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Coding, Rating, and Coverage

Author: Bill Wilson
I got my start in the Big “I” family while working for ISO. The state Big “I” association had me go on a series of rating seminars that taught class rating and using a product called “Rapid Rater.” The association for many years hired VU faculty member John Eubank, CPCU, ARM, a former ISO regional VP, to conduct property, CGL, and commercial auto coding/rating seminars regularly. Then automated rating took over and…everybody forgot how to code and rate. Recently, the VU "Ask an Expert" service engaged in the following Q&A:
Question...“Would a yoga studio that sells no products need products/completed operations coverage? I say no, because when the session is over, the operations are over. But I'm trying to imagine whether there could be an exposure if the student does a pose at home, learned in class, and hurts her/himself. I just don't see it as either a product or a completed operation.”
Answer?For the moment, we’ll forget about the danger in recommending someone NOT buy a particular type of coverage. (Even if there wasn’t a P/CO exposure at policy inception, what if there was later in the policy period? And not all “products” are sold…what about promotional items?). The ISO CGL policy includes coverage for the premises/operations and products/completed operations exposures. Yes, you can exclude the latter, but especially in this case, it would be a HUGE mistake to do so. Why? Because, if you look up the likely code for this risk (44311 or 44315 for health or exercise clubs/facilities) in the CLM, you’ll find this note:
Premium Base: Gross Sales, Products/Completed Operations are included
P/CO coverage is included and FREE (i.e., no additional premium), so why would you want to exclude it for any reason other than you were not aware that it was already included?
Question...“I am looking for an example of how the coverage would flow under class code 91580 - Contractors-Executive Supervisors or Executive Superintendents. I understand the coverage is for an individual(s) who visit job sites to check on progress and to confer on problems, but does not directly supervise the workers (supervises indirectly through the job foreperson). The problem I am having is understanding how this type of claim flows or happens. I know it doesn't cover professional liability, so what is it actually doing?”
Answer?Unless there is an endorsement tying coverage to coding, how something is rated is nothing to do with whether the policy covers it. Class-limited coverages are very hard to uphold in court, though there are lots of such endorsements in the marketplace, particularly in the construction industry. To learn more about this, sign up for our March 23, 2016 national webinar called “Horrible Policy Forms and Endorsements” when we give examples of policy forms your customers should avoid at all costs.
Certain CGL risks are rated on payroll and there numerous factors which are considered within what is and is not “payroll” under ISO CGL Manual Rule 24. Different codes are used to classify various types of employees and 91580 describes a specific category of employee, meaning their payroll is included for rating. A classification code confers nor implies any coverage provision in the CGL, only rating information.
So, can you properly insure customers knowing absolutely nothing about how to code and rate them? Probably not but, just in case, make sure your E&O limits and coverages are up to date. The following is a consensus dialog from several VU faculty members following the questions above:
What I’m seeing in my consulting practice is a huge need for fundamentals, meaning things we all take for granted because we grew up in a different era in the business. For example, I was in an agency recently and their commercial lines manager didn’t know what the CLM was. I almost fell out of my chair. She’s the manager, mind you, 14 years in the business. The agency pays for a subscription to ISO, but absolutely nobody uses it. We all know that many agencies don’t do a good job training, especially with those brand new to the business, and many choose the cheapest and fastest way to meet their state's CE requirement. I think that’s something that could gain a lot of traction, especially since we know they won’t let them out of the office to learn anything.
I constantly find this class code misunderstanding as well. Also, I have a couple of agencies who think the insured has to add drivers every time they hire someone. They think since they gave the carrier a list at the inception or renewal, they have to add to it during the year, in the absence of any policy language that would require it. In both personal and commercial lines, agency staff misunderstand the issue of “drivers” vs. “insureds.” They equate drivers with insureds, thinking that if they’re not shown as drivers, they aren’t insureds. Perhaps that’s because some insurers, particularly nonstandard auto carriers, have policies that require this. And, since the agency staff all too often don’t read the policies they sell, they think that’s the case for all insurers.
They don’t read the policies and if they attend a halfway decent seminar or webinar on ISO forms, they’re unable to take that information and apply it to other policies. We too often feed them by giving them fish instead of teaching them how to fish. Like I said, fundamentals.
So, if we offered a webinar on something like “Commercial Lines Insurance Rating and Coding Essentials,” would your staff attend? If so, email and we’ll consider working such a course into the curriculum in the near future.
Last Updated: November 29, 2023


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