Chapter 6 | Additional Factors Affecting Coverages and Classifications

Table of Contents

  Educational Objectives
  U.S. Longshore and Harbor Workers’ Compensation Act
      Introduction
      Persons and Employments Covered
      Classifications and Rates
      Extensions of the USL&HW Act
  The Admiralty Law and the Federal Employers’ Liability Act
      Admiralty Law
      Federal Employers’ Liability Act (F.E.L.A)
      Migrant and Seasonal Agricultural Worker Protection Act (MSAWPA)
      Coverage Programs
      Coverage Methods
      Classifications and Rates
      Waters Not Covered Under Admiralty Jurisdiction
  Employers’ Liability Insurance - Part Two
      Other States Insurance - Part Three
      Policy Preparation
  Other Factors Affecting Premium Determination
      Rates and Advisory Loss Costs
      Loss Constant
      Expense Constant
      Minimum Premium
  Extra - Territorial Employments
      Employees Who Move About From State to State
      Truckers
      Contracting
      Monopolistic States

 

Educational Objectives
Upon completion of this section, you should be able to:

1. Identify USL&HW/Admiralty exposures.

2. Determine persons and employments covered/not covered.

3. Develop the correct premium for USL&HW/Admiralty.

Recognize the purpose of Employers’ Liability Insurance.

Identify the type of employees covered under the Federal Employers’ Liability Act

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U.S. LONGSHORE AND HARBOR WORKERS’ COMPENSATION ACT

INTRODUCTION
The U.S. Longshore and Harbor Workers’ Compensation Act (U.S.L.&H.W. Act) provides compensation and other benefits to employees engaged in maritime employment at a covered location. This is a Federal law. The statutory obligation placed on the employer to insure is satisfied by attaching the Standard U.S.L.&H.W. Compensation Act Coverage Endorsement (WC 000106A) to the standard policy. It is not designated in item 3.A of the information page.

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PERSONS AND EMPLOYMENTS COVERED
The U.S.L.&H.W. Act covers the following types of employees: longshoremen, harbor workers, ship repairmen, shipbuilders, ship breakers and other employees engaged in loading, unloading, repairing or building a vessel. It applies to such employees while working on navigable waters of the United States and also while working on any adjoining pier, wharf, dry dock, terminal, building way, marine railway, or other area adjoining such navigable waters customarily used for loading, unloading, repairing or building a vessel and to any other employee while working aboard a vessel in navigable waters. Navigable waters are usually defined as those which form a continuous highway for interstate or international commerce.

Note that the act does not cover masters or members of the crew of a vessel, governmental employees, or employees hired by the master of the vessel to load, unload or repair small vessels.

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CLASSIFICATIONS AND RATES

The classifications listed in "Part Two - Classifications" of the Basic Manual are used for U.S.L.&H.W. coverage. Classification code numbers which are followed by the letter "F" include in their rates premium for exposures subject to the U.S.L.&H.W. Act. For other operations, the usual classifications for compensation insurance are used. Since the rates for these class codes do not include premium for operations subject to the U.S.L.&H.W. Act, if any such classifications become subject to the act, the manual rates and minimum premiums for those codes affected must be increased by the U.S. Longshore and Harbor Workers’ percentage shown on the state rate page. The increased rates apply only to the payroll of employees engaged in operations subject to the Act. This percentage increase does not apply to loss and expense constants. Note that the overtime rules discussed earlier in this manual do not apply to classifications (those followed by the letter "F") included under the Stevedoring Section of the Basic Manual.

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EXTENSIONS OF THE USL&HW ACT
Defense Base Act
This act extends the provisions of the USL&HW Act to employers and their employees on overseas military bases and on other overseas locations under public works contracts with agencies of the United States Government. Non-U.S. citizens may be exempted form coverage with an approved wavier by the Secretary of Labor. Coverage is provided by attaching the Standard Defense Base Act Coverage Endorsement (WC000101A).

Outer Continental Shelf Lands Act
This act extends the provisions of the USL&HW Act to employers and their employees exploring for natural resources on the outer continental shelf of the United States. The contemplated area is generally described as all submerged lands lying seaward and outside of the area of lands beneath navigable water of the United States and subject to its jurisdiction. Coverage is provided by attaching the Standard Outer Continental Shelf Lands Act Coverage Endorsement (WC000109A).

Civilian Employees of Nonappropriated Fund Instrumentalities Act
This act extends the provisions of the USL&HW Act to employers and their employees of nonappropriated fund instrumentalities such as post exchanges and service clubs for the Armed Forces. Coverage is provided by attaching the Standard Nonappropriated Fund Instrumentalities Act Coverage Endorsement (WC000108A).

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THE ADMIRALTY LAW AND THE FEDERAL EMPLOYERS’ LIABILITY ACT

ADMIRALTY LAW
Admiralty law covers masters and members of crews and, as mentioned previously, they are not subject to state Workers’ Compensation laws, nor to the U.S.L.&H.W. Act. Under admiralty law, if they are insured, masters and members of crews can sue their employers for damages in Admiralty Courts, or in other courts, in a proceeding which resembles an employers’ liability suit. Under this Federal law, they can also seek action for transportation, wages, maintenance and cure. The Merchant Marine Act of 1920, known as the Jones Act, applies the benefits and provisions of the Federal Employers’ Liability Act to these seamen. Seamen are those employees having a permanent connection with the vessel, who work on board or otherwise aid its navigation. (Navigable waters are defined as those that form a continuous highway for interstate or international commerce.) Further details can be found in the Jones Act (46 U.S. Code, Section 688, 1970).

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FEDERAL EMPLOYERS’ LIABILITY ACT (F.E.L.A.)
This federal law covers employees of interstate railroads as these employees are not subject to state Workers’ Compensation law. If an injured railroad employee can demonstrate any negligence on the part of the railroad, this Act would impose liability for damages on that railroad. Complete details can be found in 45 U.S. Code, Section 51-60, 1970.

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MIGRANT AND SEASONAL AGRICULTURAL WORKER PROTECTION ACT (MSAWPA)
This act makes agricultural employers, agricultural contractors and agricultural associations liable for injuries sustained by an employee due to intentional violation of the Act or regulations under the Act.

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COVERAGE PROGRAMS
There are two programs described in the NCCI Basic Manual which are used to furnish insurance for liability under one or more state Workers’ Compensation laws, and also for liability under admiralty law or F.E.L.A. The programs, used with the Standard Policy, are:

Program I
Provides Part One coverage - statutory liability under the Workers’ Compensation law of any state designated in Item 3A of the Information Page and Part Two coverage - Employers’ Liability for damages under admiralty law or F.E.L.A., subject to a standard limit of liability of $25,000.

Program II
Provides the same coverage as Program I, but with the addition of Voluntary Compensation Insurance. Under Program II, the insurance carrier will offer a settlement of a claim strictly in accord with the statutory benefits provided in the Workers’ Compensation law designated in the Voluntary Compensation Endorsement attached to the policy as if the claim were subject to such law, instead of subject to the laws of negligence. If the offer of settlement is rejected, Part Two then applies to such claim or suit, with the same standard limit as for Program I.

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COVERAGE METHODS

Methods of coverage under these programs include:

Admiralty Law Endorsement - To provide for Program I, attach the Standard Maritime Coverage Endorsement (WC000201A). To provide Program II for admiralty law, also attach the Standard Voluntary Compensation Maritime Coverage Endorsement (WC000203).

Admiralty Law Coverage Options - The Maritime Coverage Endorsement excludes liability to provide transportation, wages, maintenance and cure. This endorsement may optionally include a provision to insure such liability for an additional premium based on an (a) rate.

F.E.L.A. Endorsements - To provide Program I for employment subject to F.E.L.A., attach the standard Federal Employers’ Liability Act Coverage Endorsement (WC000104). To provide Program II, also attach the Standard Voluntary Compensation and Employers’ Liability Coverage Endorsement (WC000311A).

U.S.L. & H.W. Act - When insurance is provided for liability under admiralty law or F.E.L.A., insurance for liability under the U.S.L. & H.W. Act also may be necessary. To provide such insurance, attach the Standard U.S.L. & H.W. Compensation Act Coverage Endorsement (WC000106A).

MSAWPA Endorsement - Protection is provided by adding the Migrant and Seasonal Agricultural Worker Protection Act Coverage Endorsement (WC000111). Premium is based upon a rated determined by the carrier.


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CLASSIFICATIONS AND RATES
The classifications for admiralty or F.E.L.A. operations can be found under reference table F.3 of the Basic Manual Users Guide. Rates will be found on the appropriate state rate pages.

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WATERS NOT COVERED UNDER ADMIRALTY JURISDICTION
When an insured conducts operations on waters not subject to admiralty jurisdiction, coverage for those operations is provided by the Standard Policy and endorsement forms. This insurance is subject to the rules which apply to statutory Workers’ Compensation insurance. The admiralty classifications and rates for Program II apply to these operations. The advisory loss cost for each classification is shown after its code number on the state advisory loss cost pages in Part Three of the manual. The manual rate for each classification is the authorized rate approved by the appropriate insurance regulatory authority for use by the carrier. When there is a potential liability under admiralty law, the rules for insurance under admiralty law should be followed. Likewise, with a potential liability under the U.S.L. & H.W. Act, the manual rules for the U.S.L. & H.W. Act would be followed.

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EMPLOYERS’ LIABILITY INSURANCE - PART TWO

  • Employers’ Liability insurance (Part Two) provide coverage for the legal obligation of an employer to pay damages because of bodily injury by accident or disease, including resulting death, sustained by an employee. Employers’ liability coverage applies only if the injury or death of an employee arises out of and in the course of employment and is sustained:
  • In the United States of America, its territories or possessions, or Canada, or
  • While temporarily outside the United States of America, its territories or possessions, or Canada, if the injured employee is a citizen or resident of the United States or Canada; but suits for damages and actions on judgments must be in or from a court of the United States, its territories or possessions or Canada.

The Standard Policy also provides coverage for:

a) Employers’ Liability for disease not covered by a Workers’ Compensation law or Federal Employers’ Liability Act unless coverage is specifically excluded by endorsement. Rules and endorsements to cover, limit or exclude this exposure will be found elsewhere in this chapter and in this manual.

b) Employers’ Liability insurance for the liability of an employer under admiralty law or Federal Employers’ Liability Act unless coverage is specifically excluded by endorsement. Rules and endorsements to cover, limit or exclude this exposure will be found elsewhere in this chapter and in this manual.

c) Employers’ Liability insurance written with Workers’ Compensation insurance.

d) 1. Employers’ Liability insurance written without Workers’ Compensation insurance when an endorsement is attached which excludes any obligation to pay Workers’ Compensation benefits. The advisory Employers’ Liability Coverage Endorsement may be used. Refer to the Limits of Liability Rules in the NCCI Manual which govern such Employers’ Liability insurance.

2. Item d-1 is permissible only where all employees of the employer are excluded from a Workers’ Compensation law by requirement or by election not be to subject to the law and where there is no law or regulation which makes it illegal to issue such a policy.

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OTHER STATES INSURANCE - PART THREE
To provide employers’ liability insurance in specific states, where permitted by law, they must be listed in Item 3C of the Information Page.

A detailed description and a copy of the appropriate endorsement for each of these coverages is contained in Section 3 - Endorsements in this manual.

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POLICY PREPARATION

A. Explanation of Terms

The following definitions are contained in User’s Guide, Section D, of the NCCI Basic Manual. These terms are used in the Information Page of the Standard Policy.

1. Employer

Employer may be an individual, partnership, joint venture, corporation, limited liability company, association, or other legal entity, or a fiduciary such as a trustee, receiver or executor.

2. Insured

Insured means the employer designated in Item 1 of the Information Page.

3. Majority Interest

Majority Interest as defined in the Experience Rating Plan Manual applies in this Manual. This phrase usually means:

  • Majority of voting stock, or
  • Majority of members or directors if there is no voting stack, or
  • Majority participation of general partners in profits of a partnership.

4. Risk

Risk means all insured operations of one employer within a state.

B. Name, Address, and Other Workplaces of Insured - Item 1

1. Combination of Legal Entities

Separate legal entities may be insured in one policy only if the same person, or group of persons, owns the majority interest in such entities. Classifications shall be applied separately to each legal entity.

2. Single Location

All operations of any one employer at a single location shall be insured in one policy.

3. Multiple Locations

All locations and operations of the employer in a state shall be insured in one policy if required by the state workers’ compensation law.

C. Policy Period - Item 2

1. Normal Policy Period

The normal policy period is one year. A policy may be issued for any period not longer than 3 years.

2. Policy for One Year

  • The manual rules are based on a policy period of one year.
  • A policy issued for a period not longer than one year and l6 days is treated as a one year policy.

3. Policy Longer Than One Year

A policy issued for a period longer than one year and l6 days, other than a 3 year fixed rate policy, is treated as’ follows:

a. The policy period is divided into consecutive 12 month units.

b. If the policy period is not a multiple of l2 months, use the Policy Period Endorsement (WC 00 04 05) to specify the first or last unit of less than l2 months as a short term policy.

c. All manual rules and procedures apply to each such unit as if a separate policy had been issued for each unit.

4. Three Year Fixed Rate Policy Option

If the estimated annual premium is less than the amount necessary to qualify for experience rating and the risk does not otherwise qualify for intrastate or interstate experience rating, a policy may be issued for a period of three years at a fixed manual rate.

A policy issued under this option shall be known as a Three Year Fixed Rate Policy and shall be so designated in the Information Page. Refer to 3-B.

D. State Laws Designated in the Policy - Item 3A

1. Listing of States

Insurance for operations conducted in a state is provided by listing the state in Item 3.A. of the Information Page.

2. Longshoremen’s Act

The U.S. Longshoremen’s and Harbor Workers’ Compensation Act shall not be entered in Item 3.A. Of the Information Page. (An endorsement is used to provide coverage.)

3. Additional States

A state may be added after the effective date of the policy. For the additional state operations, apply:

a. Manual rates in effect on the anniversary rating date of the policy to which the state has been added,

b. Any rate change which applies to outstanding policies for the state being added, and

c. Any applicable experience rating modification for the policy to which the state has been added. Refer to the Experience Rating Plan Manual.


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OTHER FACTORS AFFECTING PREMIUM DETERMINATION

RATES AND ADVISORY LOSS COSTS
The rate is the amount of premium for each $100 of payroll unless the classification has a per capita charge. Jurisdictions where the manual applies may be either competitive rating or administered pricing. The difference between these systems is that in competitive rating, the rates and some rules must be filed by or filed to be adopted by the carrier; whereas, in administered pricing, the rates and rules are filed by NCCI or another licensed rating organization for use by the carriers. The Preface in the Basic Manual lists both competitive and administered jurisdictions.

Rates for administered pricing jurisdictions for each classification are the authorized rate approved for use by the carrier. The advisory loss cost is the portion of the rate that represents projected losses to which the carrier adds an increment for expenses to develop a manual rate. Advisory loss costs and rates are shown in Part Three of the manual.

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LOSS CONSTANT
The loss constant is an additional charge for those policies which generate less than $500 in annual premium. The reason for this is that experience has shown that the cost per unit of exposure is higher for small businesses than for that of larger ones. The loss constant has been eliminated in most states. The only state where a loss constant still applies is Massachusetts.

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EXPENSE CONSTANT
The expense constant is a premium charge that applies to every policy and is identified on the Information Page. It covers expenses for issuing, recording, and auditing workers’ compensation policies regardless of premium size and is shown in the state rate pages. It is included in the minimum premium for each classification and shall not be added if the minimum premium becomes a final premium for that policy. Further, the expense constant is not subject to premium discount, experience or retrospective rating.

When more than one state is insured on the same policy, the highest expense constant shall be charged - even if that state is on an "if any" basis. If two or more states have the same highest expense constant, the expense constant shall be reported for the state with the largest amount of premium. An expense constant can not be changed mid term and will not be less than $15 when a policy is a short term contract.

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MINIMUM PREMIUM
Minimum premiums are applicable to help cover some of the expenses incurred in writing and issuing a policy, therefore, the minimum premium is the lowest premium required in order to provide insurance under a standard policy.

The premium auditor should keep in mind that the minimum premium for any classification includes the loss and expense constants and that the minimum premium is not subject to experience rating. The minimum premium is subject to final adjustment and shall be determined upon audit only on the basis of those classifications developing premium. If the final earned premium is less than the minimum premium determined upon audit, that minimum premium shall be charged. If no classification develops premium, the minimum premium for code 8810 will apply.

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EXTRA - TERRITORIAL EMPLOYMENTS

EMPLOYEES WHO MOVE ABOUT FROM STATE TO STATE
Examples of employees who move about from state to state are salespersons, sales engineers, service people, supervisors, executives and other employees who travel for administrative purposes.

1) If the employee lives in the same state as the headquarters from which he or she travels, remuneration should be assigned to the headquarters’ state.

2) If the employee lives in a state different from that in which the headquarters are located, but nevertheless travels from the headquarters, remuneration should be assigned to the headquarters’ state.

Example:
A salesperson may work for a Connecticut concern, but lives in Massachusetts. There may be days he or she does not report to the headquarters, but is nevertheless assigned to and operates from the Connecticut headquarters.

3) A salesperson may be stationed in a state where there are no headquarters and operates from his or her home. Remuneration should be assigned to the state in which he or she lives.

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TRUCKERS
The Insurance Audit Committee of NCCI recently was asked to provide clarification regarding the proper assignment of truckers relative to key considerations such as the location of the base terminal and the state of residence of the trucker. The following revised interpretation was provided in the previously published Premium Audit Reference Book:

The payroll of drivers, chauffeurs and helpers for truckers shall be assigned to the state in which the base terminal from which they load, unload, store or transfer freight on a regular basis is located.

Example:
A trucker resides in State A. His base terminal is in State B. If the driver travels regularly to the base terminal in State B to load or unload freight, the trucker’s payroll shall be assigned to State B.

When the driver, chauffeur or helper does not operate from a "base terminal" a determination shall be made as to where the exposure lies. In that case, payroll shall be assigned as follows:

1) If it can be established that a trucker spends a majority of driving time in a specific state, the trucker’s payroll shall be assigned to that state.

2) If base terminal or state of majority driving time cannot be established and a trucker is traveling from his state of residence, payroll shall be assigned to state of residence.

For purposes of these procedures the following definitions shall apply:

  • Base Terminal: A permanent location with central loading docks and/or storage facilities where a trucker regularly goes to load, unload, store or transfer freight.
  • State of Residence: The state in which the trucker resides as evidenced by the location used for the filing of federal income taxes.
  • Regular: A pattern of 40 hours per week or any other pattern that appears on a continuing basis.

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CONTRACTING
The following guidelines apply to the assignment of employees working for a contracting risk:

1) Payroll of employees or contractors who have their place of business in a given state and also operate in adjoining states and who are constantly crossing state lines, but usually return to their homes each night, should be assigned to the headquarters’ state.

Example:
Jobbing contractors such as electricians, plumbers, carpet layers, etc.

2) The payroll for executive supervisors who may visit a job but who are not in direct charge of a job should be assigned to the state in which their headquarters are located.

3) There are contractors who maintain a permanent staff of employees and superintendents. If any of these employees or superintendents are assigned to a job which is located in a state other than the headquarters’ state, either for the duration of the job or any portion thereof, their payroll should be assigned to the state in which the job is located. This is currently a PAAS interpretation only. NCCI indicates that these types of employees are to be assigned to the higher rated jurisdiction, job state vs. headquarters.

4) The payroll of employees who are hired for a specific job project should be assigned to the state in which the job is located.

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MONOPOLISTIC STATES
When a portion of the operations of a risk are insured in a monopolistic state fund, consideration must be given to the special rules and requirements which may exist in such cases.

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