2022 Construction Dual Wage Thresholds - An Early Look

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

There are 16 construction workers’ compensation class code pairs in California, each set up as dual wage classifications. The purpose of these “split” class codes allows the Workers’ Compensation Insurance Rating Bureau (WCIRB) and California insurers to better predict future risk and underwrite with more accuracy.

To illustrate the dual wage threshold, consider a seasoned laborer with years of safety training, exposure awareness, and familiarity with jobsite protocol. This employee is going to be less of a safety risk compared to an apprentice who is still learning his or her trade, the safety techniques and all of the skill associated with a trade. As one might imagine, statistics consistently show a much higher probability of an injury occurring with an apprentice versus a seasoned veteran or journeymen. So, having a dual wage threshold allows carriers to generate pricing based on the employees’ experience and likelihood of having an injury.

Exploring how this can directly impact rates and pricing, the 2021 roofing dual wage class codes of 5552 and 5553 is a great example.

Class code 5552 is defined as roofers who make less than $27 per hour. The average California worker’s compensation insurance base rate for this class code is $40 per $100 of payroll. Class code 5553 includes roofers who make $27 or more per hour. This class code’s average California workers’ compensation insurance base rate is $20 per $100 of payroll. In this example, the workers’ compensation premium base rate is half the cost for a more experienced employee over someone with less experience.

It is crucial for any roofing contractor to be mindful of this wage threshold data knowing that the delta in the 2022 recommended increase represents a staggering 61% gap between the two base rates.

Additionally, the WCIRB has continued to increase wage thresholds. This is to keep up with inflation of the US dollar, the increase in minimum wage and the demand for labor, among other factors.

Dual Wage Classification Thresholds by Year

Shown below are the wage thresholds for all dual wage classifications. For information about these classifications, see the California Workers' Compensation Uniform Statistical Reporting Plan—1995, effective September 1, 2021.

Classifications
Year	5027	5140	5183	5185	5201	5403	5446	5467	5474	5484	5538	5552	5632	6218	6307	6315
	5028	5190	5187	5186	5205	5432	5547	5470	5482	5485	5542	5553	5633	6620	6308	6316
9/1/2022	$32	$34	$31	$32	$32	$39	$38	$36	$31	$36	$29	$29	$39	$39	$39	$39
9/1/2021	$28	$32	$28	$29	$28	$35	$36	$33	$28	$32	$27	$27	$35	$34	$34	$34
1/1/2021	$28	$32	$28	$29	$28	$35	$36	$33	$28	$32	$27	$27	$35	$34	$34	$34
1/1/2020	$28	$32	$28	$29	$28	$35	$36	$33	$28	$32	$27	$27	$35	$34	$34	$34
1/1/2019	$27	$32	$26	$27	$25	$32	$34	$32	$26	$29	$27	$25	$32	$31	$31	$31
1/1/2018	$27	$32	$26	$27	$25	$32	$34	$31	$26	$29	$27	$25	$32	$31	$31	$31
1/1/2017	$27	$30	$26	$27	$24	$30	$33	$31	$24	$27	$27	$23	$30	$30	$30	$30

© 2021 Workers' Compensation Insurance Rating Bureau of California. All Rights Reserved.

WCIRB’s 2022 RECOMMENDATION:

The Bureau is considering raising the hourly wage threshold for all 16 dual wage classification pairs with some codes seeing as much as a $5.00 increase. The average delta between the lower advisory rate and higher advisory rate is 48%.

 Proposed Dual Wage Threshold Increases

Dual Wage Classifications	Existing Threshold	Proposed Increase	Proposed Threshold	Low Wage Advisory Rate	High Wage Advisory Rate	% Difference From Low Wage Rate
5027/5028 Masonry	$28	$4	$32	$8.18	$4.21	-48.50%
5190/5140 Electrical Wiring	$32	$2	$34	$3.76	$1.45	-61.40%
5183/5187 Plumbing	$28	$3	$31	$5.31	$2.36	-55.60%
5185/5186 Automatic Sprinkler	$29	$3	$32	$4.57	$1.00	-57.30%
5201/5205 Concrete Work	$28	$4	$32	$6.64	$1.95	-36.30%
5403/5432 Carpentry	$35	$4	$39	$10.03	$4.23	-55.10%
5446/5447 Wallboard Installation	$36	$2	$38	$5.42	$4.50	-55.10%
5467/5470 Glaziers	$33	$3	$36	$7.62	$2.65	-59.30%
5474/5482 Painting Waterproofing	$28	$3	$31	$8.09	$3.10	-46.40%
5484/5485 Plastering or Stucco	$32	$4	$36	$9.98	$4.34	-37.40%
5538/5542 Sheet Metal Work	$27	$2	$29	$5.07	$2.52	-50.30%
5552/5553 Roofing	$27	$2	$29	$21.05	$8.14	-61.30%
5632/5633 Steel Framing	$35	$4	$39	$10.03	$4.50	-55.10%
6218/6220 Grading/Land Leveling	$34	$5	$39	$5.10	$2.93	-42.50%
6307/6308 Sewer Construction	$34	$5	$39	$6.98	$2.84	-59.30%
6315/6316 Water/Gas Mains	$34	$5	$39	$4.18	$3.70	-11.50%

This recommendation, if approved by the insurance commissioner, would become effective September 1, 2022.

With the continuing labor shortage in the construction arena, employers have been doing everything possible to retain employees by offering richer benefits plans, pay increases and merit bonuses, when applicable. These recommended wage classification increases could potentially push employers to extend additional pay raises to employees in an effort to minimize workers’ compensation premiums.

It is best for contractors who utilize any of the 16 dual wage classification pairs to be aware of the potential increases and to do the math to see if it makes sense to consider raises prior to your 2022-2023 September 1st workers’ compensation renewal.

Rancho Mesa predicts that this info will become a major factor in payroll decisions based on overhead cost management and recommend this as a topic for discussion early so that our clients, prospects and listeners can prepare.

To discuss how the proposed dual wage threshold increases may affect your business, contact me at (619) 438-6874 or khoward@ranchomesa.com.

Top Five Workers’ Compensation Claims That Impact a MEP’s Bottom Line

Author, Amber Webb, Account Executive, Rancho Mesa Insurance Services, Inc.

If you are a Mechanical, Electrical & Plumbing (MEP) contractor who wants to impact both your productivity and profitably, then the following is crucial for your success. Our MEP Group at Rancho Mesa understands the importance of identifying the top five workers’ compensation claims that impact your industry while providing pertinent resources to help mitigate that risk. By working with leading workers’ compensation carriers and the Occupational Safety and Health Administration (OSHA), we identified the top 5 workers’ compensation claims affecting the MEP industry:  

1. Cut/Puncture/Scrape/Lacerations

2. Slip/Falls from both same level and ladders/scaffolding

3. Strains from lifting/handling/pushing/pulling

4. Struck by object/Foreign Body in Eye

5. Motor Vehicle Accident (injured employee)

With employee safety at the forefront of your operations, understanding where the claims are likely to come from and then having the support and tools in place to address those concerns is vital to your long term success. When injuries occur on the job, it impacts not only the life of the injured worker and their family but will directly impact the productivity and profitability of the project.

For our clients to proactively mitigate these exposures, we provide them with access to specific trainings related to these top MEP claims and OSHA citations from our Risk Management Center Library. Our Client Services team then works closely with our clients to customize their trainings while meeting their specific risk management needs. 

If you are not already a Rancho Mesa client, and would like a free trial of our Risk Management Center, please complete the form or contact Amber Webb at (619) 486-6562 or awebb@ranchomesa.com.

Understanding Single and Aggregate Surety Bond Limits

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

When we work with the bonding carriers on surety credit programs for our contractor customers, we traditionally put into place single and aggregate bond limits. This provides our contractor clients certain parameters when they are considering a maximum project size for bonding purposes.

The single limit is a guide the contractor can use on a per project basis as they consider various projects to bid or negotiate.

The aggregate limit is the total of all current projects using a “cost to complete” calculation. The cost to complete would be the estimated costs on a project (less) the costs to date. As an example, a contractor may have a $5,000,000 single / $20,000,000 aggregate bonding program.

A few important points to consider:

• The limits are not set in stone. This is important to understand. The bond company will often raise the single and aggregate limit if the right type of project presents itself.

• We include the bonding limits when we prepare a bondability letter for our client. If you are looking at a project that might exceed your single bonding limit, be sure that the required limit listed is sufficient to support the projected amount. For example, if your limit is typically $5,000,000 and the project requires a bondability letter for a $6,000,000 job, it is important that you secure pre-approval from your agent/bond company to increase the amount of the single limit on the letter.

• The bonding limits are often determined by the contractor’s fiscal year-end financial statement. This is one of many factors to set the limit but an extremely important consideration.

One final consideration is that bonding limits listed on a letter are often just a guideline reflecting the normal size of the projects our contractor clients usually bid. Based on their financial ratios and project history, some clients, for example, will qualify for a $10,000,000 limit but only list $2,000,000 because they rarely consider projects over that amount.

If you would like more information on how your particular bond limits are determined, please contact me at 619-937-0165 or mgaynor@ranchomesa.com.

A Deep Dive into Workers’ Comp Claims in the Landscape Industry

Author, Greg Garcia, Account Executive, Rancho Mesa Insurance Services, Inc.

Workers’ compensation premiums typically represent one of the largest overhead expenses for landscape companies. Premium costs are driven by the number and severity of claims a company has had over a five-year period. Thus, fewer claims often equate to a lower premium paid for workers’ compensation insurance.

The National Institute for Occupational Safety and Health (NIOSH) takes a closer look at the landscape industry, detailing where claim frequency is increasing and decreasing.

When analyzing the claims data, a couple of areas stand out as contributors to higher premiums.

Most notably, 50% of all serious claims occur during the first year of an employee’s tenure. Employees under the age of 34 are also more susceptible to a serious claim occurrence. Therefore, it is best to provide new hires with immediate and comprehensive safety training when they first start and continue to emphasize a safety culture throughout their tenure to minimize claims. As employees gain experience, they become more likely to take safety seriously.

The data also shows that loading and unloading trucks and trailers causes roughly 20% of all serious claims. This includes loading and unloading materials, tools, and equipment. Although a seemingly simple task, it’s often overlooked, yet statistics confirm that improved attention to safety when performing these tasks can significantly reduce serious claims.

The industry has seen a considerable decline in claims from overexertion injuries such as back sprains and disc disorders which were once a large contributor to higher premiums. The improvement of lifting techniques and implementation of programs such as Rancho Mesa’s Mobility & Stretch/A.B.L.E. Lift Program, have played a key role in reducing these claims. Programs such as these ensure employees are lifting properly while also stretching their muscles before they begin work.

Reducing workers’ compensation claims should be a top priority for any landscape company. Not only does it protect employees from harm but it also can benefit the company’s bottom line. As an added resource to reducing workers’ compensation claims, Rancho Mesa encourages landscape businesses to take advantage of available safety trainings for new and experienced employees, implement safety measures for loading and unloading trucks, and utilize the Mobility & Stretch/A.B.L.E. Lift Protocol.

In order for you to take your safety program to another level, sign up and receive our weekly safety training tailgate talks specifically designed for the landscape industry.

To start a conversation about how Rancho Mesa can assist your company, contact me at (619) 438-6905 or ggarcia@ranchomesa.com.

OSHA Issues ETS Addressing Mandatory COVID-19 Vaccination or Testing

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

Update: November 16, 2021 - Since the original publication of this article, OSHA announced it “has suspended activities related to the implementation and enforcement of the ETS pending future developments in the litigation.”

Recently, the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) announced a new Emergency Temporary Standard (ETS) to protect more than 84 million workers from the spread of the coronavirus on the job.

Under the ETS standard, employers must develop, implement and enforce a mandatory COVID-19 vaccination policy, unless they adopt a policy requiring employees to be either vaccinated or undergo weekly COVID-19 testing and wear a face covering at work.

The emergency temporary standard covers employers with 100 or more employees and provides options for compliance.  The standard also requires employers to provide paid time to workers to get vaccinated and to allow paid leave to recover from any side effects from the vaccination.

The ETS requires employers to:

1. Determine the vaccination status of employees, obtain acceptable proof of vaccination and maintain records and a roster of each employee’s vaccination status.

2. Require employees to provide prompt notice when they test positive for COVID-19 or receive a COVID-19 diagnosis.  Employers must then remove the employee from the workplace, regardless of vaccination status. Employers must not allow them to return to work until they meet required criteria.

3. Ensure each worker who is not fully vaccinated is tested for COVID-19 at least weekly (if the employee is in the workplace at least once a week) or within 7 days before returning to work (if the employee is away from the workplace for a week or longer).

4. Ensure that each employee who has not been fully vaccinated wears a face covering when indoors or when occupying a vehicle with another person for work purposes.

The ETS does not require employers to pay for testing.  However, employers may be required to pay for testing to comply with other laws, regulations, collective bargaining agreements.  So, check with state and local jurisdictions for requirements.

The ETS is effective immediately upon its publication in the Federal Register, which took place on Friday, November 5, 2021.  Employers must comply with most requirements within 30 days of publication and with testing requirements within 60 days of publication, or January 4th of 2022.

While more than half of the states are challenging the legality of federal OSHA’s ability to enforce the new ETS requirements, it is likely that individual states with their own OSHA State Plans (i.e., Alaska, Arizona, California, Hawaii, Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Nevada, New Mexico, North Carolina, Oregon, South Carolina, Tennessee, Utah, Vermont, Virginia, Washington, and Wyoming) will eventually adopt the new ETS as their own with or without modifications.

California’s State Plan (Cal/OSHA) implemented the most stringent COVID-19 ETS in the country months before federal OSHA released its original COVID-19 ETS that only applied to the health care industry.

Employers of all sizes should pay close attention to not only what federal OSHA’s ETS requires, but also requirements issued by state and local municipalities.  Once your state adopts a COVID-19 ETS, be sure to also check your local ordinances, as some counties and cities are requiring additional measures.

If your state has not yet adopted the new federal OSHA ETS, which applies to our California clients, we recommend you start thinking about a game plan and maybe an alternate plan depending on whether your State Plan decides to adopt the ETS as it has been published or if they decide to adopt a more stringent ETS. You will want to consider the following:

• Will you, as the employer, require all employees to be vaccinated?

• Who will manage the vaccination records and the ongoing paperwork?

• If testing is offered as an alternative to a vaccine, who will pay for testing (the employer or employee)?

• If testing is offered as an alternative to a vaccine, will the company specify which type of test will be acceptable (PCR or Antigen)? Either is allowed, but the antigen tests must be proctored by a medical professional (virtually is allowed) or witnessed by the employer (for the over-the-counter home test). Who will administer the weekly tests?

As we learn more, Rancho Mesa will provide guidance and resources to mitigate risk in the workplace.

For questions about mitigating your risks, contact me at (619) 937-0167 or sclayton@ranchomesa.com.

How Year End Financial Statement Preparation Influences Bonding Programs

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

As a contractor looking to qualify for a contract surety bond program, your team should be aware that company financial statements will be required by underwriters in most cases. This is largely due to the fact that a company’s financials, their balance sheet and an income statement, represent the primary source of information that a surety will use when building a bond program. And, the way this information is presented goes a long way in determining the amount of credit that a bond company is willing to extend. There are a few different options for presenting year-end financials, with the two most common being internal financials and CPA-reviewed financials.  

Internal statements are prepared either by the contractor in-house, or by a hired bookkeeper, and are often accepted by surety companies for contractors that do not bond frequently and/or only bond smaller projects under one million dollars. The reason for this limitation is internal statements are not viewed as being overly reliable because they have not been prepared by a third party CPA. If a contractor is looking at a bigger job or looking to grow their bond program, then it is worth the investment to have a CPA complete a review for the fiscal year-end financial statement.    

A review from a CPA provides a deeper dive into a contractor’s financial statements and will usually include notes about the financial statements regarding revenue, accounts receivables, accounts payables, and other financial events that occurred over the course of the year. And, while there is a larger cost associated with a review, between $10,000-$15,000, as opposed to providing an internal year end statement, the surety gains a greater understanding of the company’s financials over internal statements. Additionally, they consider a CPA review more reliable and trustworthy, thereby willing to offer increased bonding capacity to qualified contractors.  

Providing CPA-reviewed financials adds additional overhead to a company’s budget, but it can be vital to ensuring the maximum bonding capacity is provided when it’s need it most. Furthermore, to emphasize the point, it is important that contractors select a competent, proactive bonding agent and construction CPA in order to map out a successful strategy for year-end financial preparation. The right partnership can help your firm build the highest possible level of bond credit as you build toward the future. 

Finding an experienced CPA with a construction financials background can be a challenge. I can help recommend someone who can assist your company.

To answer more questions from this article or discuss if it may be time to make the jump to a CPA review, please email me at aroberts@ranchomesa.com or call my direct line at (619) 937-0166.

Hydraulics Safety in the Tree Care Industry

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

Tree care professionals regularly work with equipment that utilizes hydraulics: aerial lifts, stump grinders, and chippers, just to name a few.

Injuries from hydraulic fluid leaks are very serious and can result in amputation. These injuries occur when hydraulic fluid is lost through a small hole and comes in contact with the skin of a worker. The injury can at first look like a mild, small puncture wound – but the truth is that they are anything but minor.

Hydraulic fluids are toxic and act as a poison to the body. In almost all cases, treatment (surgery) is immediately required to save the workers limb.

Stump grinders, chippers, and other equipment that tree care professionals use commonly run at 4,000 PSI, and the pressure needed to penetrate your skin is only 100 PSI.  So, it is vital that employees be trained on how to safely use hydraulic equipment.

Hydraulics safety trainings should include:

• an overview and description of which equipment utilizes hydraulics;

• proper techniques to check for leaks;

• how to handle leaks;

• how to handle injuries;

• regular maintenance and upkeep on hydraulic hoses; and

• the appropriate time to replace hydraulic hoses.

Make sure hydraulics safety is on your list of rotating topics that are regularly discussed with your crews at safety meetings.

For assistance with building your library of safety material for tailgate topics, reach out to me directly at (619) 486-6437 or randerson@ranchomesa.com.

SB 606 Broadens Cal/OSHA’s Enforcement Reach

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

California Governor Gavin Newsom recently signed into law Senate Bill 606 (SB 606), greatly expanding Cal/OSHA’s enforcement powers and monetary penalty amounts. The new law will take effect January 1, 2022, so California employers have only a few months to tighten their safety practices or face steep monetary fines.

The new law could be especially damaging to employers with multiple worksites. SB 606 creates a rebuttable presumption that an employer with multiple worksites has committed an “enterprise-wide” violation, if Cal/OSHA determines either of the following is true:

• The employer has a non-compliant written policy or procedure.

• Cal/OSHA "has evidence of a pattern or practice of the same violation or violations committed by that employer involving more than one of the employer's worksites."

This change creates the possibility that a California employer adhering to a written program applicable to all locations can be cited for each California worksite.

Cal/OSHA will also have the authority to seek a temporary restraining order and an injunction against any employer suspected to have committed an enterprise-wide violation.

The far-reaching second part of the law states that if Cal/OSHA determines an employer has “willfully and egregiously” committed a violation, the employer may receive a citation “for each egregious violation” and “each instance of any employee exposed to that violation shall be considered a separate violation for purposes of the issuance of fines and penalties.”

The law details seven bases for “egregious” conduct. Proof of only one will be sufficient to justify a citation.

California employers must prioritize a full review of safety policies, procedures, and practices to reduce the likelihood of an “enterprise-wide” or “egregious” conduct violation. Cal/OSHA’s Consultation Branch offers free on-site visits to proactively address any potential violations.

 For helpful safety resources and compliance information, please contact me at (619) 937-0175 or sbrown@ranchomesa.com.

How Janitorial Firms Can Avoid OSHA Fines

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

Avoiding government standards in the janitorial industry can be costly in the event of an unexpected OSHA visit or after a serious injury. In an industry that generally has lean profit margins, OSHA fines could be detrimental to the stability of the business. Knowing the most common OSHA violations and protecting your business from them can help insulate your organization from costly fines while also keeping your company safe. Here are five of the most common OSHA violations in the janitorial industry and strategies to avoid potential fines.

Hazard Communication Standard:

A hazard communication standard requires that all cleaning businesses provide written information to their employees about hazardous chemicals used in the course of business and stored on site. The employer is required to label all chemicals with information relating to its hazard classification, and the employer must maintain safety data sheets (SDS) at each jobsite. In addition to having this information available, the employer is also responsible for training the employees on the proper handling of each chemical before they begin using it. Having a hazard communication standard in place can help you avoid an OSHA fine while also creating a safe work environment.

Proper Use of Personal Protective Equipment (PPE):

It is critical that all janitorial staff is trained on the proper use of PPE. PPE can help protect employees against harmful exposures that occur while performing their normal duties. Examples of PPE include gloves, masks, safety glasses, and back braces. Proper training on the use of PPE should be done with each employee and documented in their employee file. Supervisors should monitor the use of PPE by employees to ensure consistent use. If employees are seen not wearing the proper PPE for the task at hand, this should be addressed verbally, and in writing to minimize future injuries. Serious injuries and OSHA fines are avoidable if the proper use of PPE is taught and monitored.        

Slip, Trips, and Falls:

One of the most common injuries in the janitorial industry comes from slips and falls. Some falls can result in serious injuries, workers’ compensation claims, lawsuits, and OSHA fines. The most common slip and fall hazard is from wet floors, typically while mopping. These wet floors not only pose a problem for janitors, they are also a huge concern for the general public. Common ways to avoid these types of injuries include using caution cones to alert people of the wet surfaces, closing off areas that are being cleaned, and mopping areas after hours when there is less foot traffic. Using caution cones and proper signage can warn others of wet surfaces to avoid serious injuries and OSHA fines.

Bloodborne Pathogen Standard:

For those janitorial businesses that work within a healthcare setting, it is imperative that they follow the Bloodborne Pathogen Standard. This policy establishes an easy and safe way to handle blood and other bodily fluids. If you work in a setting where blood contact is common, it is important that you have the proper training. Otherwise, it could result in an OSHA citation.

Record Keeping:

Proper record keeping is critical if and when your firm is presented with an unexpected OSHA visit. Keeping updated records such as your injury & illness protection program, safety data sheets, documented employee training, and employee handbooks can help avoid common administrative fines.

Organizing and implementing these strategies can be overwhelming for many janitorial companies that may not have the resources for full-time human resources directors and/or safety coordinators. Through the Risk Management Center, Rancho Mesa and MaintenanceOne™ offers clients the tools and programs that can proactively manage these risks and the documentation required to be prepared when OSHA knocks on your door. Reach out Jeremy Hoolihan at jhoolihan@ranchomesa.com or 619-937-0174 to learn more about how we can assist you.

Premium Cost Per Vehicle Continues to Increase for Landscape Professionals

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

Commercial auto premiums for landscape companies continue seeing heavy increases, and there is no end in sight. 

Knowing your cost per unit (CPU) is a critical component landscape owners and CFO’s must follow to properly monitor, budget, and forecast fleet related premium. Landscape companies with the lowest CPU’s minimize accident frequency and severity by practicing proactive and reactive risk management techniques.

Proactive management can include routine MVR checks, continuous driver monitoring, and ongoing driver training. 

Reactive management can consist of reporting, analyzing, and correcting both near miss and post-accident incidents. 

Fortunately for companies working with Rancho Mesa, we offer a number of video training series in English and Spanish including accident prevention, defensive driving, distracted driving, and more.

When an auto accident occurs, Rancho Mesa’s client services department will analyze the incident and recommend specific training back to our landscape customers, encouraging proactive safety and helping to mitigate future accidents.

What is your CPU, are you addressing accidents with training, and is your program leaking premium dollars? 

For more information on how to help control rising premium costs, contact Drew Garcia at (619) 937-0200 or drewgarcia@ranchomesa.com.

Pure Premium and How It Impacts Your Company

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

The Workers’ Compensation Insurance Rating Bureau (WCIRB) is an agency that compiles essential data annually which determines how your Experience MOD is impacted. These factors establish the baseline average MOD of 1.00 for California companies that produce enough payroll and premium to qualify within the guidelines. These factors can change year to year and represent a key rate trend indicator for all policyholders.

There are different rates generated for different classifications based on exposure and projected losses. The premium company’s pay for workers' compensation begins with multiplying the insurer's rate for the assigned classification(s) by the payroll developed in each classification. Workers' compensation rates are applied per $100 of payroll.

Pulling directly from the WCIRB website, “The WCIRB submits advisory pure premium rates to the California Department of Insurance (CDI) for approval. Insurer rates are usually derived from the advisory pure premium rates developed by the WCIRB and approved by the Insurance Commissioner. Advisory pure premium rates, expressed as a rate per $100 of payroll, are based upon loss and payroll data submitted to the WCIRB by all insurance companies. These rates reflect the amount of losses an insurer can expect to pay in benefits due to workplace injuries as well as the cost for adjusting and settling workers' compensation claims. Pure premium rates do not account for administrative and other overhead costs that an insurer will incur and, consequently, an insurer's rates are typically higher than the pure premium rates.” (WCIRB).

Of note, new pure premium rates were just released in September. Each carrier’s individual experience with all respective class codes also has an impact on these rates. Workers’ compensation has been in a soft market for the past several years with the expectation that rates will gradually start increasing. Following the change in pure premium rates is a great indication of where the marketplace is heading an effective way to better understand future costs that your company may be expecting.

With this in mind, engaging a broker that specializes in your industry and prepares you accordingly for the renewal process is a critical step in controlling workers compensation costs. Part of this process begins with understanding pure premium rates and how they ultimately will impact your MOD, carrier base rates, and your renewal pricing.

To discuss the current market or how your XMOD is affecting your workers’ compensation premium, contact me at (619) 438-6900 or ccraig@ranchomesa.com.

ADR Workers' Compensation Programs Reduce Litigation

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

Workers’ compensation rates have fallen steadily over the last ten years, but businesses in California still pay the highest rates in the country. In addition, California has the highest frequency of permanent disability claims, the highest medical cost per claim, and the highest litigation rates per claim.

To mitigate the friction within the workers’ compensation system, California and several other state legislatures in the early 1990s developed legislation that would permit unions and management to jointly develop an Alternative Dispute Resolution (ADR) program or “carve-out” agreement that resolves disputes outside the state workers’ compensation system with benefits that are at least equal to the benefits required by the Labor Code.

ADR is an alternative to the traditional approach to workers’ compensation claims. With ADR, an injured worker will report the injury and then use the services of a neutral ombudsmen hired by the union trust who is knowledgeable in workers’ compensation law to quickly determine if the injury is work related. The ombudsmen will recommend to the injured worker the appropriate treatment and other benefits owed within the carve-out agreement.

Union ADR provides employers with flexibility to manage the overall cost for their workers’ compensation program by promoting voluntary agreement early on with the injured worker on effective medical treatment to reduce litigation over the scope of medical treatment. ADR can also provide an accelerated claims resolution, faster medical treatment and potentially quicker return to work for the injured employee. 

This process limits litigation with the services of an ombudsman and, if needed, mediation and arbitration procedures designed to resolve the claim quickly and appropriately. Since this is a very specialized arena, workers’ compensation carriers typically have a separate claims division that are well versed in the nuances of ADR claims.

To find out if your workers’ compensation carrier offers ADR programs or to learn more, I can be reached at 619-937-0167 or sclayton@ranchomesa.com.

Surety Keith Clements from Tokio Marine HCC

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

Rancho Mesa's Director of Surety Matt Gaynor interviewed Vice President of Tokio Marine HCC Surety, Keith Clements on Wednesday, September 15, 2021 to learn about his background, his role with Tokio Marine HCC and how the company fits into the surety marketplace.

As a college student in Iowa, Keith had career options. Companies visited the college looking to recruit new grads. He jokes that he had a choice to either go into surety bonds, or sell Oscar Meyer wieners. He chose surety.

“I started looking around and thought, you know what? I like numbers… I think this bonding thing might sound pretty good,” Keith tells Matt.

After over 20 years in the industry, “I’m still trying to figure out if I like it,” Keith says jokingly.

Matt and Keith reminisced about processing bonds in the early 1980s and compare the old technology to today’s high-tech methods of getting the bonds issued.

Keith explains the types of surety bonds Tokio Marine HCC writes as an A++ XV rated company.

Listen to the full Ep. 135 to learn more about Keith and the Tokio Marine HCC Surety.

Best Practice Controls for Solar Contractors

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

As we continually build broad and competitive insurance programs for solar contractors in southern California, we recently interviewed a Senior Underwriter from a national workers’ compensation carrier in an effort to learn best practice controls for these types of risks. To our delight, this underwriter provided the top five controls their team looks for while reviewing a submission to quote. Having these controls in place can show an underwriter that your company deserves the best possible pricing available in the insurance marketplace:

1. Fall Protection

• A written fall protection plan is in place and available for review

• Employee training is documented

• A competent person is able to assess fall hazards through a written hazard assessment prior to installation

• There is familiarity with all fall arrest systems (e.g., yo-yos, ropes, lanyards, harnesses, and guardrails)

• Rescue procedures and training on rescuing is in place

• Assembly, maintenance, inspection, handling and storage of fall protection equipment is documented and organized

2. Responsive and Thorough Claim Reporting

• Claims are reported same day

• Claims are documented for future training opportunities

• Witness statements from co-workers are documented

3. Outsourcing Delivery of Solar Panels to a Third Party

• Minimizes the driving exposure to and from the jobsite

• Lowers the material handling exposure

• Reduces any potential lifting exposure while on a jobsite

4. Create a Smaller Radius of Work

• Lessening of your company’s driving exposure, which in turn can lower the probability of any car accident leading to a claim

• Company vehicles to return the same day which reduces any after-hours driving by employees

• Allows for vehicles to be monitored more easily

5. Health Benefits are Provided

• Lowers the probability of employees filing fraudulent  claims

• Increases overall employee wellness.

Some of these controls may be difficult or unrealistic to implement with your current business model. With workers’ compensation representing such a large line item on so many solar contractor’s profit and loss statements, engaging a forward-thinking insurance broker who can provide you additional resources and a clear renewal strategy is critical. At Rancho Mesa, we bring both of those tools to our relationships, utilizing our Risk Management Center to properly implement controls and our 20+ year history as leaders in the construction insurance marketplace.

To start a conversation about how we can assist your company, contact me at (619) 438-6874 or  khoward@ranchomesa.com.

Performance-Based Workers’ Compensation Programs – Are Retros In Your Future?

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

In the past, we explored performance based workers’ compensation programs. These plans can create a competitive advantage and an opportunity to monetize your company’s insurance program.   

While we have previously discussed several of these programs in detail (i.e., captives and deductibles), another option that is often overlooked; Retrospective Rating Plan (retros), could possibly be the right next step for many businesses to explore.

Typically, these plans begin to make sense once a company’s annualized premiums exceed $500,000. They contain many elements and variables that must be analyzed and understood before inception, including:

• maximum, basic, and minimum premiums

• required letters of credit (LOC)

• loss cost factor (LCF)

• losses based on incurred or paid

• potential return of premium

• number and frequency of recalculation of the premium/losses

• recapture of premium in future calculation if claims develop

• claim buyouts

Are you a candidate for a performance based program? 

Example of a Retro Workers’ Compensation Program
Assumes a $500,000 premium with a 30% incurred loss ratio

If you would like us to create a performance model for you and your team members to evaluate, contact Rancho Mesa at (619) 937-0164 or via our website. Or, complete our performance based insurance spreadsheet and submit to Alyssa Burley at aburley@ranchomesa.com 

Risk Bow Tie Exercise

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

Rancho Mesa’s non-profit clients successfully serve their communities in changing economic and political climates. In part, their success is due to managing risk for an organization’s employees, clients, finances, and mission. Just as important, but less discussed than risk management, is risk analysis. This article offers one helpful tool non-profit leaders can use to facilitate risk analysis, the Risk Bow Tie Exercise.

Introduced to Rancho Mesa by the Nonprofit Risk Management Center’s book World-Class Risk Management for Nonprofits, the Risk Bow Tie technique helps nonprofit leaders consider an event’s positive and negative consequences in a group setting. Following the exercise, participants may feel empowered to utilize the technique in multiple departments to analyze both expected and unexpected events. 

The five steps of the bow tie exercise include:

1. Identify a potential event.

2. Identify some of the underlying conditions that make the event more or less likely, more or less impactful, and more or less urgent.

3. Identify some of the consequences or ripple effects,  both positive and negative, should the risk materialize.

4. Identify preventative risk management steps or controls that could make the event less likely or less detrimental.

5. Identify risk management steps or controls that could be planned now, but implemented after the event has occurred, to reduce the potential negative consequences.

The image below, from page 152 of World-Class Risk Management for Nonprofits, is a sample Bow Tie Worksheet.

Risk Bow Ties Worksheet image provided by World-Class Risk Management for Nonprofits.

Performing the exercise in a workshop or group setting will usually provide one or more of the following insights:

• The group uncovers details of an event that had not previously been discussed or observed.

• Both positive and negative consequences can result from one event.

• The exercise brings to light unique perspectives and experiences from multiple participants.

• Identifying important underlying conditions and consequences better informs the creation of relevant controls.

• Team members can perform a risk analysis in a fun, accessible and informal way.

Nonprofit leaders can use a diverse set of tools to analyze and manage risk. Rancho Mesa encourages clients to ask about various tools we have available to prepare for both the expected and unexpected.

To learn more about the Risk Bow Tie technique contact me  at sbrown@ranchomesa.com or (619) 937-0175.

Mitigate Janitorial Industry’s Employee Theft Exposure

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

Employee theft can be detrimental to any business and can come in many forms. Janitorial businesses, in particular, have an inherent risk of employee theft as employees often work alone at the client’s property with little to no supervision and access to valuables. Employee theft can start with smaller items that are easily overlooked and can quickly escalate. These types of losses are not only a financial burden, but can also tarnish the business’ reputation.

Insurance companies typically break employee theft into two categories: 1st party and 3rd party theft or crime. When an employee steals directly from the employer, it is called 1st party crime. Examples of this include embezzlement, inventory theft, theft of supplies, and more. Third party crime occurs when an employee steals property from the employer’s client or vendor. Examples of this would include stealing property from a client’s premises such as laptops, cash, etc. 

It is important to note that most insurance policies do not automatically cover employee theft. Those that extend coverage typically only offer 1st party crime via an endorsement and provide lower limits than stand-alone policies.

Janitorial companies can protect themselves from theft exposure by securing a fidelity bond or business services bond, a commercial crime policy, or through obtaining a specialty enhancement endorsement which adds 1st and 3rd party crime coverage to a package policy.

A fidelity bond protects a company if employees commit theft, fraud, or other dishonest acts. Most insurance policies exclude dishonest and malicious acts which includes employee theft.

A commercial crime policy and fidelity bond are similar in some respects, but they differ in that commercial crime insurance covers a wider range of threats, while fidelity bonds offer more targeted coverage. In addition to the offerings listed above, a commercial crime policy could cover crimes by people outside of the company, including burglary, theft, and forgery.

As mentioned, a third option is purchasing a 1st and 3rd party crime enhancement endorsement to the package policy. This is typically the most cost effective; however, these endorsements are usually only available through specialty programs specific to niche industries like janitorial and typically have limited access. Rancho Mesa’s MaintenanceOne™ Janitorial Program has access to markets that provide these specific endorsements.

To discuss these options in further detail, please reach out to me at 619-937-0174 or at jhoolihan@ranchomesa.com.

Top Five OSHA Citations the Tree Care Industry Should Avoid

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

Every year, Federal OSHA conducts hundreds of inspections and issues costly citations to tree care companies. Although the Occupational Health OSHA citations can be issued for many reasons, there are five specific citations that continually plague the tree care industry every year.

1. Violation of standard 1910.132, PPE General Requirements
Employers of tree care companies can be cited for a violation if they fail to assess the workplace hazards, don’t provide personal protective equipment and fail to train employees on when and how to use it.

• Average penalty: $1,300

2. Violation of standard 1910.1200, Hazard Communication
This citation is served if the employer lacks a hazard communication program for hazardous substances such as gas or hydraulic fluid periodically encountered in the tree care workplace.

• Average penalty: $454

3. Violation of standard 5(a)(1), OSHA General Duty Paragraph
This is when an employer fails to provide a workplace free of recognized hazards. OSHA did not have a standard to describe the hazards specifically encountered in the tree care industry, but general duty citations usually cite passages from the ANSI Z133 standard.

• Average penalty: $2,992

4.Violation of standard 1910.67, Vehicle-mounted Elevating and Rotating Work Platforms (e.g., bucket trucks and aerial lifts).
This citation can be issued if the employer fails to provide fall protection for the lift operator or fails to properly inspect the lift.

• Average penalty: $3,325

5. Violation of standard 1910.135, Head Protection
This citation occurs when the employer fails to ensure that employees wear hard hats when required.

• Average penalty: $1,262

As a tree care company, it is important that employee trainings routinely cover these five topics. While the standard safety training topics for the tree care industry are impactful (e.g., fall protection, chainsaw safety, etc.) and vital to your company’s safety success, these top five OSHA citations should be considered a high priority for regular review.

Access these specific trainings from our Risk Management Center library. If you’re not a Rancho Mesa client, please contact me at (619) 486-6437 or randerson@ranchomesa.com for a free Risk Management Center trial.

How Improving Equity Impacts Your Bond Program

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

In our current series of articles, we are taking a deeper look into the properties of a balance sheet that will affect a contractor’s bonding capacity. We have previously discussed bonding capacity and summarized working capital in regards to the impact it can have on a contractor’s capacity. However, another very important component on the balance sheet that surety underwriters will consider is net worth, also referred to as equity.

Equity is calculated by subtracting a company’s total liabilities from their total assets on the balance sheet, and is a measurement that is used to determine their long term liquidity. From a bonding standpoint, surety underwriters love to see equity increase year after year. They analyze each item in the equity section of the balance sheet such as common stock, additional paid in capital, and shareholders’ loans. One item that carries a particularly large amount of weight is retained earnings.

Retained earnings represents the net income or profit that a company reinvests in its business after distributions are paid to the shareholders. This is important because as a general guideline we say a contractor can qualify for an aggregate bonding capacity that is ten times their company’s equity. Thus, their retained earnings heavily influence the overall equity of the company. Contractors looking to maintain a strong bond program, or increase their bond program, will want to retain as much profit in the company as they can. This allows their retained earnings and their equity to continue to grow through the years, making it even more important to have a knowledgeable and proactive bonding agent on your side. This should be someone who understands your business and overall goals, can analyze your balance sheet, and will discuss strategies with you to reach optimal capacity.

For many contractors, building a strong bonding capacity can create opportunities for significant revenue growth. Perhaps one of the more critical elements to note as you review your balance sheet is being educated on the importance of having strong retained earnings inside your financials. You can start this process and leapfrog your competitors when you request a quick capacity analysis from our surety team. They’ll provide you with a detailed evaluation.

To answer more questions about your bonding program, contact me at aroberts@ranchomesa.com or call my direct line at (619) 937-0166 and we can get started.

One Easy Step Can Improve Your Equipment Theft Prevention Program

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

A piece of heavy equipment like a skid steer, backhoe, or excavator can be a vital tool for a landscape company and is expensive to replace, if stolen. According to the National Equipment Register (NER), heavy equipment is nine-times more likely to be stolen than vandalized and five-times more likely to be stolen than encounter fire damage. These statistics are alarming and prove theft of heavy equipment has now become a billion dollar illegal industry.

When confronted with these realities, business owners are comforted that they’ve purchased an inland marine insurance policy to cover the loss of a piece of heavy equipment. But, there is another step companies can take to reduce the likelihood that a piece of their equipment will be stolen or increase the chance that stolen equipment will be recovered.

HELPtech (i.e., heavy equipment loss prevention technology), is an online database that tracks heavy equipment. Law enforcement officials are able to utilize the information from the database to track and recover stolen equipment. Decals on the equipment alert would-be thieves that stealing this equipment and trying to sell it will be more trouble than it’s worth.

In some cases, insurance carriers are willing to waive the policy theft deductible, if the equipment that was stolen is actively registered through the NER - HELPtech database. 

The NER also provides updated theft trends and security tips for best practices to help companies stay informed and up to date on activity across the country.

In partnership with the NER, Rancho Mesa can offer clients a 20% discount when utilizing HELPtech. Register your equipment, today.

To learn more about your heavy equipment exposure, contact me at (619) 937-0200 or drewgarcia@ranchomesa.com.