Rancho Mesa's Alyssa Burley and Drew Garcia sit down to discuss the two class codes, or governing codes, that are commonly reclassified for workers’ compensation

Show Notes: ⁠⁠https: ⁠Subscribe to Rancho Mesa's Newsletter⁠

Director/Host: ⁠⁠⁠Alyssa Burley⁠⁠⁠

Guest: ⁠⁠⁠Drew Garcia⁠⁠⁠

Producer/Editor: ⁠Megan Lockhart⁠

Music: "Home" by JHS Pedals, “News Room News” by Spence

© Copyright 2024. Rancho Mesa Insurance Services, Inc. All rights reserved.

Transcript:

Alyssa Burley: You’re listening to Rancho Mesa’s StudioOne™ podcast, where each week we break down complex insurance and safety topics to help your business thrive.

I’m your host, Alyssa Burley, and today I’m joined by Drew Garcia, Vice President of the Landscape and Tree Care Group here at Rancho Mesa, and we’re going to discuss the two class codes—or governing codes—that are commonly reclassified for workers’ compensation.

Drew, welcome to the show.

Drew Garcia: Alyssa, thanks for having me.

AB: Well, we're happy you're here.

Now, you've spent nearly 10 years working with landscape, lawn care, and tree care professionals across the United States, and you understand how this industry operates and can effectively relay that information back to the insurance carriers when advocating for your clients. So before we get into the class codes, will you explain the purpose of a carrier audit?

DG: Absolutely. Yeah, it's crazy to think how fast 10 years goes. So it'll be 10 years for me in October and I'm still learning and I want to still be learning when I'm 20 years in. I think that's the fun part of the business.

And so today when we talk about carrier audits, what they're trying to get done is they want to reconcile estimated premiums that you put in forth at the beginning of the policy and at the end you're going to earn premiums based on what you actually did for that year because most work comp. is all based on payroll as opposed to sales.

So the auditor at the end of the policy is going to check to see what was your actual payroll for this year and then they want to make sure you're using the appropriate class codes so that they're collecting adequate premium for the exposure.

AB: Okay, so an it is really just comparing the estimated payrolls to the actual payrolls—companies could have added people, let people go, things like that—and just making sure that the class codes are correct.

DG: Absolutely. I want to add too, because I think audit the term is scary, but it's very normal. So all insurance policies are audited. It's not that you've done something wrong or you're in trouble for something. This is a standard process that carriers need to do just to make sure that they're up to speed on the premium they're collecting.

AB: Okay, now the National Council on Compensation Insurance, or the NCCI Rating Bureau, uses these codes to classify different industries and in some cases different jobs within an industry. So why is it important for an employer to use the proper NCCI code when classifying their employees and how can that affect their end-of-policy term audit?

DG: Well, so if you ever want to get into a rough conversation with somebody that you don't know, you say, "Oh, how was your last insurance audit?" You know, normally you give them a chance to let some things go for about 10 minutes. But the reason why it's important to have the audit and the reason why it's important for the landscape business to set up their policy properly to begin with is so that there's no surprise. What people don't like in insurance is surprises. So, when it comes to this, what they would not like to see is, “Oh my goodness, I owe so much premium at the end of the policy because I misclassified my employees and I was paying on a lower rate and now I'm going to be charged this higher rate.”

And obviously, that can impact cash flow and the operations of the business, but also reflects poorly on insurance and the carrier and employer relationship. So, what we like to do is make sure from the get-go, our customers are set up appropriately so we can minimize the opportunity for those surprises to happen. And the codes that we're talking about today are for the primary operations for a landscape business. So whether you're in landscape maintenance or landscape construction, those are kind of the two silos; there are two different work comp codes that you can use. And it's important to use them correctly because each vary in the rate that they charge.

Now, there's a number of different categories and rates to charge for different operations that can fall under landscaping. But for today, we're just talking about two. And when you look at that, there's going to be a higher premium or a higher rate based on heavier exposure. And generally that's going to come from more landscape construction or installation, and so the carrier needs to charge for that higher potential return of injury for that class code.

AB: All right, so what are those two most and reclassified codes in the landscape industry?

DG: Yeah, so this is the, I believe, fifth or sixth year in a row where this was the number three or four most commonly reclassified class code for NCCI. And there are over, probably, 600 codes that go into the NCCI's database. And so for this, it's 9102, which would be the maintenance code, landscape maintenance. And then 0042, which would be landscape construction. But I like to use the industry terms because it makes a little bit easier for our customers to understand what I'm talking about.

So, for 9102, when the employee's primary operation is maintaining existing landscapes, which is the bulk of the businesses that we work with, that would be considered 9102 lawn care services, landscape maintenance. That's what that code is for, and it's a lighter rate.

Then there's 0042, which would be for landscape construction. And then here's the terms that I think help people better understand it: construction, installation, enhancement, work order, those types of services that you're offering where there's more of an install exposure and you're moving around plant material, you're ripping out old plants, you're putting in new material, they're going to charge a higher rate for that and that's 0042.

AB: Yeah, and that makes sense. There seems to be more risk if you're going to be installing, doing those construction activities versus just maintaining what's already there.

So, Drew, if listeners have questions about their class codes and how they can affect their audit, what’s the best way to get in touch with you?

DG: The best way would be through my email, so drewgarcia@ranchomesa.com and they can send me an email and I'll respond that way.

AB: All right, well, Drew, thank you for joining me in StudioOne™.

DG: Alyssa, thanks for having me.