Quick - whose payroll is excluded under the General Liability Trucker Classification?
CLASSIFYING RISK
A classification does not always tell the entire story
By Linda D. Ferguson, CPCU
Quick - whose payroll is excluded under the General Liability Trucker Classification?
1) Truckers
2) Warehouse employees
3) Clerical workers
The answer is all of the above.
Sometimes it seems that ISO has quite a sense of humor, but reading the policy and the manuals makes its approach seem entirely reasonable. So, let's look at the Commercial General Liability Policy (CG 00 01), the Classification Manual and the General Liability Rules Manual.
First, we must delve into the policy. Premium follows coverage, so if there is no coverage provided, there should be no premium charge made. The key exclusion in this case is found on page 4, exclusion 2.g, which is called the Aircraft, Auto or Watercraft Exclusion. This exclusion states that "bodily injury" or "property damage" due to the ownership, maintenance, use or entrustment of automobile is excluded. Furthermore, it states that use also includes operation and "loading and unloading." So just by referring to the exclusion, we can see that there is no coverage while the person is driving the truck or working on the truck.
Now, what do we know about the critical point of contact with the customer? That is where the definition of "loading and unloading" comes in. This is so important that ISO has defined it on page 14 of the policy as item 11. Loading starts when the trucker starts to move the object and doesn't end until the object is where it is supposed to be.
Reading the exclusion with the definition of loading and unloading in mind, this exclusion makes it clear that whatever coverage there might be, it is extremely limited since almost every aspect of the trucker's job is excluded. Therefore, no premium should be charged for the truckers exposure.
Now that we know why the truckers exposure shouldn't be charged for, how does ISO communicate that to us?
Section 24 of the General Liability Manual is called Bases of Premium. This section explains exactly what each premium base will include. Truckers is a payroll code, so we start at the payroll part of Section 24. The first part of the payroll item states how the payroll is determined and what is included. The next part indicates what is excluded. Two of the many exclusions read as follows:
* "The payroll of drivers and their helpers if their primary duties are to work on or in connection with automobiles"
* "The payroll of clerical office employees"
Although the term "trucker" is never used, the payroll of drivers and their helpers cannot be included in the classification unless there is a special exception within the classification itself. We will need to review the classification section for exception. However, if there are no exceptions, the payroll for both the clerical office employees and truckers must be excluded from the payroll in this classification.
Now, let's turn to the classification manual.
The truckers code is 99793. The classification title doesn't provide much insight, but the footnote provides very important instructions. There are three parts to the footnote:
First, warehouse operations are to be separately classified and rated. Therefore, we must turn to another classification in order to charge for any storage or warehousing at the terminal.
Second, the payroll for terminal employees and garage and repair persons is to be included in the truckers classification.
Last, the payroll of employees that deliver merchandise on foot is not included.
So, now we know that the ware-house employees are not included under this classification and that a charge must be made in a more appropriate classification.
Why not pick up the warehouse payroll as a part of the truckers classification?--because there is no requirement that a trucker have a warehouse in order to be a trucker. If a trucker chooses to expand his or her operation, which many do, a separate exposure is created and therefore separate premium must be collected.
The payroll for any terminal employee who is not clerical, trucker or warehouse would be included. Therefore, a large terminal may have significant payroll but a small general liability premium because the premium is collected from the commercial automobile portion of the exposure, not the general liability. Logically, this is the way it should be. There is very little public exposure in a trucking terminal so the chance of loss is limited. The main exposure for the terminal is the repair and maintenance of the trucks, and that is why the payroll is gathered.
There is a very limited time period when the trucker would have a general liability exposure that would be covered, so there is no premium that follows him or her.
Since many truckers do have a warehouse exposure, how should that exposure be classified? The following warehousing classification options are used:
The most common code is Warehouse Code 99938. This is a payroll-based code that is an NOC classification. Since it is an NOC (not otherwise classified) class, we must search for any other code that might be more appropriate before choosing this one.
Cold Storage Warehouse - public - 99917 is to be used for cold storage warehouses. This does not include individual lockers but is designed for the cold storage public warehouses only.
All other warehouse classes involve lessors risk or private warehousing. Review carefully the warehousing exposure prior to assigning a classification.
The moral is that a classification does not always tell the entire story. It is only one chapter in a complete book. So don't get caught by the surprise ending--you could lose a client.
The author
Linda D. Ferguson, CPCU, has 30 years of underwriting experience with national commercial lines carriers. She operates a consulting business, Pleasant Street Consulting Company, in West Union, OH.