How Increased Material Costs Leave Contractors Underinsured

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

Over the last 15 months, COVID-19 has brought numerous challenges to the construction industry. Second to only the labor shortage, the most pressing challenge faced by contractors is the spike in material costs which can leave them underinsured if a proper installation floater is not updated.

Lumber, steel, copper, and other building material costs rose anywhere from 100% to 500% between April 2020 and May 2021, depending on the material. Since most projects are bid 6 to 18 months prior to the start of construction, many suppliers and subcontractors were caught off guard and did not reflect these increases in their initial bids.  

Most contractors will purchase an inland marine policy that provides coverage for their miscellaneous tools, scheduled equipment, rented or leased equipment as well as an installation floater. It is important for contractors to understand the installation floater and how the increase in material costs could leave a contractor underinsured in the event of a loss.

An installation floater policy provides protection for direct physical loss or damage to materials, as well as supplies and labor costs for property being installed at jobsites. Materials are also covered while in transit and stored at temporary locations. The floater also extends coverage to the property until the installation work is accepted by the purchaser or when the insured's interest in the installed property ceases.

So, in the event of a covered loss, which includes fire, theft, explosions, transit-related damage and vandalism, a contractor’s installation floater will respond with coverage.

Proactive contractors should rely on their insurance advisor to discuss and design a program that addresses these unforeseen material and labor increases. 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.

To discuss how an installation floater can protect your company, contact me at (619) 937-0167 or sclayton@ranchomesa.com.

ANSI Releases New Mobile Elevating Work Platforms Standards

Author, Casey Craig, Account Executive, Rancho Mesa Insurance Services, Inc.

Last year, the American National Standards Institute (ANSI) updated their aerial lift standard, starting with renaming it Mobile Elevating Work Platforms (MEWP). This has been in the works since 2018 and is designed to align training, certifications, and equipment used on a more universal standard. According to the Center for Construction Research and Training (CPWR), roughly 26 people die from MEWP each year. This prompted the Occupational Safety and Health Administration (OSHA) to increase training requirements to keep accidents to a minimum. Obviously, MEWP are essential for completing a wide variety of construction jobs. So, what should you, as a business owner, be doing to ensure your employees are safe and in compliance when OSHA comes by your jobsites?

MEWP are prone to tipping over on uneven ground and in inclement weather conditions, if equipment is extended out. The most common cause of the MEWP tipping over is driving it over uneven surfaces. Understandably, many contractors rush to complete projects but moving extended lifts can be the easiest way to have a serious accident. Alternatively, taking proper time to lower a lift before moving it leads to fewer serious accidents.

Identifying exposures and objects that conflict with a lift’s surroundings is also of great concern for lift operators. A very common occurrence involves employees being pinned between the lift and an object. It is easy to become fixated on either the ground or the direction the lift is moving and ”miss” objects that could be hazardous as you are raising and lowering the lift. Allowing for time to plan ahead and move the machinery safely is immensely important.

Many of these new requirements are focused on teaching proper equipment use and creating an awareness of the changes to new equipment in the marketplace. Inherently, these machines are dangerous but necessary. So, maintaining a respect for them and understanding how to properly use them is vital. Lift use trainings, techniques, and protocol are available through our Risk Management Center and are compliant with the new ANSI/SAIA A92.20, A92.22, and A92.24 standards that were just released, last year.

Please reach out to me at ccraig@ranchomesa.com or call at 619-937-0164 for more information, or for help assigning the trainings.

The Importance of Properly Classifying Stump Grinding Operations

Author, Rory Anderson, Account Executive, Rancho Mesa Insurance Services, Inc.

Almost all tree care companies’ operations include stump grinding. Stump grinders are powerful machines that are designed to chew away and grind a tree stump down into little pieces, after a tree has been cut down. The operator guides the blade over the stump to take it down below ground level. Because stump grinding is done from the ground, it can create some confusion for tree care companies on how to properly classify this exposure for workers’ compensation insurance. A lot of tree care companies assume that because the employee operating the stump grinder is on the ground, it should be classified in 0042 – Landscape Gardening, which is more cost effective than classifying them in 0106 – Tree Pruning. However, this assumption is incorrect. It’s important to understand how and where to classify this exposure, so you’re not setting yourself up for an issue at the audit.

The Workers’ Compensation Insurance Rating Bureau defines all class codes to help companies classify specific operations. Let’s look at how they define 0106 Tree Pruning, Repairing or Trimming.

0106 Tree Pruning, Repairing or Trimming
This classification applies to pruning, repairing or trimming trees or hedges when any portion of the operations requires elevation, including but not limited to using ladders, lifts or by climbing. This classification includes clean-up, chipping or removal of debris; stump grinding or removal; and tree spraying or fumigating that are performed in connection with tree pruning, repairing or trimming. This classification also applies to the removal of trees that retain no timber value.

According to this definition, a tree care company must report stump grinding in 0106 if the stump grinding is in connection to the 0106 tree work that they performed. Even though the stump grinding operator is working from the ground, they must be classified as 0106 because the stump grinding is performed in connection with the 0106 tree work that they performed.

For example, a specific job calls for the removal of four valley oak trees. The arborists from a tree care company spend the morning climbing, trimming, and removing the four trees. A few hours later, the ground crew grinds all four stumps down using the stump grinder. Per the WCIRB classification definition, the ground crew who are operating the stump grinder must be classified in 0106 because it was in connection to the 0106 tree work that they (the company) performed.

The WCIRB also states that “stump grinding performed for other concerns on a fee basis and not in connection with tree pruning, repairing or trimming at a particular job or location shall be classified as 3724 – Millwright Work.”

To clarify, a tree care company may report stump grinding in the 3724 Millwright Work class code if it has no connection to 0106 tree work. So, in other words, you may only report stump grinding in 3724 if the job calls for only stump grinding.

For example, a homeowner has a stump in their backyard and calls a tree care company out to grind the stump down. This work may be classified in 3724 Millwright Work only if the tree care company did not trim or remove the tree first; they simply showed up and grinded the stump.

Having an insurance agent who specializes in the tree care industry is instrumental in building trust so that this critical information is communicated to you properly. With this information, you can have the confidence that you are reporting payroll correctly and avoid classification issues that can potentially arise at the final audit.

For questions about your operations and corresponding tree care classification codes, contact me at (619) 486-6437 or randerson@ranchomesa.com.

Historic Wildfire Losses Alter Risk Assessments for Many Buildings

Author, Sam Brown, Vice President, Human Services Group, Rancho Mesa Insurance Services, Inc.

The 2017 historic wildfire losses and ever-changing atmospheric conditions continue to alter the commercial property insurance marketplace in 2021.

Insurance carriers have used the CoreLogic® Wildfire Risk Score to evaluate risk and pricing since 2003 without significant changes to the Risk Score’s calculation. However, 2017’s wildfire season put change in motion.  

According to CoreLogic, 2017’s fire activity increased in scope and occurred in areas that previously had not been considered high risk areas. Analysis of the fires’ impact noted the surprising intensity with which the fire spread and how the fires burned deep into urban residential neighborhoods without the traditional fuel sources one would expect to see. The analysis also determined that both wind and drought played a major role in the fires’ spread and severity.

Since 2017, California has experienced its most destructive fire in its history, the Camp Fire which burned in 2018 and its most destructive fire season on record in 2020. Analysis of the destruction and pre-fire conditions confirmed the relationship between drought and wind with the size and scope of the fires.

In response to the growing data set and changing conditions, CoreLogic now incorporates wind risk data and the drought factor into the 2021 Wildfire Risk Score. While some structures will see no change in risk score, other areas will be negatively impacted. The bottom line is the wildfire risk score will make some structure very difficult and costly to insure properly.

Rancho Mesa clients and brokers will continue to discuss the changing property insurance landscape as more information and underwriter feedback is gathered.

To discuss how to best insure your commercial property, please contact me at (619) 937-0175 or sbrown@ranchomesa.com.

Closing Your Bond Liability – Understanding the Consent of Surety Document

Author, Matt Gaynor, Director of Surety, Rancho Mesa Insurance Services, Inc.

The project our contractor client was required to bond has been completed and they are looking to get their final payment and collect their retention. But the owner or general contractor is requiring a Consent of Surety document from our contractor. What is a consent of surety and why is this document required?

The Consent of Surety document is used by the owner to check with the bond company to determine if any claims or notices have been filed with the bond company that the owner may not be aware of. The form states:

The surety hereby approves of the final payment to the contractor, and agrees that final payment to the contractor shall not relieve the surety of any of its obligations to the owner.

Essentially, the bond company agrees that they still have responsibility for the contract even after final payment has been made.

Prior to approval of this document, the bond company will typically request the final contract amount of the bonded project. They may also request that the owner complete a bond status form to determine if any problems/complaints might have occurred on the project.

Once they are satisfied that the project has completed in good standing, they will authorize the bonding agent to issue the Consent of Surety document. They will also invoice for any additional bond premium if the contract increased in size.

For more information on the requirements for a Consent of Surety document and how it pertains to your contract, please contact me at (619) 937-0165 or mgaynor@ranchomesa.com.

Three Signs You’re Ready for Captive Insurance

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

As a business owner, you might hear about group captive insurance but are unsure whether or not it would be a fit for your business model. With auto rates rising dramatically and property and casualty premiums poised to shift upwards over the next 5 years, exploring a group captive could benefit your business. A group captive could help you potentially recover more than 60% of your premiums, generating substantial returns on your investment in safety.

So, how do you know if a group captive would be the right fit for your business? Below are three signs it is time to consider a captive option.

1 . Combined Premiums – Your annual premiums for workers’ compensation and commercial auto combined exceeds $100,000.

Many group captives have minimum premiums in the $250,000 to $500,000 range; however, Rancho Mesa represents group captives with minimums as low as $100,000.

2. Risk Controls – You have invested in risk controls in order to prevent or reduce losses and you would like to maximize your return on that investment.

Some examples of controls could be fulltime safety coordinators, GPS/telematic systems installed in all owned autos, pre-employment physicals and/or drug testing, and mandatory stretching or ergonomics, to name a few.

3. Performance – Your business continues to operate as a profitable risk for your insurance company partners.

If the business’ loss ratio is lower than its peers in your industry and your track record looks great, a group captive may be the right fit.

If the above list describes your business, a group captive could be a great long term solution.

To learn more about a group captive option, listen to our StudioOne™ Podcast Episode 86 where Rancho Mesa’s President Dave Garcia discusses captive insurance with Doug Hayden, Senior Vice President of Captive Resources.

If you have questions about if group captive insurance is right for your business, please do not hesitate to contact me at (619) 438-6874 or khoward@ranchomesa.com.

Californians Wait for Revised COVID-19 Prevention Emergency Temporary Standards

Author, Alyssa Burley, Media Communications and Client Services Manager, Rancho Mesa Insurance Services, Inc.

Over the past few weeks, Californians have eagerly awaited news from the State’s Occupational Safety and Health Standards Board (Standards Board) on revisions to Cal/OSHA’s COVID-19 Prevention Emergency Temporary Standards after the Centers for Disease Control (CDC) released its latest guidance that ease mask wearing for those who are fully vaccinated.

On June 3, 2021, the seven-member Standards Board first voted to deny a revised set of standards that would place additional requirements on business owners and most notably prevent fully vaccinated employees from being able to take off their masks in the workplace if everyone in the room was not vaccinated. However, in the same meeting, the Standards Board voted a second time which led to the approval of the revised standards which were set to go into effect no later than June 15, 2021 when the State is scheduled to fully reopen.

With pressure from businesses, community groups and California Governor Gavin Newsom, the Standards Board held an emergency meeting on June 9, 2021, where they unanimously voted to rescind the proposed standards previously approved on June 3, 2021.

If all of this sounds confusing, you are not alone.

As of the publication of this article on June 15, 2021, business owners should be following the COVID-19 Prevention Emergency Temporary Standards that were adopted in November 2020 and May 3, 2021’s Executive Order N-84-20 which allows for fully vaccinated people who have been exposed to a COVID-19 case, but show no symptoms, to remain in the workplace. Rancho Mesa has created a COVID-19 Prevention Plan template based on those requirements. It is available for download.

The Standards Board is scheduled to meet on June 17, 2021 where it is expected they will propose new standards that are more in line with the CDC’s masking recommendations. The agenda provides information on how to attend the virtual meeting.

When changes are made to the COVID-19 Prevention Emergency Temporary Standards, Rancho Mesa will update its COVID-19 Prevention Plan template and make it available to the public.

Stay up to date on this issue and others that affect California businesses by subscribing to our weekly Risk Management Newsletter and podcast.

Cyber Attacks Threaten One-in-Six Firms’ Survival

Author, Sam Brown, Vice President of the Human Services Group, Rancho Mesa Insurance Services, Inc.

The dramatic increase in cyber-attacks since 2020 has resulted in employer pain and made headlines as the economic cost skyrockets. The recent Hiscox Cyber Readiness Report 2021 states that the number of firms attacked rose from 38% to 43%. Not surprisingly, more than 28% of those employers suffered multiple cyber-attacks.

Determining the cost of a breach can be difficult, but the report states that one-in-six firms’ survival was threatened. Over 58% of firms hit with a ransom paid the threat-actors to regain access to the computer system and vital information. In 2020, the standalone cyber loss ratio increased to 73%, its highest level since separate cyber data were included in financial reporting, six years ago.

The increase in cyber-attacks and claim payouts is causing alarm in both insurance companies and businesses. According to the Insurance Journal, insurance companies are quoting significant premium rate increases and tighter coverage terms to improve underwriting performance and profitability. The average cyber renewal premium rate increased 11%. Meanwhile, written premiums for standalone cyber coverage increased 29% in 2020, a sign of growing demand.

The shift to a remote workforce and an increase in phishing email has tested network security systems. Fortunately, many insurance carriers now offer a cyber readiness assessment to help policyholders address vulnerabilities and avoid cyber-attacks.

As cyber-attacks continue, it is important for all employers to learn more about the specific exposures that cyber insurance coverage can cover along with ways to improve cyber security.

We will be offering a Cyber Liability workshop in the coming weeks, so be sure to look for that information on our workshops and webinars webpage.

Please contact me at (619) 937-0175 or sbrown@ranchomesa.com to discuss our process of developing competitive quote options.

SB 93 Impacts Janitorial Companies’ Hiring Practices

Author, Jeremy Hoolihan, Account Executive, Rancho Mesa Insurance Services, Inc.

As businesses continue moving towards fully reopening, certain California employers will be faced with reemployment or recall requirements, due to Senate Bill 93 (SB 93). SB 93 was signed into law by Governor Gavin Newsom on April 16, 2021. The law requires that covered employers offer their employees who were laid-off due to the COVID-19 pandemic, available employment based on a preference system. 

While several industries are impacted by this new legislation, employers that provide “building services” such as janitorial, building maintenance, or security services to office, retail, or other commercial buildings also fall under the requirements of the new law.

As an expert insuring janitorial companies through our exclusive MaintenanceOne™ program, this impacts many of our clients. To understand some of the additional components of the new law, we have summarized some key points below:

Qualifying Employees

Employees that qualify for SB 93 protection must have:

• Been employed by a covered employer for “6 months or more in the 12 months preceding January 1, 2020.

• Been “separated from active service…due to a reason related to the COVID-19 pandemic, including a public health directive, government shutdown order, lack of business, a reduction in force, or other economic, non-disciplinary reason related to the COVID-19 pandemic.”

• Worked two hours or more per week for the employer.

Requirements of the Employer

• Covered employers must offer laid-off employees all job positions that become available for which the employee qualifies. Laid-off employees will be deemed qualified if the employee held the same position at the time of the lay-off.

• The laid-off employee must be given five business days to respond to the offer.

• In the event that more than one employee would be eligible for a position, the employer must offer the position to the employee with the longest tenure based on the date of hire.

• An employer that declines to recall a laid-off employee on the grounds of lack of qualifications must provide the laid-off employee written notice within 30 days.

Record-Keeping

Covered employers must maintain the following records for at least three years starting from the date of layoff:

• Employee’s full legal name

• Employee’s job classification at time of layoff

• Employee’s date of hire

• Employee’s last known home address

• Employee’s last known email

• Employee’s last known telephone number

Records must also include any layoff notices and “all records of communications between the employer and the employee.”

Enforcement and Penalties

SB 93 compliance and enforcement is handled by the California Division of Labor Standards Enforcement (DLSE). The DLSE may order reinstatement, front and back pay, and benefits, as well as impose substantial penalties and liquidated damages. SB 93 takes effect immediately and expires on December 31, 2024.

The law also has a collective bargaining agreement waiver provision – any such waiver must be explicitly set forth in that agreement in clear and unambiguous terms.

No Retaliation

SB 93 prohibits employers from retaliating or taking adverse action against employees seeking to enforce their rights.

What’s Next?

Covered employers should take stock of their current situations and evaluate their options for compliance.  Employers should also take extreme caution when making their employment decisions. It is an especially difficult time for both employers and employees. Employers are expected to follow the law closely and employees are desperate to find employment. If not careful, this could lead to disagreements and potential employment related lawsuits.

If you are a janitorial business trying to navigate through these turbulent times, consider our  MaintenanceOne™ program which provides a full service Risk Management Program that can not only assist your business with its insurance needs such as Employment Practices Liability Insurance, but also assist with HR and compliance that can guide you through this process. 

Please contact me at (619) 937-0714 or jhoolihan@ranchomesa.com for more information on MaintenanceOne™.

Experience Mod KPI Provides Trend Analysis, Opportunity Assessment, and Vital Management Tools

Author, Drew Garcia, Vice President, Landscape Group, Rancho Mesa Insurance Services, Inc.

In January 2021, we launched the Safety Key Performance Indicator (KPI) Dashboard to provide a tool for our customers to use as a bridge between their experience mod and safety performance.

Our primary goals were to:

• Eliminate surprises

• Simplify concepts

• Track performance

• Highlight the positive and negative trends

• Benchmark safety performance against industry competitors

An experience mod above 100 can limit a landscape company’s ability to be awarded jobs or maintain contracts, increase insurance premiums, and have other significant financial implications.

Our dashboard is a tool companies can use to strategically manage the underlying components that directly impact the experience mod and help project future experience mod deviations.  Rancho Mesa can help interpret the results and provide insights to help improve your performance.

Not a Rancho Mesa client but interested in seeing what your dashboard looks like? Complete our new KPI Dashboard quick form, to see how your company measures up.

Top Three Professional Liability Exposures for Tree Care Companies

Author, Rory Anderson, Account Executive, Rancho Mesa Insurance Services, Inc.

Professional tree care companies must have a general liability policy that will cover incidents that cause bodily injury or property damage resulting from their operations. However, there are situations that will not be covered under a typical general liability policy and would require professional liability coverage, or, in the tree care industry it would specifically be Arborist Errors and Omissions coverage. Here are three exposures that tree care companies face that a professional liability policy would address.

Tree Work

At times, tree care companies could inadvertently remove the wrong tree or prune a tree incorrectly causing various issues. As a result, the client may bring action against the tree care company for a number of reasons, including:

• The loss of the intrinsic value the tree provided – shade, design, look, etc.;

• The dollar value of the tree for replacement;

• Mental distress suffered by the client.

Adjacent Trees

A professional tree care company can also be held responsible for damage caused by a failed tree that they did not even touch, but was on or nearby a recent jobsite. To be held liable for a failed tree (when a tree experiences structural collapse or breakage of any part of the tree: trunk, roots, or limbs) that they did not perform work on may seem unfair, but the client may claim that the arborist is the specialist and has a responsibility to point out any trees on a jobsite that could be dangerous.

Professional Tree Advice (Consulting)

Most tree care companies have a certified arborist who offers tree consulting and will give a professional opinion on whether or not a tree is safe.  This leaves the tree care company potentially responsible in the event a tree that was deemed safe actually fails and causes property damage, or even worse, bodily injury to a human.

Tree work, adjacent trees and consulting are three common exposures not typically covered by a general liability policy; therefore, professional tree care companies must strongly consider some form of professional liability coverage. Work with your trusted insurance advisor and have them thoroughly assess your exposure to these concerns.  To learn more about professional liability coverage for the tree care industry, listen to our StudioOne™ Safety and Risk Management Podcast Episode 99.

Contact me for a complete risk analysis of your operations at randerson@ranchomesa.com or (619) 486-6437.

A Contractor’s Guide to Bonding Capacity

Author, Andy Roberts, Account Executive, Surety Group, Rancho Mesa Insurance Services, Inc.

For contractors that do a lot of bonded work, their bonding capacity is a critical element of their business. Capacity often determines which projects a company can and cannot pursue, so it is managed very closely. However, for contractors that are new to bonding or have not bonded previously but remain interested in performing bonded work, this is likely a foreign concept to them. So, what is bonding capacity, and what items determine the amount of capacity that a surety carrier is willing to offer?

Generally speaking, a contractor’s bonding capacity is comprised of single and aggregate limits, where the surety underwriter will approve performance and payment bonds for a job, up to the single limit. The aggregate limit is the cap that the surety carrier sets for how much total bond liability a contractor can have extended at one time. Having these caps is what makes it important for contractors to have an understanding of what information sureties use when determining how much capacity to offer. Underwriters will look at personal and business credit, industry experience, as well as personal financial wealth. Typically, though the most important item a surety underwriter will focus on is the company’s financials, specifically, their balance sheet and income statement. 

When reviewing the balance sheet and income statement, two important items that an underwriter will be reviewing are the contractor’s working capital and their equity. We took a deeper dive into working capital in a previous article, but simply put, working capital represents a contractor’s current assets minus current liabilities, and this measures how much a company has available to pay its current debts. Equity, or net worth on the balance sheet, is made up of retained earnings, common stock and additional paid in capital, and these numbers provide a measure of the long term liquidity of a company. Surety carriers take a hard look at this number because they want to ensure that there are sufficient reserves to complete the work that they have issued performance and payment bonds on.    

Building an effective bonding program can take time and requires collaboration with competent, trusted advisors. Determining what type of bonding capacity you can establish and/or deserve is a key part of the process. To find out what your bonding capacity looks like, request a quick capacity analysis and I will provide you with the information you need for your company. To answer more questions, you can email be at aroberts@ranchomesa.com or call my direct line at (619) 937-0166. Stay tuned for my next article which will take a deeper dive into strategies for improving equity and how this can increase capacity.

Changes on Horizon Likely to Affect Workers’ Compensation

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

Businesses in California have become accustomed to many changes in legislation and the filings from the Workers’ Compensation Insurance Rating Bureau (WCIRB). 

Changes by the WICRB typically take place at the first of every year and can impact workers’ compensation Pure Premium Rates, Expected Loss Rates (ELR) and Wage Thresholds. However, the WCIRB has amended its filing schedule in 2021 to take effect September 1st.

Below are key changes that businesses should be aware of that can alter Experience Modification Rates (ExMod) and workers’ compensation renewal pricing.

Assembly Bill 1465

The proposed Assembly Bill 1465 (AB 1465) could have significant impact on workers’ compensation rates in the years to come.  If passed, AB 1465 will establish the California Medical Provider Network (CAMPN), a broad and largely unregulated network run entirely by the state that would apply to the workers’ compensation system.  All licensed physicians in good standing who elect to treat injured workers will be included in the network.  Injured workers can choose any provider within the network and can transfer among providers multiple times without any limitation.

If this bill passes and a CAMPN is created, employers can anticipate:

• Doctor shopping by injured workers and attorneys;

• Increase in temporary disability and time to return to work;

• Increase in permanent disability ratings;

• Overall increase in medical costs per claim;

• Poorer quality medical reports due to fewer controls and less oversight.

Workers’ Compensation Rates

The WCIRB recently proposed a 2.7% workers’ compensation rate increase, effective 9/1/2021. This would be the first rate increase since 2015.  Updated fee schedules for med-legal review reports and physician office visits are what is driving this potential increase.

Expected Loss Rates

A characteristic of a Best Practice business is their focus on managing their ExMod. In simple terms, if a business’s ELR increases, it will have a positive effect on their ExMod. Conversely, if their industry’s ELR decreases, it will have a negative effect. While understanding what an ELR is and how it can specifically impact your ExMod is critical, this should be something your insurance advisor is explaining to you and projecting the impact it will have on your ExMod and ultimately your insurance premium.

To put this information at our clients’ finger tips, we have created a Key Performance Indicator (KPI) dashboard to not only show the impact of any changes in the ELR but also provide other key indicators like industry benchmarking, claim trending, and many other critical factors.  Request your customized KPI dashboard.

To stay up to date with these topics and related insurance news, subscribe to our weekly safety and risk management newsletter and podcast. Or, contact me directly at (619) 937-0167 or sclayton@ranchomesa.com to discuss how your company may be affected.

California’s Landscape Industry Prepares for Ex-Mod Changes

Author, Drew Garcia, Vice President, Landscape Group, Rancho Mesa Insurance Services, Inc.

For the first time in several years the Expected Loss Rate for class code 0042 has increased from $2.38 to $2.42, a 2% increase.

Bottom line, although very minimal, this should help bring the experience mod down.

This information will impact any landscape company who has a policy effective date of September 1, 2021 and beyond.

Based on a couple of projection comparisons, we have seen an impact of 1 to 4 points come off the experience mod for landscape companies.

Landscape companies working with Rancho Mesa with policy effective dates after 9/1/2021 will see updated information on their KPI Dashboard, at the next review.

For landscape companies not working with Rancho Mesa, you can request a custom KPI Dashboard today by reaching out to Drew Garcia.

Implementing an Effective Fall Safety Program Can Have Serious Impacts

Author, Casey Craig, Account Executive, Rancho Mesa Insurance Services, Inc.

Year after year, falls are among the leading type of workers’ compensation claims and generate the highest claim costs. They account for multiple infractions on the top 10 most frequently cited standards, according to the Occupational Safety and Health Administration. How can you, as a business owner, control your exposure and keep your employees productive and healthy?

Prevention

According to the Centers for Disease Control, “27% of the 900,380 nonfatal work injuries resulting in days away from work in 2018 were related to slips, trips, and falls.” That’s a shockingly large number especially when 100% of falls are preventable if you take the time to plan, according to the National Safety Council (NSC). The NSC recommends:

• Walking a job before employees get there to ensure proper set up is achievable with the equipment you are bringing for that job.

• Pay attention to environmental conditions such as wind, rain, or excessive heat.

• Check your equipment frequently to ensure nothing is worn down or damaged.

• Make sure employees are wearing the proper foot wear and other Personal Protective Equipment (PPE) items required for the individual job needs.

Having employees working on ladders or scaffolding is essential for some jobs, and fortunately is a risk you can control. In addition to evaluating the work site, the equipment, the environmental factors, and PPE needed, you should also evaluate the health and fitness of all employees. Factors to consider should include the employee’s:

• Experience

• Fitness level

• Age

Height Matters

A fatal fall can happen at almost any height. According to the NSC, only 16% of fatal falls in 2016 occurred as a result of a fall from over 30 feet; however, 53% of fatal falls that year resulted from below 20 feet. Given this data, best practices would dictate that construction companies should step back and reevaluate the safety procedures they have in place and determine if any changes need to be made, particularly for jobs that are considered the lower heights.

RM365 Advantage Safety Star™ Program

To get your employees properly trained, we recommend enrolling in our RM365 Advantage Safety Star™ program that includes Fall Prevention training. This program includes fundamental safety topics that allows your foreman or key management team to go through internet-based safety trainings and earn their Safety Star certification. This program has shown to improve safety while helping to reduce your workers’ compensation premiums. Register to start your RM365 Advantage Safety Star™ program, today.

Rancho Mesa understands the exposure our clients face on a daily basis and can help implement safety procedures to mitigate these risks. Underestimating a project’s risk or undertraining employees is an exposure you can address.

If you would like help in reviewing your safety protocols and procedures or if you have further questions, do not hesitate to reach out to me at (619) 438-6900 or email me at ccraig@ranchomesa.com.

The Construction Risk Management Guide

Author, Daniel Frazee, Executive Vice President, Rancho Mesa Insurance Services, Inc.

As a business or firm, you are most likely aware of many risks that come with construction projects. Whether it is meeting the terms of a contract, maintaining employee safety on the job site, or dealing with natural disasters, every project has its own set of hazards. If not managed, these risks can compromise your projects and prove fatal to your bottom line. Thus, construction risk management is a must-have for any company, but an effective plan must have easy-to-follow, yet detailed processes to help you control the risks, make decisions on how to deal with them, and turn them around to uplift your company. With the presence of rising material costs, more complex projects and increased safety concerns, having a risk management plan is more crucial than ever.

What is Construction Risk Management?

Risk management is the process of determining the risks present in your business and evaluating the procedures to minimize their impact. In the construction world, the process involves planning, monitoring and controlling instances of risk. At the center of this process is your risk management plan, a formal document that details the risks and your processes for addressing them.

Sources of construction risks may include:

• Safety Risk - any risks or hazards that can lead to worker accidents at a construction site;

• Financial Risk - internal and external factors like sales, problems with the economy, unexpected cost increases and competition from other firms;

• Legal Risk - disputes in the fulfillment of contracts with clients;

• Project Risk - hazards such as poor management of resources, miscalculation of time, lack of proper policies, etc.; and

• Environmental Risk - natural phenomena that damage construction sites like floods and earthquakes.

How to Manage Risks

Before you can manage risk, companies must develop a risk management plan. This process can be broken down into six steps.

1. Identify the Risks
   Risk identification should take place during the preconstruction phase of a project to allow ample time to manage any potential risks before accepting them. One effective way is to hold brainstorming sessions with your project team with an emphasis on identifying all the possible scenarios that could impact the project at hand. Once the brainstorm is complete, hold regular meetings to continually identify new risks that develop.

2. Prioritize Risks in Order of Importance
   High-probability risks should be handled first while low-impact, low probability risks should be addressed last. As an example, an unexpected price increase in the materials for your project can severely hurt your profit margins and might be considered a high priority.

3. Determine your Response Strategy
   Once you have evaluated the priority of risks, your team must decide a response strategy for each hazard. You can avoid the risk altogether, mitigate the risk, transfer the risk if possible via insurance and/or performance bonds, or accept the risk.

4. Execute the Plan
   Much like a sports team on game day, your company now has to execute the plan after you have developed your strategy. Your plan must detail crucial information for each team member and provide specific solutions to mitigate, transfer, or accept risks.

5. Involve Members of the Team
   Great plans are developed with multiple opinions, involving contribution from all team members typically including the ownership group, the financial officers, and the field team. Members are managing cash flows, schedules, inspections, project logs, contracts and regulatory documents.

6. Create Contingencies and Revise
   Strong risk management programs have contingency plans. That is, alternative methods for finishing a project despite accepting the risk. Consistent monitoring and revisions to your plan will help increase resilience against any possible risk and ensure that your “document” evolves and changes over time.

Benefits of Risk Management in Construction

Along with the actual building process, risk management should be seen as one of the most critical steps of a construction project. Identifying, assessing, controlling and monitoring risks strengthen awareness and teamwork among those key members of your organization. Working in step with your insurance broker for resources, templates, and feedback can be key to integrating your plan with the company’s safety initiatives. Request a sample Accident Prevention Template to start your Construction Risk Management plan. And, in turn, communicating an effective and tested plan to the insurance marketplace can position you and your broker to leverage the most competitive terms and pricing within your renewal cycle.

For more information or questions related to this article, please contact me at 619-937-0172 or via email dfrazee@ranchomesa.com.

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Accident Prevention Template

How to Choose a Workers’ Compensation Carrier Partner

Author, Dave Garcia, President, Rancho Mesa Insurance Services, Inc.

Many years ago, when I was a young producer, one workers’ compensation carrier legend pulled me aside and told me never to forget that a workers’ compensation decision is not a one-year decision, but at least a 4-year decision. Of course, policies are only written on a one-year basis but what he was teaching me was that the carrier you choose will handle all the claims you have through your Experience Modification cycle. So, evaluating and recommending a workers’ compensation partner for my clients just became a much more thorough analysis of many critical factors beyond just the premium.

I understand and want to acknowledge that competitive pricing is very important, yet other than price, most business owners are not sure what to look for when comparing carriers. All businesses should consider the following in their evaluation of a workers’ compensation carrier:

• What is the A.M. Best rating of the carrier?

• How long have they been in the State workers’ compensation marketplace?

• What is their premium volume within the State?

• What “in-house” services does the carrier provide? Two services for special consideration are:

  • The Claims Department

  • Loss Control Service

• How does their medical cost containment numbers compare to the industry averages?

• How does their claim closing rates compare to the industry average?

• Are the following services available?

  • Telemedicine

  • Nurse Triage

For any businesses that pay above $250,000 in annual premium, should consider these additional questions:

• Does the carrier offer a dedicated indemnity claims examiner for your business?

• Does the carrier offer Claim Review Meetings?

• Does the carrier offer a Client Services coordinator?

• Does the carrier offer on-line claim status information?

• What loss sensitive programs do they offer?

Further, for any businesses that are exploring loss sensitive programs (usually above $400,000 in annual premium) like deductible workers’ compensation, they should evaluate the following:

• What are the terms of the letter of credit required?

• Is there a Loss Conversion Factor (LCF)?

• Is a Loss Fund required?

• How are Allocated Loss Adjustment Expenses (ALAE) handled?

• Is there a policy deductible aggregate?

• Are there any claims handling charges?

• Are there Medical Cost Containment charges?

Since many of the concepts and terms above require a deeper understanding and explanation, listen to my podcast episodes where I examine this topic in greater detail.

Also, consider attending one or both of my live webinars that cover this topic and afford you the opportunity to ask questions. Register for our Thursday April 1, 2021 webinar where I will focus on businesses with annual premiums below $400,000, and/or register for my Thursday April 8, 2021, webinar where I will deal specifically with deductible workers’ compensation. Both webinars will be 30 minutes in length.

If you would prefer to speak with me directly, I can be reached at (619) 937-0170 or email me at dgarcia@ranchomesa.com. 

I wish you all a safe and profitable 2021.

How Rising Pure Premium Rates Will Impact the Tree Care Industry

Author, Rory Anderson, Account Executive, Rancho Mesa Insurance Services, Inc.

In California, each workers’ compensation insurance company has its own set of base rates for each class of business. In order to come up with their base rate for each class code, the insurance carrier applies their Loss Cost Multiplier (LCM) to the Workers’ Compensation Insurance Rating Bureau’s (WCIRB) pure premium rates.

Pure premium rates are determined by the WCIRB and include the loss cost of claims for that particular class of business. Those costs include:

• The cost of the claim itself (i.e., indemnity, medical and expense payments)

• Loss adjustment expenses  

• Future loss adjustment expenses (e.g., fees for expert witnesses and salary/overhead for outside legal counsel)

A pure premium rate reflects the amount of losses that an insurance carrier can expect to pay out in claims for that class of business. Every 6 months, the WCIRB submits pure premium rates to the California Department of Insurance for approval. These pure premium rates are based on loss and payroll data submitted to the WCIRB by all the insurance companies in California.

A carrier’s LCM will include those additional expenses separate of the pure premium rate considerations. These would include a carrier’s:

• General overhead expenses (e.g., rent, payroll, employee benefits, etc.)

• Sales and Marketing

• Taxes, licenses and fees

• Profit

The 2021 pure premium rate in the tree care industry (class code 0106) has increased to $10.50 per $100 in payroll, which is roughly a 3.5% increase from last year’s $10.15. This means that the overall workers’ compensation claim activity in the tree care industry is up about 3.5%, and the WCIRB is recommending that workers’ compensation insurance carriers increase their base rates to address this change.

As a tree care professional, what can your company do to prepare for this change and mitigate the impact to your business? Reviewing your claims experience, benchmarking your company with the tree care industry, looking for root causes of the claims, and then implementing best practices safety trainings will go a long way in providing you a path to insulate you from future changes like these.

As part of our proprietary TreeOne™ program, we have created a Key Performance Indicator (KPI) dashboard for the tree care industry that puts this information at your fingertips. To see how you compare with your peers, request the KPI Dashboard for your company.

For more information on rising pure premium rates, contact me at (619) 486-6437 or randerson@ranchomesa.com.

Bondability Letters – Surety Prequalification for Owners and General Contractors

Author, Matt Gaynor, Director of Surety, Rancho Mesa Insurance Services, Inc.

In the normal process of bidding a construction project, our contractor clients are required to post a 10% bid bond to guarantee that they will execute and deliver a signed contract along with 100% performance and payment bonds, if they are awarded the referenced project. While this is a requirement for public projects, bid bonds have also become more prevalent for certain private projects. By approving the required bid bond, the surety company provides their stamp of approval that they have reviewed the bidding documents and are willing to support the contractor for the specific project.

On certain occasions, the owners and general contractors will require a less formal surety prequalification in the form of a letter of bondability. Although the owner/general contractor requesting the letter does not have the 10% guarantee provided by a bid bond, the letter of bondability can be issued rather quickly to let the owner know that a bond program is in place for the bidding contractor. If this contractor is deemed to be the low and responsible bidder by the general contractor, they know in advance that the contractor has been through a third-party prequalification by the surety company.

This document is normally issued by the bonding agent and contains the following:

• Name of the current surety carrier, A.M. Best Rating, treasury listing, and length of relationship.

• Approved single and aggregate program bonding amounts.

The other key wording contained in a typical bondability letter that differs from a bid bond is as follows:

“The issuance of surety credit is a matter between the principal (contractor) and surety… We assume no liability to you or any other third party if for any reason we do not execute said bonds.”

This wording is important because unlike a bid bond, the surety company does not have an obligation to provide final bonds if their principal is awarded a contract. While this rarely happens, the bond company will need to review additional information (i.e., contractual or financial) before they agree to provide performance and payment bonds in support of a project. For example, the contract or bond form may contain onerous wording that the surety company is not willing to support.

For more information on letters of bondability and how they affect your business, please contact me at 619-937-0165 or mgaynor@ranchomesa.com.

Builder’s Risk Reporter Form Policy: The Ultimate Time Saver

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

Builder’s risk policies protect construction materials while they are being stored on a jobsite or have been installed during the course of a project, prior to the completion of the work. These policies are often required by the project owners or developers and provide protection from day one up until the last speck of paint is dry when the project is completed. They are considered the glue of a general contractor’s insurance program because they can provide critical protection if there is an insurance loss that otherwise could derail an entire project.

There are two methods of purchasing builder’s risk policies.

Purchasing Individual Builder’s Risk Policies

Imagine, as a general contractor, you are eager to bid a project. You identify the need for a builder’s risk policy while reading through the prequalification documents. You then need to take steps in order to secure this policy or to make sure that the proper pricing is included in your bid. Even with a faster than average timeline, the process can take days for the actual policy to be underwritten, quoted, communicated, agreed upon, bound and then certificates issued. Add the variable of needing several policies per year and/or bidding Job Order Contracts (JOC) through local municipalities, and the workload involved can be significant.

The process of interacting with your insurance broker in order to secure a builder’s risk policy that satisfies the needs of each project, and also the vendors that require the policy, can be time consuming and involves multiple steps.  

Builder’s Risk Reporter Form Policy

Another approach, often overlooked, would be to secure a “builders risk reporter form” policy that offers:

• Annual blanket basis

• A “pay as reported” basis

The annual blanket basis would provide coverage for any size of project you would perform, annually, and that can be written on a blanket basis for projects that have not even been open for bid. A lot of time can be saved for companies accustomed to procuring one builder’s risk policy at a time.

A “pay as reported” basis builder’s risk reporter form allows policies to be purchased as they are reported to the carrier, which is ideal for any entity who needs multiple policies or that have multiple projects going on at once. Reporter forms can be set up on monthly, quarterly or on an annual reporting basis.

Items Needed to Generate a Builder’s Risk Reporting Policy Proposal

In order setup a Builder’s Risk Reporter form, you will need the following:

• A list of past projects with project name, size, type and length included (i.e. the last 10 projects is the minimum, but more info can create a more favorable response from underwriting),

• An executed and signed supplemental application, and

• A favorable loss history.

A builder’s risk reporter form can save a ton of time and energy. And as we know, time is the only resource we cannot gain back.

If you have questions about setting up a builder’s risk policy, contact me at (619) 438-6874 khoward@ranchomesa.com.