General Liability . Classification Rules Clinic. Presented by Penny Martin. Payroll Exposure Legal Entity, Owners and Officers Contractors Executive Supervisors Interior Carpentry Classification Insured Subcontractors Uninsured Subcontractors Leased and Temporary Personnel
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Presented by Penny Martin
Legal Entity, Owners and Officers
Contractors Executive Supervisors
Interior Carpentry Classification
Leased and Temporary Personnel
Contractors that pay Mobile Equipment Operators
Sales Inclusions and Exclusions
Manufacturing with Retail Operations
Installation, service or repair of named insured products (Manufacture Risk)
Installation, service or repair of merchandise sold or distributed by insured (Mercantile Risk)
Risk with two exposure bases, sales and payrollGeneral Liability – Classification Rules Clinic
The difference between owner coverage for general liability and workers’ compensation
is that under general liability,
cannot elect to be excluded from coverage
Owner payroll charge may be waived for General Liability computation if the following
criteria are met:
Owner Charge Exceptions
State mandated owner payroll amount must be charged for each active owner, partner, and executive officer when products/completed operations coverage is included. (Some exceptions may apply)
Refer to ISO CGL Manual Rule 24.E.2
Insurer Company guidelines should be reviewed before owner charges are waived
May want to include on worksheet and add Underwriting Review for consideration to excludePayroll Exposure - Owners, Partners, and Exec Officers
Contractors executive supervisors code
is misapplied more than any other
Two main reasons for misuse of the Contractors Executive Supervisors code are
Contractors – Executive supervisors or executive superintendents is defined as having administrative or managerial responsibility for construction or erection projects. Supervisory control is done through job superintendents or foremen.
Communication is key
in determining if employees qualify for this classification
Operations include the installation of wood trim, cabinets and countertops, wooden flooring, sanding and scraping of wooden floors, doors, and paneling. Other operations may include wooden staircases being built at the job site, installation of locks and cabinet hardware, and weather stripping.
This classification does not apply to
for any other carpentry
operations at the same job or location.
Residential general contractor uses subcontractors to perform all carpentry operations other than interior carpentry work.
General contractors employees perform only interior carpentry work
General contractors employees, that perform only interior carpentry work, shall be classified as
Carpentry – construction of residential property.
NOT Interior Carpentry classification
Uninsured subcontractor wages
shall be classified as payroll,
in the appropriate classification
that best describes the work performed.
Leased labor and temporary company employees are not considered
an “adequately insured subcontractor”
for premium computation.
Even if GL certificate of insurance is presented.
Refer to ISO CGL Manual Rule 24.E.2
Leased Workers Exposure
Temporary Employee Exposure
When contracting risk rents mobile equipment from another entity
A payroll charge must be made
Because the mobile equipment operator will be under direction and control of the hiring contractor
Refer to ISO CGL Manual Rule24E.2.1
such as a crane company
Installing steel beams
Insured must give direction on
how and where beams will be placed
Payroll should be included for
when payroll is the premium base
General Liability classification rule differs from Workers Compensation, when it comes to drafting and clerical employees
Refer to ISO CGL Manual Rule 28.B.3.b
Unlike other contractor classification exposures
Insured Subcontractor Exposure
based on payroll
Insured Subcontractor exposure
Is based upon
Total Cost Defined
Total Cost of all work let or sublet in connection with all specific projects including:
Refer to ISO CLM Manual Rule 24.32.1 ISO CLM
** this rule may vary by company**
The classifications applicable to subcontractors hired by the insured only apply if the subcontractors are
Classification for adequately insured subs should be determined by the named insured’s operations, not by the subcontractor’s work.
Insured Subcontractor classification codes
Total sales of consigned goods and warehouse receipts
Trade or cash discounts and bad debts
Foreign Exchange discounts
Freight allowance to customers
Amount collected for repossessed items sold on installment basis
Sales or excise taxes, paid to insured and submitted to a governmental agency
Freight Charges, if itemized separately on invoice
Credits for repossessed products and returned merchandise
Finance charges for installment based salesSales Exposure – Sales Inclusions and Exclusions
The rules regarding auditing of manufacturing and processing risks can be found in the ISO CGL Manual Rule 27
Manufacturing and Processing Risk – Classification and Premium Computation Procedures.
For Classification Assignment Purpose
each named insured’s final product(s) or process(s)
Refer to ISO CLM Manual Rule 27.B.2
Refer to ISO CLM Manual Rule 27.A.3
For Premium Computation Purpose
Refer to ISO CGL Manual Rule 24
Sales Exclusions & Exceptions
CG 2141 - Inter-company Products Suits Endorsement - Exclusion
Sales Exclusions & Exceptions
Servicing or repair of named insured’s product, is a special classification inclusion and should not be separately rated, unless exception is listed in footnote.
Refer to ISO CGL Manual Rule 27.1.D.2
Contractor rules do not apply to Mercantile Risk
Unless footnote states otherwise
Refer to ISO CGL Manual Rule 29.C
Basis of premium for mercantile risk is “Gross Sales”.
When a mercantile risk is involved with installing, servicing or repairing the goods they sold,
separate payroll classification should not be used unless directed to do so by footnote.
This is an exception to the multiple enterprise principle.
A carpet store
that installs the rugs and carpets they sell, classified as Mercantile floor covering stores
Separate classification for the installation
of carpets should not be added,
even though such a classification exists, whether the carpeting is installed by employees of the risk, adequately or inadequately insured subcontractors.
The only basis of premium for this risk is gross sales.
Some Manufacturing Risk have both gross sales and payroll exposure bases.
Manufacturing rate for gross sales does not contemplate installation, service and repair operations.
Refer to ISO CGL Manual Rule 28.B.3.D
Payroll of employees engaged in the installation, service & repair of the insured’s manufactured products shall be separately rated. If an employee’s work involves more than one classification or with a different exposure bases, assign entire payroll to appropriate code to payroll base.
Sign Mfg Company that also performs installation, service and repair
Sales Inclusions – sales for making signs
Sales Exclusions – sales tax, freight and installation if records provide separation. If not, use gross sales.