Contractors Brace for Impact of 2020 Expected Loss Rates

Author, Kevin Howard, CRIS, Account Executive, Rancho Mesa Insurance Services, Inc.

California contractors focused on their experience modification are paying close attention to the soon to be published 2020 Expected Loss Rates (ELRs).

ELRs determine the expected claim cost per $100 in pay roll for each class code during an Experience Modification (Ex-Mod) period. These rates are updated annually. The 2020 rates were recently approved on September 5, 2019. Changes in each specific class code’s ELR can positively or negatively impact a contractor’s Ex-Mod calculation.

In a nutshell, if an expected loss rate drops from one year to another with no material changes to payroll or claims, Ex-Mod’s will increase. Additionally, if an expected loss rate increases, Ex-Mod’s will decrease using the same example.

Below is a breakdown of the 2020 ELRs per class code with notable double digit increases highlighted:

Class Code	2020 ELR	Increase/Decrease %
3724 Solar/ Millwright	1.74	-4%
5187 Plumbing > $28	1.18	-8%
5183 Plumbing < $28	2.6	-5%
5542 Sheet Metal > $27	1.40	-4%
5538 Sheet Metal < $27	2.30	-12%
6258 Foundation Prep	2.65	-3%
0042 Landscape Gardening	2.59	-15%
0106 Tree Pruning	3.91	-21%
5140 Electrical Wiring > $23	.81	-6%
5190 Electrical Wiring < $23	1.89	+2%
5470 Glaziers > $33	1.63	+7%
5467 Glaziers < $33	4.30	-2%
5028 Masonry > $28	2.17	-9%
5027 Masonry < $28	4.73	-18%
5482 Painting/ Waterproofing > $28	1.42	-15%
5474 Painting/ Waterproofing < $28	3.68	-7%
5186 Automatic Sprinkler Install > $29	1.11	+5%
5185 Automatic Sprinkler Install < $29	2.45	-18%
5205 Concrete/Cement work > $28	1.95	-5%
5201 Concrete/Cement work < $28	3.95	-4%
5432 Carpentry > $35	2.01	-7%
5403 Carpentry < $35	5.27	-9%
5447 Wallboard Application > $36	1.34	-12%
5446 Wallboard Application < $36	2.76	-21%
5485 Plastering or Stucco >$32	2.66	-6%
5484 Plastering or Stucco < $32	4.78	-27%
5443 Lathing	2.37	-18%
5553 Roofing > $27	3.90	-14%
5552 Roofing < $27	9.85	-4%
6220 Excavation/Grading > $34	1.24	-24%
6218 Excavation/Grading < $34	2.34	-5%

The data above shows that a majority of class codes will be seeing a decrease in ELRs which will cause higher Ex-Mods in many cases. That reality creates a heightened need for loss control, claim management and post claim strategies. If you are seeking a partner with the tools to address these needs, please reach out to Rancho Mesa Insurance and our team of professionals at (619) 438-6874.

RM365 Safety Star Program May Lower Risk of Receiving OSHA’s Most Frequently Cited Violation

Author, Kevin Howard, CRIS, Account Executive, Rancho Mesa Insurance Services, Inc.

Rancho Mesa Insurance Services’ RM365 Advantage Safety Star Program™ checks several boxes for contractors who are looking to improve their safety culture and lower risk. The program provides safety training designed to reduce an organization’s probability of work-related injuries; thus, minimizing the likelihood of an OSHA citation when used in conjunction with the Risk Management Center tools.

Encouraging a safety culture through proper training makes sense for employers. Fed OSHA’s, maximum fine for a non-serious violation is $12,600. A willful repeat violation, however, can cost an employer anywhere from $70,000 - $126,000.

According to the United States Department of Labor, the top 10 most frequently cited standards are:

1. Fall protection, construction

2. Hazard communication standard, general industry

3. Scaffolding, general requirements, construction

4. Respiratory protection

5. Control of hazardous energy (lockout/tagout), general

6. Ladders, construction

7. Powered industrial trucks, general industry

8. Fall Protection–Training Requirements

9. Machinery and Machine Guarding, general requirements

10. Eye and Face Protection

Avoiding OSHA’s #1 Violation

With Fall Protection being at the top of OSHA’s citation list, and one of the most frequent causes of workplace fatalities in construction, it is of the upmost importance to focus on it when developing a safety program.

Rancho Mesa’s Risk Management Center offers a number of safety trainings that cover all 10 of the most frequently cited standards listed above. Fall Protection is one of five modules, within the RM365 Advantage Safety Star Program that could potentially help avoid a severe injury and OSHA fines.

When Century Painting’s Eddie Lopez was asked to give his thoughts on becoming RM365 Safety Star certified, his response was sincere.

“Obtaining my RM365 Safety Star Certificate was not only fulfilling and educational as a safety manager, but it also helped me navigate through safety criteria that OSHA is expecting us to follow regardless,” said Eddie Lopez, Safety Manager for Century Painting Corp.

RM365 Advantage Safety Star Program™ is a comprehensive tool for contractors that are hoping to package several advantages into one single task. To learn more about how to enroll, please visit the Safety Star Program™ page or contact Rancho Mesa Insurance Services at (619) 937-0164.

To learn more about the Fall Protection in Construction requirements, visit Cal OSHA’s Safety & Health Fact Sheet. You will notice links dedicated to each industry down the left side of the page. This information can further help companies avoid a potential OSHA fine, and more importantly, protect employees.

What Do You Mean My Deductible Is Infinity?

Author, Kevin Howard, CRIS, Account Executive, Rancho Mesa Insurance Services, Inc.

Employment Practices Liability Insurance (EPLI)

Employment Practices Liability Insurance (EPLI) can protect companies from claims related to wrongful termination, discrimination, defamation, unfair hiring/firing practices, and wage and hour lawsuits. EPLI policies may also provide defense costs associated with responding to employment related lawsuits.

HIGHER THAN AVERAGE DEDUCTIBLES

With the increasing frequency of EPLI claims and 40% of California claims occurring within companies with less than 100 employees, deductibles have risen to previously unseen levels. It is now common to see per claim deductibles at a $10,000 starting point and jumping as high as $50,000. These higher retentions can, at times, deter many employers from securing coverage when they might need it most.

YOUR DEDUCTIBLE IS INFINITY

For those employers who elect to self-insure this exposure and go bare without a policy, there is a question that needs to be asked. What is your deductible without EPLI coverage? The simple, very possible answer is that it can be infinity. That is, an employer is responsible for the first dollar to defend along with any future negotiated settlement. That unknown is why many of our clients ultimately purchase EPLI as their balance sheet cannot absorb an infinite loss.

ATTENTION BUSINESS OWNERS!!!

In this unsettling time, across various workforces, it makes good business sense to consider EPLI options with varied deductible ranges. Having that clarity brings comfort to many clients who have worked years to build their business, acquire assets, and improve their net worth. Exposing their business to what could very well be unlimited costs creates considerable risk moving forward.

COMMON MISCONCEPTIONS

Misconception: “If I file an EPLI claim, I will owe the entire deductible upfront.”

Truth: When a claim is filed, policy holders will team up with an attorney who will bill hours until your self-insured retention is met. This could run the course of years with small bills being paid out over time.

Misconception: “I can’t afford to pay an entire annual premium at once, on top of my other insurance renewal premiums.”

Truth: Rancho Mesa can generate a finance plan that will allow you to pay your premiums over a 12 month period.

Misconception: “If I ever have a claim occur, I will just purchase a policy at that time to protect my business.”

Truth: EPLI carriers include prior acts exclusion for this very reason. Any claim that has been made, even in its infant stages, will be declined. You must have a policy in place in advance in order to protect yourself.

Misconception: “I have never had an EPLI claim. Why would I have one now?”

Truth: The California mandate AB 1825 and SB 1343 have increased awareness and visibility of employment related lawsuits. In light of workplace discrimination concerns and the #MeToo movement, the State of California requires all employers with more than 5 employees to conduct Sexual Harassment Prevention Training.

Misconception: “My general liability policy covers EPLI.”

Truth: General liability carriers exclude employment practices liability. If you were to file a claim they would deny coverage.

Business owners deserve a clear explanation of ways to protect themselves from insurable risk. If you would like to discuss how your business is protected, please contact Rancho Mesa Insurance Services, Inc. at (619) 937-0164.

The Ticking Time Bomb for Plumbing and Mechanical Contractors: Lower Expected Loss Rates Can Mean Higher Experience Modifications

Author, Kevin Howard, CRIS, Account Executive, Rancho Mesa Insurance Services, Inc.

The Workers Compensation Insurance Rating Bureau (WCIRB) released the 2019 Expected Loss Rates (ELRs) in the 4th quarter of 2018. ELRs are the average rate at which losses for a classification are estimated to occur during an experience rating period. They are generally expressed as a ratio per $100 of payroll and can often have a dramatic impact on experience modifications. To support this point, the ELRs in the plumbing class code 5187 dropped 17% on January 1, 2019. This decrease is not getting significant attention, but could potentially create negative implications for California plumbing contractors and their respective experience modifications in 2019, 2020, and beyond. All plumbing and mechanical contractors should be made aware so they can prepare and make changes to protect themselves from the impact. Similar to a leak behind a wall, this could go undetected until the experience mods are released and then it is too late and too much damage has been done.

LINKING ELRs WITH YOUR PRIMARY THRESHOLD

The lowered expected loss rates also impact primary thresholds. Your primary threshold is the maximum primary loss value for each individual worker’s compensation claim. If primary thresholds move lower, one small lost time claim can cause a significant spike in an experience modification. An elevated experience modification can impact not only pricing, but opportunities to bid certain types of work within the commercial sector.

WHAT CAN YOU DO TO GET OUT IN FRONT OF THIS?

If these terms are completely new to you and your organization, lean on your insurance broker to provide the education needed to get up to speed. That can start with building a detailed service plan that focuses on controlling your experience modification. Some examples of critical elements that should be discussed would include:

• Addressing open reserves on claims that are impacting the future experience modification.

• How the timing of the unit stat filing will affect the future experience mod and cost.

• Ensuring that your safety program addresses the root cause of claim frequency and severity.

• Trainings that are aligned with OSHA compliance.

• Experience MOD forecasting up to 7 months prior to your firm’s effective date.

AVOIDING THE TICKING TIME BOMB

The ticking time bomb can be avoided by taking certain steps and actions that are strategically put in place with your insurance broker. If this article has created concern and/or these terms are brand new to you, pick up the phone and schedule an experience modification control meeting with an advisor from Rancho Mesa at (619) 937-0164. Their Best Practices approach to managing risk starts with a client-centric process that is focused on education and execution.

Differentiating Solar Industry Class Codes

Author, Kevin Howard, Account Executive, Rancho Mesa Insurance Services, Inc.

Research conducted by the Solar Energy Industry Association (SEIA) shows that California benefits from roughly 3,000 solar contractors conducting business in the state. Panels are being installed at a rapid rate. In fact, statistics show that as of January 2018, over 5 million California homes have “gone solar” and that number continues to grow. Not only are solar panels used to generating electricity, they can also be used to heat water in pools, spas, storage tanks and other plumbing systems using hot water solar panels. 

With solar installation of all kinds becoming more prevalent throughout California, contractors must understand which workers' compensation classification is most applicable for their specialty. 

California’s Workers' Compensation Insurance Rating Bureau (WCIRB) breaks down solar installation into two categories: (1) Hot water solar collection panel install, service and repair, and (2) Photovoltaic (PV) solar panel install, service and repair.

Hot Water Solar Collection Panel Install, Service and Repair

Hot water solar collection panels absorb solar energy to heat water or to transfer fluid that circulates through panels. This hot water is then routed through pipes to pools, spas, storage tanks or hydraulic heating systems. The installation, service or repair of solar water panels is assigned to workers' compensation class code 5183/5187 for plumbing.

PV Solar Panel Install, Service, and Repair

This classification applies to the outside installation, service or repair of electrical machinery or auxiliary apparatus, including but not limited to automated security gates, transformers, generators, control panels, temporary power poles at construction sites, industrial fans or blowers, photovoltaic solar panels, wind powered generators and industrial x-ray machines. Contractors who are installing, servicing or repairing PV solar panels will be assigned to the class code 3724(2) in electrical machinery or auxiliary apparatus. 

The workers compensation base rates for each of these two class codes can vary widely from one carrier to another. Solar installation exposures, a detailed description of operations, and appropriate safety measures utilized must be clarified with your insurance broker so that your firm is properly placed in the appropriate code. The difference can often represent significant savings.

Rancho Mesa Insurance Services, Inc. has expertise in the solar contracting arena, representing clients that cross into both categories. Consider Rancho Mesa for a policy review and audit in advance of your next insurance renewal.

The Rising Risk of Metal Theft from Jobsites

Author, Kevin Howard, Account Executive, Construction Group, Rancho Mesa Insurance Services, Inc.

Metal theft is one of the fastest growing crimes in the country. Copper, aluminum, nickel, stainless steel and scrap iron have become the desired target of thieves looking to make a quick buck.
 
Of particular concern is copper, which is found in gutters, flashings, downspouts, water lines and electrical wiring – all of which can be quickly stripped from vacant buildings, industrial facilities, commercial buildings and construction sites. Air conditioning units are especially attractive, and are often tampered with or stolen for their copper coils and pipes that connect to HVAC systems. The metal is then sold to recycling companies and scrap yards for a tidy profit. 

Common Targets

Subcontractors who store material on jobsites overnight are a common target for metal theft. Typically, subcontractors are designated specific areas on jobsites for their product waiting to be installed. And, it remains common for this material to be stored over multiple nights. Electricians often leave copper wiring; HVAC contractors can store duct work; and, plumbing contractors may store valuable fixtures. Exposure to theft can come from employees of other trade contractors on the site, as well as professionals who monitor the job, picking the right time and place to strike. 

Preventing Metal Theft

To combat theft of materials, many states and municipalities have passed laws tightening the restrictions on scrap dealers. In some instances, purchases of scrap metal are required to be held in reserve for a week or more before being resold in case they have been stolen. In other instances, states require dealers to record the seller’s name, address and driver's license.

Another approach to prevent metal theft involves reducing exposure to risk at the jobsite.  Examples can include:

• Installing security cameras with video recordings that are maintained for sufficient periods of time.

• Securing all equipment and scrap metals in locked buildings or in properly lit areas secured by fencing.

• Posting "No Trespassing" placards or signs indicating the presence of a surveillance or security system.

• Removing access to buildings and roofs, such as trees, ladders, scaffolding, dumpsters and accumulated materials such as pallet piles.

• Securing your building access with deadbolts on doors and window locks.

• Increasing exterior lighting and protecting fixtures (such as AC units) with locked metal cages.

Protecting Contractors’ Equipment on the Jobsite

Insurance for contractors that wish to transfer risk of theft at jobsites is commonly seen with Installation Floaters and Builder’s Risk policies.

Installation Floaters cover business personal property and materials that will be installed, fabricated or erected by a contractor while away from their premises. They extend coverage to the property until the installation work is accepted by the purchaser or when the insured's interest in the installed property ceases.

Builder’s Risk policies protect insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building. While trade contractors can be held responsible for securing a Builder’s Risk policy, it is more typical that general contractors and/or building owners carry these policies during the course of construction. As a result, these policy terms fluctuate based on the length and scope of each project.  

Rely on your insurance advisor to discuss these and other exposures to risk on jobsites. In advance, consider the amount of product stored at any jobsite at one time, the amount of product that can be at risk in transit, the value of product stored offsite (i.e., storage units) and the protections in place that secure your product. These will offer your broker, and ultimately the underwriter, key information in developing the right program for coverage.

For more information, contact Rancho Mesa at (619) 937-0164.

Why Would a Contractor Purchase Employment Practices Liability Insurance?

Author, Kevin Howard, CRIS, Account Executive, Construction Group, Rancho Mesa Insurance Services, Inc.

Insurance is often considered a necessary evil by business owners. It can represent a significant line item on a profit & loss statement rivaling the cost in some cases of payroll, material costs and rent. With deductibles that can range from $15,000-$25,000 per claim, why then would a business spend dollars on an insurance policy that is not required by either state law or part of any general contractor’s insurance specifications?

What does an EPLI policy cover?

Employment Practices Liability Insurance (EPLI) policies typically extend coverage to the following:

• Wrongful termination of an employee who alleges violation of their contract;

• Sexual harassment claims by one employee against another;

• Wage related claims by employees who allege denial of overtime pay or tips, or working “off the books." Note: Most carriers offer a defense only sub limit for this type of claim;

• Claims of unequal or unfair pay between employees performing the same job and having similar skills, education, seniority and responsibility;

• Discrimination claims based on age, race, gender or sexual orientation;

• Third Party. Example: Your employee out in the field of work upsets another subcontractor’s employee, a customer at their home, a student at a school enough to where they file a lawsuit against you.

Why do businesses resist purchasing EPLI?

Declining to purchase EPLI can stem from businesses feeling that they are not large enough for this type of claim to occur.  Many owners have close relationships with their employees and never believe any of the above scenarios could occur within their organization.  And yet, many more can assume that a General Liability policy would cover these types of potential claims when, in fact, most have specific EPLI exclusions. This type of thinking could result in losses that have severe financial consequences for your company. Let’s take a quick look at three common EPLI exposures facing the construction industry.

Common EPLI Claims in the Construction Industry

Rapid growth and layoffs are unique aspects of the construction industry that can cause the elimination of a specific position and/or termination.  With these ebbs and flows, contractors unintentionally open themselves up to wrongful termination cases which can carry into discrimination charges, as well.  It can also be common to see employees bring post-employment wage & hour claims, which center around improper overtime, breaks, etc.   Lastly, contractors' work very often involves interaction and exposure to the public.  This interaction can lead to comments, inferences, or specific actions that non-employees find offensive.  Claims brought by these third parties are difficult to prove when the employer is unable to witness the events first-hand.  

Light Bulb Moment

In these and other potential claim scenarios, employers without EPLI must outlay their own funds to find legal representation and fight the charges.  Legal costs add up quickly regardless of the documentation an employer has kept on file and the conviction they have that an employee’s claim is frivolous.  Defending yourself in today’s environment can become cost ineffective very quickly.  Light bulb moments can occur when EPLI limits are unavailable because coverage is not in force and an owner is staring at a “balance sheet loss,” resulting in a six figure settlement.

Consult Your Broker for EPLI Options

At Rancho Mesa, as it relates to coverage for our clients, we often say "you would rather be looking at it than for it”. That is, you want to be looking at a policy that will respond to coverage than for one at the time of a loss.  Take time to explore the nuances of employment practices liability insurance with a knowledgeable broker.  Allow an expert to educate you on the real exposure to your company, ask to spreadsheet different policy forms, deductibles and limits in an effort to balance the annual premium with the potential impact of a large loss.

For more information about Employment Practices Liability Insurance, contact Rancho Mesa Insurance at (619) 937-0164.

Congratulations, You’ve Won the Construction Contract – Now, you Need USL&H

Author, Kevin Howard, CRIS, Account Executive, Rancho Mesa Construction Group

If the title of this article gave you a good chuckle, you most likely have bid a job somewhere near a body of water; then, found out you need U.S. Longshore and Harbor (USL&H) Workers’ Compensation coverage.  You were surely not the first one to overlook this requirement and you definitely will not be the last.

History of USL&H

Let’s begin with a USL&H history lesson to understand why it was implemented, nearly 100 years ago. 

The U.S. Longshore and Harbor Workers’ Compensation Act was implemented in 1927 to provide compensation to an employee if an injury or death occurred upon navigable waters of the US - including any adjoining pier, wharf, dry dock, terminal, building-way, marine railway or other adjoining area customarily used by an employer in loading, unloading, repairing, dismantling or building a vessel.

The act’s passage compensated maritime workers, including most dock workers and ship builders that were not covered by the Jones Act ( 46 U.S.C. 30004), which only covered seamen, not those who worked in maritime-support industries.  Therefore, USL&H workers' compensation was intended to protect those employees who would otherwise not be covered. 

Moving forward to present day, to avoid conflict, project owners and general contractors alike require subcontractors and vendors to provide USL&H coverage if projects are close to navigable waters. 

Does Every Insurance Carrier Offer USL&H Coverage? 

The answer is no. Not every workers' compensation carrier is filed to offer USL&H.  Depending on the industry, classification codes and payroll size, there is most likely only a handful of options available. With that said, it’s important to know who those insurance carriers are if you plan on bidding a project that requires USL&H.  

Acquiring USL&H Coverage

The first move to acquiring a USL&H policy is to call an insurance representative that has experience in this area. Then, you can develop a game plan that will help you navigate within the USL&H marketplace.

As an eleven-year Best Practices Agency, Rancho Mesa can assist with your USL&H needs. We have been helping clients in the construction field for over 20 years. Contact Rancho Mesa at (619) 937-0164 for more information about this type of policy.