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Insurance Needs for Floor Installation Businesses

Floor installation is an industry that has a unique set of risks. Floor laying, finishing and refinishing businesses are a specific type of carpentry that increases exposures because of the construction and lay out of floors in both residential or commercial buildings. This work may include the installation of floor coverings such as linoleum, tile and carpet. There may be chemicals involved in the work that can ad to the risks faced by employees. Because of the specific risks involved in this industry, business owners should take a bit extra time to speak with their insurance agent about what exactly the employees of the business do and do not partake in on a daily basis.

When going through the quoting process for commercial insurance, it is important to remember that your insurance agent is in the business of analyzing risk. If they are absent the appropriate amount of information to assess the risks of your business, it is in the best interest of the agent to always assume more risk. If they do assume more risk than your business actually faces, it can cause your insurance premium to be significantly higher.

Once you have spoken long and honestly with your Independent Insurance Agent there are certain policies most all floor installation companies need to secure. Here are four policies that are a good idea to secure.

Property Insurance

If you own property, no matter how big or small, you need to protect that property in some way. Commercial Property Insurance is different from a personal home owners policy. Commercial Property is sold in two main ways, Actual Cash Value and Replacement Value. An Actual Cash Value Policy will pay for an agreed upon value that the property is worth. This type of policy does not pay for tear down and removal costs. A Replacement Value Policy does pay for the additional costs to tear down, remove debris, and rebuild the property to current codes. Speaking with your agent can help you determine if you need this coverage and if so how much.

Commercial Auto

If you have a company vehicle or you use your personal vehicle for work operations, than you will need some form of additional coverage for you business. Some form of Commercial Auto Insurance is needed for you or your employees if you do travel to third party locations. If your employees use their personal cars for business purposes you may just need a hired and non owned auto policy. This is because the liability to third parties for accidents that are the fault of your employee is the liability of the business. This is because the reason they are on the road is because of the actions of the business. The damages to the employees car will more than likely be picked up by their insurance company if the accident is their fault. Either way it is important to protect your business with the proper coverage for the risks you face regarding driving and vehicles.

Inland Marine Coverage

An Inland Marine Insurance Policy will cover any specialized equipment you have in your car or on a trailer attached to your car. A commercial auto insurance policy will not cover these pieces of equipment if they are damaged in an accident. For these damages, you will need this separate policy. One thing to remember in relation to an inland marine policy is to keep an up to date account of all the equipment your business owns. Take pictures of these pieces of equipment and keep them on file with your insurance agent. If you buy new equipment in the middle of your term, it is a good idea to notify your insurance agent of the new equipment.

Workers Compensation

Depending upon the state you operate in, how many employees you have, and how those employees are classified you may have to purchase workers compensation coverage. It is important to check with the proper governing body for your state to determine if you need this coverage. Even if you are not required by law to purchase this coverage, your insurance agent can help you determine if it is a good idea to still secure this coverage for your business.

Here are several common Workers Compensation Class Codes:

• 5478- Carpet, Linoleum, Vinyl Installation

• 5438- Tile Floor Installation

• 5437- Hardwood Floor Installation and Refinishing

• 5645- Residential Construction

• 5651- Commercial Carpentry

• 5436- California- Hardwood Floor Installation

Commonly Misclassified Workers Compensation Class Codes

One of the most misunderstood and difficult parts of setting up a workers compensation insurance policy is classifying the type of work being done by each employee. With over 700 classifications there are a lot to choose from and some of the wording on the classification descriptions can be misleading. In most states, the classifications are written by the National Council on Compensation Insurance (NCCI). These class codes are one of the most important parts of the workers compensation policy, because they are one of the two driving factors in price or premium. The other factor determining what a business pays is the amount of payroll for the employees of that business. If the employees are not classified properly, there is a chance that upon an end of term audit for a significant difference in rate between the classifications. This can cause either a large increase in premium owed, or a refund because too much has been paid into the policy. Here are some examples of my experiences with some classification codes that are commonly misused. Hopefully this will help you as a business owner more effectively classify your business with the proper workers comp codes.

Class Codes 5606

Contractor – Project Manager – Construction Executive – Construction Manager or Construction Superintendent

In my opinion, this classification is one of the most misused of all 700 codes. This classification is designed for an employee who is in charge of a construction project, but the employee does not take part in any of the physical work whatsoever. They also cannot have direct contact with the employees doing the work. They must be talking with the foreman who then will line out the work to be done by the employees on the job site. This position is mostly work being done in the office, but occasionally will include going to the job sites to check in with the foreman’s.

Class Codes 5437

Carpentry – Installation of Cabinets or Interior Trim

Carpentry is one of the commonly mis-classified class codes when it comes to general contractors. General contractors cannot separate out this classification from other work being done. Even if the other work was done weeks prior, the contractor still cannot use this classification. It will default to the classification that has the highest risk for the work done at the job site. The higher risk typically has a higher rate of premium. This particular classification is designed to be used by an artisan (specialty) contractor. This is someone whose scope of work is only doing the installation of cabinets or trim inside of the structure. This person is not doing any other type of work on the building. It is a very specific classification and the rate for this type of work is much less than all the other construction classifications. For this reason, if a business is using this classification and it is incorrect the business will owe a very large amount at the end of the term after an audit.

Class Codes 8810

Clerical Office Employees NOC

Clerical employees are typically one of the least expensive class codes. This is for a good reason because the chances of someone sitting behind a computer being injured is very small. Since it is the least expensive classification, it is common that business owners try to classify as many of their employees as they possibly can with this code in an attempt to reduce cost. The biggest requirement for this classification is that there has to be physical separation of the clerical employee from the other work being done at the location. This separation can be a wall or even a reception desk. The other caveat of this classification is that you typically cannot use this in conjunction with any other classifications. People within the insurance industry refer to this as a standard exception class code. The standard exception class code means the employee cannot be doing any other class of work. You cannot have an employee who is classified as 5437 (trim carpenter) and then have the same employee come back into the office to be assigned class code 8810, which is a less risky class code. Some states may have certain instances where they allow this code to be split. Missouri is one such state that allows an owner to assign 10% of their payroll to the 8810 class and the remaining to the governing code. It is important to check the regulations of the state you are operating in to make sure.

Standard Exception Class Codes

As referred to with the clerical classification (8810) they cannot be used in conjunction with any other classification. There are three of these class codes that are commonly misused in this manner, 8742 (outside sales), 8810 (clerical), 7380 (delivery). Make sure that if you are using these classifications the employee is not participating in any other aspect of work being done in the company that should be classified elsewhere.

Conclusion on Class Codes

The biggest take away from this is a business owner should verify all the classifications the agent is using on the policy of their business. The insurance agent is in the business of analyzing risk. It is in their best interest to always assume more risk. This is because it is a lot easier for the agent to explain that a business over paid. This is easier than explaining that a business under paid and now they owe additional premium. Plus the insurance agent can only operate off of the information you give them about your business. No one knows your business better than you. For this reason, it is important to take an adequate amount of time to talk with your agent. Talk with them about all of the ins and outs of your business. This will help them properly protect your business.

It is equally important that part of your conversation with your agent is to talk through the class codes. Take time to make sure the class codes are being properly assigned. You can always look up class codes online as a consumer through several different sites. Most agents will be more than happy to explain why they used a particular classification. Classifications can sometimes be very tricky and it can even vary by how a particular insurance carrier views the work being done. A little research and questioning to make sure things are set up properly can end up saving you a lot of hassle. It will also save you money upon the end of term audit. For this reason, it is important to establish a comfortable working relationship with your insurance agent.

My Insurance Question is a contribution of the experts at The Insurance Shop LLC. The Insurance Shop was founded in 2005 as an independent insurance agency that partners with a couple dozen insurance carriers. This large amount of carriers allows the agents at The Insurance Shop the ability to shop your policy around in an attempt to make the carriers compete for your business. If you are looking for a better value when purchasing your commercial insurance package, let us shop insurance so you don’t have to. Give us a call today at 800-800-4864.

What is Artisan Contractors Insurance?

Inside the insurance industry Artisan Contractors Insurance is commonly referred to as insurance for Artisan Contractors. What is an Artisan Contractor? That is a question many new business owners ask when applying for insurance the first time. These business owners frequently find out this is what classification their business is in. Artisan Contractors are a wide range of businesses that operate in different parts of the construction industry. Electricians, Plumbers and Painters are all included in this category.

Artisan Contractors Insurance for Electricians

Some common (NCCI) industry classification codes include:

5191 Electricians
5183 Plumbers
5537 HVAC Contractors
5221 Concrete Construction
5474 Painters
5437 Finishing Carpenters

They each have a similar, but different role within the construction industry and each type of work carries unique risks. From an insurers perspective they each carry their own risk and that is why they are separated into several separate class codes. Working with your insurance agent to make sure you are in the proper classification code can go a long way towards removing any headaches down the road relating to your commercial insurance policy.

Below are some common types of insurance recommended for Artisan Contractors Insurance:

General Liability

General Liability (GL) is typically the first line of insurance purchased by a business. GL is required by law in most states; additionally, businesses are often required to purchase coverage with most contracts for leases, loans, and work performed for others. GL exposures are primarily at the contractor’s office or shop and are generally limited due to lack of public access to the premises. Retail sales increase the possibility of customers slipping, falling, or tripping if customers visit office to view products. Job-site exposures include potential injury to the client or damage to the client’s property. Tools, power cords, building materials and scrap material, use of saws and other power or hand tools are all potential risks.

Workers’ Compensation

Workers’ Compensation Insurance is a state mandated insurance coverage required by nearly every state in the country. The basic purpose of Workers’ Compensation Insurance is to assure that injured workers get medical care and compensation for a portion of the income they lose while they are unable to work. Workers receive benefits regardless of who was at fault in the accident. Also, Workers’ Compensation Coverage prevents the employer from bearing the costs of injuries that occur during normal business operations.

Commercial Auto

Automobile exposures are generally limited to transporting workers, equipment and supplies to and from job sites. Hazards depend on the type and use of vehicles and radius of operation with the main hazards being upsets. Vehicles may have special modifications or built-in equipment such as lifts and hoists. If employees utilize their own personal vehicles for work related tasks then Hired and Non-Owned Coverage should be purchased.

Hired and Non-Owned Auto

Hired and non-owned auto insurance is commonly added (or endorsed) onto the commercial auto insurance policy. This endorsement adds additional coverages for the insured in the event there becomes a liability issue for their business for an automobile accident involving a vehicle they don’t directly insure. This coverage will pay for damages to a third party, on behalf of you the insured. This coverage kicks in if the business is held liable for an accident or injury caused by a vehicle they hired or a vehicle someone uses while performing work for a business. If you send an employee to run and errand on behalf of the business, your business is responsible for damages that occur.

Property Insurance

Commercial property insurance for business owners covers many types of losses and damages to a companies property. Property exposures are generally limited to those of an office, shop, and storage of materials, equipment, and vehicles. Property insurance typically provides coverage for events like fire, smoke, wind, hail and vandalism. Policies often have included or excluded coverages. Some natural disasters like earthquake or hail, may have separate deductibles.

Inland Marine

Inland marine exposures include contractors’ tools and equipment, including ladders and scaffolding, hoists, and portable welders, the transport of materials, and installation floater. Goods in transit consists of tools and equipment as well as products purchased by the customer for installation at the job site.

Artisan Contractors

Why would an artisan contractor need data breach coverage?

Data breach (or cyber liability) coverage has been one of the hottest topics in the insurance industry over the past few years. Insurance companies and agents alike unanimously agree that this line of insurance coverage is becoming critical for small businesses to protect themselves, but the odd disconnect is that many businesses don’t see the value.

First, let’s start by explaining what data breach coverage is designed to protect. This policy is designed to cover data breach recovery costs such as notifying any person/business potentially affected, good-faith advertising, and repairing security of the system. The coverage is important because a business is held responsible for protecting the personal information it collects from someone else. Most states have already passed (or are passing) regulations for steps a business must take for their clients when a data breach occurs. These regulations typically require formal notification that a breach has occurred to all potentially impacted clients, and typically the business must offer credit monitoring services for those clients for 1 year. Those steps alone can amount to a huge expense.

Most artisan contractors feel like this risk doesn’t relate to them at all, and others don’t realize that they aren’t properly covered. A recent study found that 39 percent of business owners think that data breach coverage is a part of their general liability policy. This thinking is wrong. Occasionally, a business owners package (or BOP) policy will include some minimal data breach coverage, but the limits are so low that the coverage would likely only cover a portion of any claim that existed. Many artisan contractors buy GL-only policies instead of a BOP anyway, because they feel like the extra coverage’s aren’t important for their business … and cyber liability is one line of insurance that is still considered a “luxury” expense.

In fact, one of my clients who is an artisan contractor and does HVAC work expressed himself pretty clearly: “Don’t try to sell me something that has no impact on my business. I don’t keep much information on my clients, and I’m so small that nobody would want to take the time to hack my company.”

That’s when I brought up the Target data breach, which he knew about because he was one of the victims and had to get new credit cards issued because of the hack. What this artisan contractor didn’t realize was that the hackers used a third-party vendor, HVAC company Fazio Mechanical Services, to gain access to the Target system.

The Home Depot data breach also began via a hack of a third-party vendor. In fact, using a third-party vendor is becoming the most common method for as an access point for a larger hack. As an artisan contractor, this is becoming the new risk and larger companies are starting to take notice.

Many larger organizations are now requiring a sub contractor to carry a separate cyber liability policy, along with the more typical insurance requirements (workers compensation, general liability, umbrella, etc.).

Over the next few years, I think getting a data breach policy is not only a necessary way to protect your business, but it is also a great way to separate yourself from the competition.