CLASSIFYING RISK
What happens in an office often dictates coverage
By Linda D. Ferguson, CPCU
While there is logic in the statement that "an office is an office," to most of us it just seems inherently wrong. Why? Because we know that different things happen in different offices and therefore there should be some difference in rating and/or coverage to reflect those differences.
One "office" that is different is a medical office. People who enter the office usually are sick. A different level of care is expected and anticipated than when people enter in other offices. We also expect that an extra charge should be made for the professional exposure. That means that a professional exclusion will need to be attached in order to avoid confusion over coverage.
All medical offices (there is no definition as to what a medical office is) use code 66561 and professional exclusion GC 22 44 is to be attached. The professional exposure should be insured under a separate policy form.
Another "different office" is the lawyer's office. There is going to be a significant amount of off-premises exposure along with the office exposure. The potential for personal injury is extremely high and would be better covered under the professional coverage for lawyers.
All lawyers' offices use either code 66123-not-for-profit; or code 66122-other than not-for-profit; and the personal and advertising injury exclusion CG 21 38 is to be attached. Endorsement CG 22 96 may be attached if limited personal injury coverage, outside lawyers professional, is desired.
Labor unions, political campaign headquarters and professional or trade associations are similar to each other in that many words are uttered that could be considered inflammatory or even libelous. Coverage for personal and advertising injury are necessary, but the exposure often could be well beyond the other classes--to the point that another market would need to be used. These classes also have significant off-premises exposures.
Labor union code is 65007, political campaign headquarters is 46822 and professional or trade association is 46882. All classes require the attachment of CG 21 38 the personal and advertising injury exclusion.
Insurance agencies are definitely not like other offices. Every day agents must offer advice to clients about the best plan for insuring their lives, businesses and their possessions.
The insurance agent code is 45334 and exclusion CG 22 48 is to be attached. Insurance agents have serious errors and omissions concerns. A separate policy is more appropriate for that additional coverage than the CGL.
Employment agencies and computer data processing operations are similar in that they possess incredibly sensitive information and must maintain an extremely high level of confidentiality.
Computer data processing operation is code 43151 and CG 22 77 must be attached. A more specialized coverage must be purchased for any errors and omissions that occur in the services rendered. Employment agencies are code 43200 and CG 21 38 the personal and advertising injury exclusion endorsement is to be attached. Again a more specialized coverage must be purchased to provide the coverage needed.
Three office classes are unique in that they use payroll as the basis of premium computation rather than area. All anticipate a high degree of off-premises activity and customer interaction. The office operations are important but are secondary to the interaction that takes place between the employee and the client. The group consists of real estate agents, computer consultants and programmers, and consultants.
Real estate agents are code 47050, and no exclusion is necessary provided all exposures are covered. If certain activities are not to be covered, CG 22 60 is to be attached. The code for computer consulting or programming is 41675, and exclusion CG 22 88 is to be attached which excludes errors or omissions due to consulting or programming. Consultants code is 41677 with no mandatory exclusions. This is an NOC class to be used only if the other categories are not more appropriate.
After reviewing all of the
office exposures listed above and determining that they are not appropriate, it's time to turn to the NOC classes. There are four classes that should be considered. All codes are very straightforward and none has any special amendments or exclusions.
The codes 61227 (buildings or premises--office-not-for-profit) and 61226 (buildings or premises-office--other than not-for-profit) are designed for all offices that do not fit the above classes but which are designed for regular customer visits.
The codes 61225 (buildings or premises--office--premises occupied by employees of the insured-not-for-profit) and 61224 (buildings or premises--office--premises occupied by employees of the insured--other than not-for-profit) are designed for all offices that do not fit the above classes and anticipate no regular customer visits
Why does this all of this matter? These are just offices!
Part of it is the "do it once" philosophy. Classifying an office correctly the first time means no additional paper work. A small premium policy quickly becomes an expense when questions keep pulling it out of the file.
Another is that proper classification can also identify coverages that should be offered. Knowing that certain exclusions are considered mandatory should point towards offering an insured errors and omissions coverage or professional coverage. This can generate additional income and also prevent an E&O claim down the line.
Any activity that can lower expenses and identify additional premium sources should be a winner. *
The author
Linda D. Ferguson, CPCU, has 30 years of underwriting experience with national commercial lines carriers. She now operates a consulting business, Pleasant Street Consulting Company, in Newtonsville, Ohio. She can be reached at ldfcpcu@hotmail.com.