employees ** Normal 8380 Clerical Telecommuter Employees Ak Normal 8387 Car Wash & Drivers Normal 8391 Telecommunications Companies-Office Normal 8392 Exhaust Ducts-Kitc hen-Cleaning Normal 8393 Building Operation/Commercial Properties Normal 8395 Buildings-Operation Ak Normal 8500 Buildings-Operation By Contract Normal 8601 Architect/Engineer Normal 8606 Geophysical Exporation Seis mic All Employees Normal 8710 Amusement Park Operation & Drivers Normal 8720 Bridge Or Vehicular Tunnel Oper ** Normal 8738 Apartment House Operations.. Az Normal 8741 Real Estate Agents CA only Normal 8742 Sales Outside Normal 8748 Rate deviation creditÂ—subject to experience rating LRO
94 Table A-1. Continued. Class Value Description Prem Type 8755 Rate deviation debitÂ—subjec t to experience rating LRO 8800 Letter Service Shop & Clerical Normal 8803 Asylum:All Other Employees Normal 8805 Nonrated premium discount PremDisc 8809 Premium creditÂ—contracting classification CPAP 8810 Clerical Normal 8820 Commissary Work:Restaurant ** Normal 8827 Club-Country,Golf,Fishing Normal 8832 Banks & Trust Cos.-Cafe/Rest. Normal 8833 Caterers Normal 8859 Computer Programming Normal 8868 Park Noc Normal 8871 Aircraft Oper-Passenger-9108 ** Normal 8901 Strike duty in connection with Code 7 720Â—detective or patr ol agencies Normal 9001 Charitable: All Ot her Emp & Dr. Normal 9008 Strike duty in connection with Code 8755Â—labor unions Normal 9009 Employers liabi lity/voluntary compensation for coverage in monopolistic fund states Mandatory 9012 Beach Cleaning-& Drivers Normal 9014 Ashes, Garbage Or Refuse Collection & D Normal 9015 Bldg. Operation by Owner Normal 9016 Advertising Display-Installation Normal 9019 Automobile,Bus:Painting ** Normal 9025 Cleaning Outside Surfaces Of Buil dings & Drivers. NY only Missing 9030 Building Service Contra ctor NY only Missing 9032 Automobile-Radio,Tv,Video And Audio Normal 9034 Rate deviation creditÂ—subject to experience rating LRO 9036 Advertising Display Install/Serv Normal 9037 Rate deviation creditÂ—subject to experience rating LRO 9039 Scaffolds, Hod Hoist Or Constr. Normal 9040 Concrete Distributing Towers Install Normal 9041 Bell Installation-Tower-& Drivers Normal 9046 Premium creditÂ—contracting classification CPAP 9052 Advertising Co & Drivers Normal 9058 Neon Signs-Installation Normal 9060 Sign Erection Or Removal-& Drivers Npd Normal 9061 Club NOC & Clerical Normal 9079 Advertising Company-Outdoor Normal
95 Table A-1. Continued. Class Value Description Prem Type 9082 Deductible credit not subject to experience rating Deductible 9102 Deductible credit subject to experience rating Deductible 9108 Premium credit for claims deductible coverage (credit not subject to experience rating)Â—$1,000 deductible Deductible 9109 Premium credit for claims deductible coverage (credit not subject to experience rating)Â—$1,500 deductible Deductible 9110 Premium credit for claims deductible coverage (credit not subject to experience rating)Â—$2,000 deductible Deductible 9112 Premium credit for claims deductible coverage (credit not subject to experience rating)Â—$2,500 deductible Deductible 9115 Flat Charge Waiver of Subrogation DE only Special 9126 Premium credit for claims deductible coverage (credit not subject to experience rating)Â—$3,000 deductible Deductible 9127 Construction Class Terr itory Differential Premiu m NY only Mandatory 9128 Construction Class Terr itory Differential Premiu m NY only Mandatory 9139 Premium credit for claims deductible coverage (credit not subject to experience rating)Â—$3,500 deductible Deductible 9402 Premium credit for claims deductible coverage (credit not subject to experience rating)Â—$4,500 deductible Deductible 9403 Premium credit for claims deductible coverage (credit not subject to experience rating)Â—$5,000 deductible Deductible 9410 Premium credit for claims deductible coverage (credit not subject to experience rating)Â—$250 deductible Deductible 9501 Premium credit for claims deductible coverage (credit not subject to experience rating)Â—$500 deductible Deductible 9505 Premium credit for claims deductible coverage (credit not subject to experience rating)Â—$7,500 deductible Deductible 9516 Premium credit for claims deductible coverage (credit not subject to experience rating)Â—$10,000 deductible Deductible 9519 Volunteer ambulance serviceÂ—state assessment Mandatory 9521 Volunteer fire fightersÂ—state assessment Mandatory 9522 Other than volunteer ambulance workers and volunteer fire fightersÂ—state assessment Mandatory 9526 LRO credit applied after experience mod LRO 9527 Scaffold Installation Normal 9529 LRO debit applied after experience mod LRO 9530 Premium credit for claims deductible coverage (credit subject to experience rating)Â—$250 deductible Deductible 9534 Premium credit for medical deductible coverage (credit not subject to experience rating)Â—$250 deductible Deductible 9545 Bill Posting & Drivers Normal 9549 Premium credit for medical deductible coverage (credit not subject to experience rating)Â—$500 deductible Deductible 9552 Sign Installation Normal 9554 Sign Installation Normal 9558 Premium credit for medical deductible coverage (credit not subject to experience rating)Â—$2,000 deductible Deductible 9663 Premium credit benefit deductibleÂ—$1,000 deductible Deductible 9664 Premium credit benefit deductibleÂ—$2,000 deductible Deductible 9667 Premium credit benefit deductibleÂ—$2,500 deductible Deductible 9668 Premium credit benefit deductibleÂ—$5,000 deductible Deductible 9669 Delaware deductibles Deductible 9670 Increased employers liability, coverage B, limits (with workers compensation): 100/100/1,000 Mandatory 9671 Increased employers liability, coverage B, limits (with workers compensation): 100/100/2,500 Mandatory
96 Table A-1. Continued. Class Value Description Prem Type 9672 Increased employers liability, coverage B, limits (with workers compensation): 100/100/5,000 Mandatory 9673 Increased employers liability, coverage B, limits (with workers compensation): 100/100/10,000 Mandatory 9674 Increased employers liability, coverage B, limits (with workers compensation): 500/500/500 Mandatory 9675 Increased employers liability, coverage B, limits (with workers compensation): 500/500/1,000 Mandatory 9676 Increased employers liability, coverage B, limits (with workers compensation): 500/500/2,500 Mandatory 9677 Increased employers liability, coverage B, limits (with worker compensation): 500/500/5,000 Mandatory 9678 Increased employers liability, coverage B, limits (with workers compensation): 500/500/10,000 Mandatory 9679 Increased employers liability, coverage B, limits (with workers compensation): 1,000/1,000/1,000 Mandatory 9682 Increased employers liability, coverage B, limits (with workers compensation): 1,000/1,000/2,500 Mandatory 9683 Increased employers liability, coverage B, limits (with workers compensation): 1,000/1,000/5,000 Mandatory 9684 Increased employers liability, coverage B, limits (with workers compensation): 1,000/1,000/10,000 Mandatory 9702 #N/A Missing 9722 LRO LRO 9724 LRO LRO 9740 Terrorism Risk Mandatory 9742 Collective Bargaining Program Credit No t Subject to Experience Rating Discretionary 9746 Workplace Safety and Loss Consultati on Premium Credit NY only Mandatory 9747 Workplace Safety and Loss Consultati on Premium Surcharge NY only Mandatory 9748 Safety Investment Premiu m Credit NY only Mandatory 9758 Additional premium for admiralty or FELA increased limitsÂ—$100,000 Mandatory 9759 Additional premium for admiralty or FELA increased limitsÂ—$200,000 Mandatory 9760 Additional premium for admiralty or FELA increased limitsÂ—$300,000 Mandatory 9761 Additional premium for admiralty or FELA increased limitsÂ—$400,000 Mandatory 9762 Additional premium for admiralty or FELA increased limitsÂ—$500,000 Mandatory 9763 Basic employers liability and additional premium for increased limits, without workers compensationÂ— $100,000/100,000/1,000,000 Mandatory 9764 Additional premium for employers liability in creased limits, withou t workers compensationÂ— $100,000/100,000/2,500,000 Mandatory 9765 Additional premium for employers liability in creased limits, withou t workers compensationÂ— $100,000/100,000/5,000,000 Mandatory 9772 Additional premium for employers liability in creased limits, withou t workers compensationÂ— $100,000/100,000/7,500,000 Mandatory 9778 Additional premium for employers liability in creased limits, withou t workers compensationÂ— $100,000/100,000/10,000,000 Mandatory 9784 Additional premium for employers liability in creased limits, withou t workers compensationÂ— $500,000/500,000/500,000 Mandatory 9785 Additional premium for employers liability in creased limits, withou t workers compensationÂ— $500,000/500,000/1,000,000 Mandatory 9786 Additional premium for employers liability in creased limits, withou t workers compensationÂ— $500,000/500,000/2,500,000 Mandatory 9787 Additional premium for employers liability in creased limits, withou t workers compensationÂ— $500,000/500,000/5,000,000 Mandatory 9788 Additional premium for employers liability in creased limits, withou t workers compensationÂ— $500,000/500,000/10,000,000 Mandatory 9802 Additional premium for employers liability in creased limits, withou t workers compensationÂ— $1,000,000/1,000,000/1,000,000 Mandatory 9803 Additional premium for employers liability in creased limits, withou t workers compensationÂ— $1,000,000/1,000,000/2,500,000 Mandatory
97 Table A-1. Continued. Class Value Description Prem Type 9804 Additional premium for employers liability in creased limits, withou t workers compensationÂ— $1,000,000/1,000,000/5,000,000 Mandatory 9805 Additional premium for employers liability in creased limits, withou t workers compensationÂ— $1,000,000/1,000,000/10,000,000 Mandatory 9806 Additional premium for employers liability increa sed limits, without work ers compensationÂ—over $1,000,000/1,000,000/10,000,000 Mandatory 9807 Employers liability increased limitsÂ—all other Mandatory 9808 Florida employers liability increased limitsÂ—200,000/200,000/500,000 Mandatory 9809 Connecticut experience modification deviation premium credit Discretionary 9810 Employers liability for increased limitsÂ—admiralty or FELA over $500,000 (not available in DE, NJ, and PA) Mandatory 9811 Premium credit for Drug-Free Workplace Program Mandatory 9812 Premium credit for Drug-Free Workplace Program Mandatory 9813 Additional premium for standard limits: 100/100/500 Mandatory 9814 Premium credit for Drug-Free Workplace Program Mandatory 9815 Workers compensation balance to minimum premiumÂ—coverage B, employers liability Mandatory 9816 Additional premium required to balance to minimum for admiralty and/or FELA increased limits Mandatory 9817 Premium for the extension of employers liability covera ge to additional interests un der a VFBL policy Mandatory 9818 Premium credit for large deductible coverageÂ—$25,000 de ductible (not subject to experience rating) Deductible 9819 Premium credit for large deductible coverageÂ—$50,000 de ductible (not subject to experience rating) Deductible 9820 Premium credit for large deductible coverageÂ—$75,000 de ductible (not subject to experience rating) Deductible 9821 Premium credit for large deductible coverageÂ—$100,000 de ductible (not subject to experience rating) Deductible 9822 Premium credit for large deductible coverageÂ—$150,000 de ductible (not subject to experience rating) Deductible 9823 Premium credit for large deductible coverageÂ—$200,000 de ductible (not subject to experience rating) Deductible 9824 Premium credit for large deductible coverageÂ—$250,000 de ductible (not subject to experience rating) Deductible 9825 Premium credit for large deductible coverageÂ—$350,000 de ductible (not subject to experience rating) Deductible 9826 Premium credit for large deductible coverageÂ—$500,000 de ductible (not subject to experience rating) Deductible 9827 Premium credit for large deductible coverageÂ—$750,000 de ductible (not subject to experience rating) Deductible 9828 Premium credit for large deductible coverageÂ—$1,000,000 deductible (not subject to ex perience rating) Deductible 9829 Premium credit for large deductible coverageÂ—$2,500,000 deductible (not subject to ex perience rating) Deductible 9830 Premium credit for large deductible coverageÂ—$5,000,000 deductible (not subject to ex perience rating) Deductible 9831 Premium credit for large deductible coverageÂ—all higher deductibles (not subject to ex perience rating) Deductible 9832 Certified managed careÂ—5% credit Mandatory 9833 Safety certificationÂ—5% credit (LA=2%) Mandatory 9834 Safety certificationÂ—10% credit (LA=5%) Mandatory 9835 Workplace safety program debit Mandatory 9836 WorkplaceÂ—safety pr ogram credit Mandatory 9837 Premium credit under coinsurance coverageÂ—5,000 limit Deductible 9838 Premium credit under coinsurance coverageÂ—2,5000 limit Deductible 9839 Risk management program premiu m creditÂ—experience-rated and/or schedule-rated insureds Mandatory 9840 Merit rating programÂ— 15% credit Discretionary
98 Table A-1. Continued. Class Value Description Prem Type 9841 Merit rating credit Discretionary 9842 Merit rating debit Discretionary 9845 Schedule rating credit Discretionary 9846 Schedule rating debit Discretionary 9848 Safety committee credit program Discretionary 9849 Safety premium creditÂ—greater than 5% for employers who have implemented certified safety and health programs Discretionary 9850 Risk management program premiu m creditÂ—experience rated and/or sche duleÂ—nonrated insureds Discretionary 9856 Merit rating debitÂ—4% Discretionary 9857 Experience modification (c ompany use only) Experience 9858 Premium credit for claims deductible coverageÂ—$3,000 limit Deductible 9859 Premium credit for claim deductible coverageÂ—$3,500 limit Deductible 9860 Premium credit for claim deductible coverageÂ—$4,000 limit Deductible 9861 Premium credit for claim deductible coverageÂ—$4,500 limit Deductible 9862 Premium credit for coinsurance coverageÂ—$5,000 limit Deductible 9863 Premium credit for coinsurance coverageÂ—$10,000 limit Deductible 9864 Premium credit for coinsurance coverageÂ—$15,000 limit Deductible 9865 Premium credit for coinsurance coverageÂ—$20,000 limit Deductible 9866 Premium credit for coinsurance coverageÂ—$21,000 limit Deductible 9867 Premium credit for coinsurance/deductible coverageÂ—$3,000 Deductible 9868 Premium credit for coinsurance/deductible coverageÂ—$3,500 Deductible 9869 Premium credit for coinsurance/deductible coverageÂ—$4,000 Deductible 9874 Premium credit for coinsurance/claims dedu ctible coverageÂ—$500 deductible Deductible 9875 Premium credit for coinsurance/claims dedu ctible coverageÂ—$1,000 deductible Deductible 9876 Premium credit for coinsurance/claims dedu ctible coverageÂ—$1,500 deductible Deductible 9879 Premium credit for coinsurance/claims dedu ctible coverageÂ—$2,000 deductible Deductible 9880 Premium credit for coinsurance/claims dedu ctible coverageÂ—$2,500 deductible Deductible 9881 Premium credit for coinsurance/deductible coverageÂ—$4,500 Deductible 9882 Premium credit for medical deductible coverageÂ—$250 deductible (credit subject to experience rating) Deductible 9883 Premium credit for medical deductible coverageÂ—$100 deductible (credit subject to experience rating) Deductible 9884 Premium credit for medical deductible coverageÂ—$150 deductible (credit subject to experience rating) Deductible 9885 Premium credit for medical deductible coverageÂ—$200 deductible (credit subject to experience rating) Deductible 9886 Premium credit for medical deductible coverageÂ—$300 deductible (credit subject to experience rating) Deductible 9887 Schedule credit Discretionary 9889 Schedule debit Discretionary 9890 Premium credit for medical deductible coverageÂ—$1,000 deductible (credit subject to experience rating) Deductible 9891 Premium credit for medical deductible coverageÂ—$1,500 deductible (credit subject to experience rating) Deductible 9893 Premium credit for medical deductible coverageÂ—$2,000 deductible (credit subject to experience rating) Deductible
99 Table A-1. Continued. Class Value Description Prem Type 9896 Premium credit for medical deductible coverageÂ—$2,500 deductible (credit subject to experience rating) Deductible 9897 Experience modification Experience 9898 Experience modification Experience 9900 Premium credit for claims deductible coverageÂ—$100 deductible (credit subject to experience rating) Deductible 9904 Premium credit for claims deductible coverageÂ—$200 deductible (credit subject to experience rating) Deductible 9905 Premium credit for claims deductible coverageÂ—$300 deductible (credit subject to experience rating) Deductible 9906 Premium credit for claims deductible coverageÂ—$400 deductible (credit subject to experience rating) Deductible 9907 Premium credit for claims deductible coverageÂ—$500 deductible (credit subject to experience rating) Deductible 9908 Premium credit for claims deductible coverageÂ—$1,000 de ductible (credit subject to ex perience rating) Deductible 9909 Premium credit for claims deductible coverageÂ—$1,500 de ductible (credit subject to ex perience rating) Deductible 9910 Premium credit for claims deductible coverageÂ—$2,000 de ductible (credit subject to ex perience rating) Deductible 9911 Premium credit for claims deductible coverageÂ—$2,500 de ductible (credit subject to ex perience rating) Deductible 9912 Premium credit for claims deductible coverageÂ—$5,000 de ductible (credit subject to ex perience rating) Deductible 9913 Premium credit for claims deductible coverageÂ—$10,000 deductible (credit subject to experience rating) Deductible 9914 Premium credit for coinsurance/deductible coverageÂ—$5,000 Deductible 9915 Premium credit for coinsurance coverageÂ—$4,200 limit Deductible 9916 Premium credit for per-accident deductible coverageÂ—$500 deductible Deductible 9917 Premium credit for per-accident deductib le coverageÂ—$1,000 deductible Deductible 9918 Premium credit for per-accident deductib le coverageÂ—$2,500 deductible Deductible 9919 Premium credit for per-accident deductib le coverageÂ—$5,000 deductible Deductible 9920 Premium credit for per-accident deductible coverageÂ—$10,000 deductible Deductible 9924 Premium credit for per-accident deductible coverageÂ—$25,000 deductible Deductible 9925 Premium credit for per-accident deductib le coverageÂ—$1,500 deductible Deductible 9926 Premium credit for large deductible coverageÂ—up to and including $100,000 deductible Deductible 9927 Premium credit for large deductible coverageÂ—$100,001 $150,000 deductible Deductible 9928 Premium credit for large deductible coverageÂ—$150,001 $250,000 deductible Deductible 9929 Premium credit for large deductible coverageÂ—$250,001 $350,000 deductible Deductible 9930 Premium credit for large deductible coverageÂ—$350,001 $500,000 deductible Deductible 9931 Premium credit for large deductible coverageÂ—$500,001 $750,000 deductible Deductible 9932 Premium credit for large deductible coverageÂ—$750,001 $1,000,000 deductible Deductible 9933 Premium credit for large deductible coverageÂ—$1,000,001 $2,500,000 deductible Deductible 9934 Premium credit for large deductible coverageÂ—$2,500,001 $5,000,000 deductible Deductible 9935 Premium credit for large deductible covera geÂ—$5,000,001 and above deductible Deductible 9936 Premium credit deductible aggregate limitÂ—$2,000 deductible Deductible 9937 Premium credit deductible aggregate limitÂ—$4,000 deductible Deductible 9938 Premium credit deductible aggregate limitÂ—$6,000 deductible Deductible 9939 Premium credit deductible aggregate limitÂ—$8,000 deductible Deductible
100 Table A-1. Continued. Class Value Description Prem Type 9940 Premium credit deductible aggregat e limitÂ—$10,000 deductible Deductible 9941 Premium credit deductible aggregat e limitÂ—$15,000 deductible Deductible 9942 Premium credit deductible aggregat e limitÂ—$25,000 deductible Deductible 9943 Premium credit deductible aggregat e limitÂ—$50,000 deductible Deductible 9944 Premium credit deductible aggregat e limitÂ—$75,000 deductible Deductible 9945 Premium credit deductible aggregat e limitÂ—$100,000 deductible Deductible 9946 Per-accident deductible aggreg ateÂ—$1,000 deductible Deductible 9947 Per-accident deductible aggreg ateÂ—$2,500 deductible Deductible 9948 Atomic Energy Commission proj ects (except New Jersey) Normal 9949 For reporting radiation experience in connection with risks other than Atomic Energy Commission projects (except New Jersey) (losses only) Mandatory 9950 Per-accident deductible aggreg ateÂ—$5,000 deductible Deductible 9951 Per-accident deductible aggreg ateÂ—$10,000 deductible Deductible 9952 Per-accident deductible aggreg ateÂ—$25,000 deductible Deductible 9953 Premium debitÂ—offset to experience ratingÂ—contracting classification CPAP 9954 Premium creditÂ—Oregon supplement al experience rating Experience 9955 Premium debitÂ—Oregon supplemental experience rating Experience 9956 Small premium policy plan penalty Mandatory 9959 Maintenance tax surcharge Mandatory 9960 Painting / Sheet Rock Install Normal 9961 Premium credit for large deductible coverageÂ—$150,001 $250,000 deductible Deductible 9962 Premium credit for large deductible coverageÂ—$250,001 $350,000 deductible Deductible 9963 Premium credit for large deductible coverageÂ—$350,001 $500,000 deductible Deductible 9964 Premium credit for large deductible coverageÂ—$500,001 $750,000 deductible Deductible 9965 Premium credit for large deductible coverageÂ—$750,001 $1,000,000 deductible Deductible 9966 Premium credit for large deductible coverageÂ—$1,000,001 $2,500,000 deductible Deductible 9967 Premium credit for large deductible coverageÂ—$2,500,001 $5,000,000 deductible Deductible 9968 Premium credit for large deductible covera geÂ—$5,000,001 and above deductible Deductible 9970 Premium credit deductible aggregate limitÂ—$2,000 deductible Deductible 9971 Premium credit deductible aggregate limitÂ—$4,000 deductible Deductible 9972 Premium credit deductible aggregate limitÂ—$6,000 deductible Deductible 9973 Premium credit deductible aggregate limitÂ—$8,000 deductible Deductible 9974 Premium credit deductible aggregat e limitÂ—$10,000 deductible Deductible 9975 Premium credit deductible aggregat e limitÂ—$15,000 deductible Deductible 9976 Premium credit deductible aggregat e limitÂ—$25,000 deductible Deductible 9978 Premium credit deductible aggregat e limitÂ—$50,000 deductible Deductible 9979 Premium credit deductible aggregat e limitÂ—$75,000 deductible Deductible 9980 Premium credit deductible aggregat e limitÂ—$100,000 deductible Deductible
101 Table A-1. Continued. Class Value Description Prem Type 9982 Per-accident deductible aggreg ateÂ—$1,000 deductible Deductible 9983 Per-accident deductible aggreg ateÂ—$2,500 deductible Deductible 9984 Atomic Energy Commission project s (except New Jersey) Mandatory 9985 For reporting radiation experience in connection with risks other than Atomic Energy Commission projects (except New Jersey) (losses only) Mandatory 9986 Per-accident deductible aggreg ateÂ—$5,000 deductible Deductible 9987 Per-accident deductible aggreg ateÂ—$10,000 deductible Deductible 9988 Per-accident deductible aggreg ateÂ—$25,000 deductible Deductible 9990 Premium debitÂ—offset to experience ratingÂ—contracting classification CPAP 9992 #N/A Missing 9993 #N/A Missing 9995 Premium creditÂ—Oregon supplement al experience rating Experience 9996 Premium debitÂ—Oregon supplemental experience rating Experience 9997 Small premium policy plan penalty Mandatory 9998 Maintenance tax surcharge Mandatory 15250 Cement Mfg Normal
102 APPENDIX B SIC CODES Table B-1. SIC Codes. SIC Codes Major SIC Description 07 Agriculture, Fore stry, And Fishing 10 Mining 15 General Building Contractors 16 Heavy Construction, Ex. Building 17 Special Trade Contractors 21 Tobacco 29 Petroleum products 32 Stone, Clay, Glass, And Concrete Products 35 Industrial And Commercial Machinery And Computer Equipment 45 Transportation by Air 46 Pipelines, except Natural Gas 47 Transportation Services 49 Electric, Gas, and Sanita ry Services (utilities) 70 Lodging 80 Health Services 82 Educational Services 95 Administration of Environmental Quality and Housing Programs Ind. Group Description 078 Landscape services 102 Copper Ores 152 General Building Contractors-residential 153 Operative BuilderÂ’s 154 General Building Contractors-nonresidential 161 Highway And Street Construction, Except Elevated Highways 162 Heavy Construction, Except Highway And Street 171 Plumbing, Heating And Air-condition 172 Painting And Paper Hanging 173 Electrical Work 174 Masonry, Stonework, Tile Setting, And Plastering
103 Table B-1. Continued. Ind. Group Description 175 Carpentry And Floor Work 176 Roofing, Siding, And Sheet Metal Work 177 Concrete Work 178 Water Well Drilling 179 Miscellaneous Special Trade Contractors 211 Cigarettes 291 Petroleum Refining 295 Asphalt Paving Mixture and Blocks 327 Concrete, Gypsum, And Plaster Products 353 Construction, Mining, And Materials Handling 458 Airports, Flying Fields and Airport Terminal Services 461 Pipelines 478 Miscellaneous Services Incidental to Transportation 491 Electrical Services (not construction) 701 Hotels and Motels 806 Hospitals 822 Junior Colleges and Technical Institutes 953 Administration of Housing And Urban Programs SIC Description 0782 Lawn and Garden Services 1021 Copper Ores 1521 General Contractors-Single-Family Houses 1522 General Contractors-Residential Buildings, Other Than Single-Family 1531 Operative BuilderÂ’s 1541 General Contractors-Industrial Buildings and Warehouses 1542 General Contractors-Neither Residential nor Industrial 1611 Highway and Street Construction, Except Elevated Highways 1622 Bridge, Tunnel, and Elevated Highway Construction 1623 Water, Sewer, Pipeline, and Communications and Power Line 1629 Heavy Construction, Not Elsewhere Classified 1711 Plumbing, Heating and Air-Conditioning 1721 Painting and Paper Hanging 1731 Electrical Work 1741 Masonry, Stone Setting , and Other Stone Work 1742 Plastering, Drywall, Acoust ical, and Insulation Work 1743 Terrazzo, Tile, Marble, and Mosaic Work 1751 Carpentry Work 1752 Floor Laying and Other Floor Work, Not Elsewhere Classified
104 Table B-1. Continued. SIC Description 1761 Roofing, Siding, and Sheet Metal Work 1771 Concrete Work 1781 Water Well Drilling 1791 Structural Steel Erection 1793 Glass and Glazing Work 1794 Excavation Work 1795 Wrecking and Demolition Work 1796 Installation or Erection of Building Equipment, Not Elsewhere 1799 Special Trade Contractors, Not Elsewhere Classified 2111 Cigarettes 2911 Petroleum Refining 2951 Asphalt Paving Mixture and Blocks 3273 Ready-mix Concrete 3533 Oil and Gas Field Machinery and Equipment 4581 Airports, Flying Fields and Airport Terminal Services 4619 Pipelines-not Petroleum 4789 Transportation Services NOC 4911 Electrical Services (not construction) 7011 Hotels and Motels 8062 General Medical and Surgical Hospitals 8221 Junior Colleges and Technical Institutes 9532 Administration of Urban Planning and Community and Rural
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107 Hislop, Richard D. (1999). Construction Site Safety . Florida: CRC Press. Houweling, Dermond E. (January 2, 1999). Â“W rap-up Insurance on Big Projects Cuts Costs, Improves Safety.Â” Insurance Advocate, Vol. 110, Iss. 1, p. 13. Johnson, Scott P., and Tonseth, Ralph G. ( 2003). Memorandum to Honorable Mayor and City Council of San Jose, California, http://www.sanjoseca.gov/clerk/ agenda/10_28_03_3.4.htm.(March 2005). Kalis, Peter J., Reiter, Thomas M., and Segerdahl, James R. (1997). PolicyholderÂ’s Guide to the Law of Insurance Coverage . New York: Aspen Publishers. Katzman, Gerald. ( 2002). Â“Owner-controlled Â‘W rap InsuranceÂ’ is Viable Alternative for Contractors.Â” The Business Review, Albany, New York. http://albany.bizjournals. com/albany/stories/2002/07/29/ focus13.html.(April 2003). Kit, Corey. (2004). Â“Controlled Insuran ce Program Services.Â” Financial Risk Management. http://www.us.kpmg.com/microsite/attachme nts/frm/ControlledInsuranceProgramS ervices.pdf. (March 2005). Lavers, Anthony P. (1999). Case Studies in Post-Construction Liability and Insurance . United Kingdom: Spon Press. Lew, Jeffery J., and Overholt, Mike. (Sum mer 1999). Â“Managed C ontractors Insurance Programs.Â” Journal of Construction Education, Vol. 4, No. 2, pp. 152-161. Levitt, Raymond E., and Samelson, Nancy M. (1993). Construction Safety Management . New Jersey: John Wiley and Sons. Lunch, Milton F. (August 1999). Â“GAO Report Exam ines Merits of Wrap-up Insurance.Â” Building Design and Construction, Vol. 40, Iss. 8, pg. 29. MacCollum, David V. (1995). Construction Safety Planning . New Jersey: John Wiley and Sons. McIntyre, William S., and Shay, James M. (2005). Â“Estimating Project Risk and Insurance Costs.Â” International Risk Management Institute, 25th IRMI Construction Risk Conference http://www.irmi.com/Conferences/Crc/H andouts/Crc25/Estimating/EstimatingProj ectRiskandInsuraceCosts.pdf. (Jan. 2006). NCCI Resource. (2006) National Code Cousel Institute. http://www.ncci.com/NCCI/servicestool s.aspx?cat=sat1&id=vccst (Jan. 2006)
108 Nilsson, Bradford A. (2003). â€œOwner Controlled Insurance Programs (OCIPs): Why Owners Like Them And Why Contract ors May Not.â€ Construction Weblinks . http://www.constructionweblinks.com/Res ources/Industry_Repor ts__Newsletters/J uly_14_2003/ocip.htm. (July 2004). Oâ€™Gara, David. (2002). â€œWrap-up Programs Prove Valuable During Hard Market.â€ Near North National Group. http://www.nnng.com/newsletter/spring2002/ features/fa6.html. (March 2003). Oâ€™Gara, David. (Fall 2001). â€œRolling Wrapups: A Trend in Construction Insurance.â€ Near North National Group, http://www.nnng.com/newsletter/fall2001/ features/fa5.html. (March 2003). Ostermiller, Marilyn. (August 1998). â€œConstructing a Safety Net.â€ Bestâ€™s Review, Property/Casualty Insurance Edition, Vol. 99, Iss. 4, p. 89. Palmer, William J., Maloney, James M ., and Heffron III, John L. (1996). Construction Insurance, Bonding, and Risk Management . New York: McGraw-Hill. Parry Sr., James R. (February 1999). â€œ Wrap It Up.â€ Bestâ€™s Review/Property-Casualty Insurance Edition, Vol. 99, Iss. 10, p. 37. â€œPartner Controlled Insura nce Program (PCIP) Overview .â€ (2001). T-REX Project. http://www.trexproject.com/trex_docum ents/Employment/PCIPOverview.doc. (March 2003). Pella, Austin E. (May 2005). â€œAssessment of Controlled Insu rance Programs for Construction Project.â€ University of Florida, Gainesville. Perkins, William H. (November 2005). â€œWor kersâ€™ Compensation.â€ International Risk Management Institute, 25th IRMI Construction Risk Conference. http://www.irmi.com/Conferences/Crc/H andouts/Crc25/WrapUp/Workersâ€™Compen sation.pdf. (Jan. 2006) Peterson, Steve. (January 6, 2006). â€œInsurance Analyst Approach.â€ Journal of Construction Engineering and Management , Vol. 12, Iss. 3, p. 14.â€ Resnick, Richard. (March 2000). â€œWrap-ups and the Issue of Critical Mass.â€ IRMI.com. http://www.irmi.com/Expert/Articl es/2000/Resnick03.aspx. (March 2003). Riley, Sheila. (February 19,1999). â€œNew Options for On-site Construction Insurance.â€ Silicon Valley/San Jose Business Journal , pp.15-17 . Ron Rakich and Associates. (2000). â€œWhy OCIP? Definition of an Owner Controlled Insurance Program.â€AON http://www.ronrakich.com/whyocip.ht ml&&DI=293&IG=10ffdf186bc14e798aff49 7ba2a34b67&POS=10&CM=WPU&CE=8 (Sept. 2004).
109 Schexnayder, Cliff J., Weber, Sandra L. and David, Scott A. (July/August 2004). Â“Transportation Agency Use of Owne r-Controlled Insurance Programs.Â” Journal of Construction Engineering and Management, p. 22. Schliesman, Kyle. (April 23, 2001). Â“Wrap-up In surance May Save Millions for Airport.Â” Inside Tuscon Business, Vol. 11, Iss. 5, p. 15. Sklar, Stanley P. (2004). Handling Construction Risks, 2004: Allocate Now or Litigate Later . New York: Practicing Law Institute. Spon. (1993). Post-Construction Liability and Insurance . United Kingdom: Spon Press. Â“The State is not Taking Advantage of all Opportunities to Reduce the Cost of Construction Contracts.Â” (2003). IN F03, California Performance Review. http://report.cpr.ca.gov /cprrpt/issrec/inf/inf 03.htm. (March 2004). Swendiman, Steve. (1997). Â“Owner-cont rolled Insurance Programs.Â” National Association of Counties, Online County News, Vol 29, No. 14. http://www.naco.org/cnews/1997/97 -07-28/fsnews.htm. (July 2004). U.S. Department of Transportation Federa l Highway Administration (USDOT). (2003). Â“Guide to FHWA Funded Wrap-up Projects.Â” http://www.fhwa.dot.gov/programadmin/c ontracts/wrap.pdf. (October 2003). United States General Accounting O ffice (USGAO). (1999). Â“Advantages and Disadvantages of Wrap-up Insurance for Large Construction Projects.Â” Rep. GAO/RCED-99-155 Prepared for Subcommittee on Transportation, Committee on Appropriations, U.S. Senate, Washington,D.C. http://www.gao.gov/archive/1999/rc99155.pdf. (June 2004). Wheeler, Roy. (March 2004). Â“Reducing Cons truction Costs And Saving Budget Dollars With An OCIP.Â” TASB Risk Management Fund, Vol. 8, No. 1. Â“Wrap-ups: A ContractorÂ’s Perspective.Â” (2003). Risk Management. http://mpelembe.mappibiz.com/archiv es/Risk_Management.html. (Nov. 2003).
110 BIOGRAPHICAL SKETCH Samuel Scott Scialabba is an active duty Major in the United States Marine Corps currently assigned to the University of FloridaÂ’s NROTC Un it. Samuel taught Amphibious Warfare and Evoluti on of Warfare within the De partment of Naval Science and simultaneously pursued completion of the degree of Master of Science in Building Construction from the University of Flor ida in May 2006. Samuel earned a degree of Bachelor of Science in systems engineeri ng from the United States Naval Academy in May of 1993. Since May of 1993 he has served as a Naval Aviator and Officer of Marines for 13 years and continues to fly the AH-1W Cobra helicopter. Samuel also holds the title of Aviation Safety Officer fr om completed post graduate work in aviation safety at the Naval Post Graduate Sc hool in Monterey, CA. With 2500 hours of accumulated flight time, Samuel earned an Ai rline Transport Pilot Rating from the FAA, but continues to serve on active duty. Upon completion of his assignment at the University of Florida in May 2006, Major Sc ialabba will return to an active duty squadron for deployment.