Rancho Mesa's Alyssa Burley and Account Executive of the Tree Care Group Rory Anderson discuss properly classifying equipment and vehicle maintenance operations, in the tree care industry, to avoid insurance audit nightmares.
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Director/Host: Alyssa Burley
Guest: Rory Anderson
Producer/Editor: Megan Lockhart
Music: "Home" by JHS Pedals, “News Room News” by Spence
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Transcript
Alyssa Burley: Hi, this is Alyssa Burley with Rancho Mesa's Media Communications and Client Services Department. Thank you for listening to today's top Rancho Mesa news brought to you by our Safety and Risk Management Network, StudioOne. Welcome back everyone. My guest is Rory Anderson, Account Executive with Rancho Mesa. He specializes in commercial insurance for the tree care industry. Today we're going to talk about properly classifying equipment and vehicle maintenance operations in the tree care industry in order to avoid insurance audit nightmares. Rory, welcome to the show.
Rory Anderson: Yes, Alyssa, thanks for having me back. It's good to be here.
AB: Of course. So tree care companies use specialized vehicles and equipment to perform their work. And in order to maintain their effectiveness, the machines need routine maintenance and upkeep. And the maintenance of this equipment can be a full time job. Sometimes companies will even have a mechanic on staff to ensure their equipment is working properly. So why is it important for tree care business owners to understand how to properly classify this type of work when reporting payroll to their workers compensation carrier?
RA: Yeah, so I mean, you hit it on the head, Alyssa. This is a really important role within a tree care company's organization is to make sure that their equipment and their vehicles are being maintained properly so that they're being used properly, making sure that they're maintaining their effectiveness and their safety and all those things. And so, when you do have an employee or a team of employees that are in the shop working on equipment and vehicles, you just want to make sure that you’re classifying those operations properly because payroll and specific classifications is gonna equate to what your premium equals at the end of your policy term. And so you want to make sure that you're classifying those properly. And so when we first talk about Worker's Comp, the WCIRB, which is the Worker's Comp Insurance Rating Bureau in California, has created a specific class code for shop maintenance and that code is 8227 construction or erection of permanent yards or shops. However, the key thing here is that the Bureau defines that that class code can only apply to construction workers in the construction industry and the tree care code, 0107, or the landscape code as well, 0042, are not considered construction in the state's view.
AB: Okay so that might be an issue.
RA: Yeah it's a big issue and a lot of people don't understand that and so they might use that code and then at the audit you know they get caught off guard and what happens is the bureau wants you to classify those payroll operations in your governing code which is the field code that you have the most payroll in. So for a lot of my clients that would be 0106, tree trimming.
AB: All right. So it's imperative that business owners are reporting payroll using the appropriate class codes to ensure that the carrier is actually calculating their premium correctly and they're not blindsided like you mentioned at the end of their policy when they're audited. So how does this affect a general liability policy?
RA: Yeah, great. question and great kind of transition because you know we do have two audits right for a company right one for workers comp and then one for the liability. And unlike workers comp there actually is a dedicated class code for these operations on general liability and that GL code is going to be 91590, contractor, permanent yards, maintenance, or storage of equipment or material. And so that code is absolutely going to be cheaper than your GL rate for tree care. The 9977: tree pruning, dusting, spraying, repairing, trimming or fumigating.
AB: So that makes sense.
RA: Yeah, because the exposure is much lower than that of tree care. And so you actually can split between those codes on the liability side of things. It's just really important to remember to keep good payroll records, segregating those payrolls. So when the auditor comes out and does their work, you have those records to support that.
AB; Yeah, so you really do need to make sure that you're able to split it out for your GL, but for your workers' comp, it's all gonna be together.
RA: Together, yeah. And that could be tough, right? Because you're, you're doing it two different ways, but it could be more cost effective on the GL.
AB: Oh yeah. Absolutely. It's worth, you know, keeping those records and, and making that little bit of effort, um, in order to save as much as you can. So I'm glad that you're bringing up this topic because it's something that I think could easily be missed if somebody doesn't have a broker like yourself that's going to point stuff like that out. Rory, if listeners have questions about their workers compensation, their general liability, or their overall risk management profile, what's the best way to get in touch with you?
RA: Yeah, I'd be happy to audit any current policies to see, you know, what the current structure is on the class codes and things like that. So I can be reached at 619-486-6437 or you can email me at randerson@ranchomesa.com.
AB: All right well Rory thank you so much for joining me in StudioOne.
RA: Thanks.
AB: This is Alyssa Burley with Rancho Mesa. Thanks for tuning in to our latest episode produced by StudioOne. For more information, visit us at ranchomesa.com and subscribe to our weekly newsletter.
