New NCCI Bulletin: Get the Right Digits When Classifying A Manufacturer
While we haven't seen a change yet in the way carriers are interpreting warehouse vs. manufacturing exposures, they may begin to enforce the rule down the road. This could mean a rate change, and ultimately, an overall increase in premium.
Here are a few important examples from the NCCI Bulletin.
1A - Manufacturing risk with all operations within a single NCCI stateA staffing client company is a manufacturer of aluminum beverage cans and is appropriately assigned to "Can Mfg.," code 3220. Once the cans are produced, they're packaged and delivered to the insured's distribution warehouse located in another city, but within the same state. When a customer places an order, the cans are delivered by the insured's employees in company trucks.
Manufacturing risks, including those assigned to code 3220, encompass the receipt and storage of the raw materials, the manufacturing operations and the warehousing of the finished goods. As code 3220 does not include drivers, employees transporting the cans from the production facility to the warehouse and from the warehouse to the customers are classified to "Drivers, Chauffeurs, Messengers, and Their Helpers NOC - Commercial," code 7380.
1B - Manufacturing risk with operations in more than one state, but both in NCCI jurisdictionsAssume a staffing client's production facility is in State A and the distribution warehouse is in State B. Both states are subject to NCCI jurisdiction. Although the distribution warehouse operation located in State B is solely dependent upon the manufacturing operation conducted in State A, Rule 1-D requires the appropriate classification for a risk's operations be determined by state. Code 3220 would not apply to State B because the risk is not conducting any manufacturing operations in that state. A warehouse code would also not be assigned as the risk is not in the business of storing the goods of others. The appropriate wholesale store classification, in this example "Store: Wholesale NOC" - code 8018, is the proper classification.
The appropriate state assignment for the drivers will be determined by the specifics of the particular situation. A driver that merely delivers the cans from the manufacturing facility in State A to the distribution warehouse in State B should be assigned to State A because they are working from the headquarter state. Drivers delivering the cans to customers should be assigned to State B as the distribution warehouse is considered their base terminal.
1C - Manufacturing risk with operations in more than one state, one being an NCCI jurisdiction and the other an independent bureau stateAssume a staffing client's company production facility is located in State A, an NCCI jurisdiction. The distribution warehouse is situated in State C, an independent bureau state.
The independent bureau state is concerned only with the operations of a business within their particular state. Code 3320, or the applicable can manufacturing classification, would not apply since the insured is not manufacturing cans in State C. A warehouse code would also not be assigned, as the risk is not in the business of storing the goods of others. By analogy, the appropriate wholesale store classification would most likely be assigned. The proper classification would be determined based on the classification rules for the particular independent bureau state.
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