| It
may seem obvious to those in the business that plumbing,
heating, ventilation, cooling that the trades have many
variations. Yet to many outside of the industry it is not
that clear. The reason may have to do with the fact that
many contractors do some of each and that the company names
they select can be open to interpretation.
Using Hawthorne Co. as an
example let’s consider some of the names that might be
used:
Hawthorne Plumbing and
Heating
Hawthorne HVAC
Hawthorne Mechanical Services
Hawthorne Heating and Cooling
To many they might
interpret all of the above as a form of plumber or simply as
HVAC never really seeing the differences of the various
activities. This lack of clarity includes insurance agents
and some of the carriers for which they sell policies. When
an agent walks into your business do they know what they are
looking at? The underwriter at the insurance carrier will
assume so. What is at stake is whether your general
liability (GL) and workers compensation (WC) policies are
set up properly.
Setting up the policy based
on assumptions can be expensive. Here are a few questions
that should be asked to make sure the GL and WC policies are
set up correctly.
For Plumbing Operations
Type of plumbing performed?
__% Residential
__% Commercial
__% Industrial
__% Service Work
__% New Construction
__% Process Piping
__% Medical Gas
__% Sprinklers
Why? For GL policies, some
carriers have different rates for residential and
commercial. If the wrong class was used then either they
held too much of your money throughout the year or you will
owe them money at audit and typically an audit bill is 100%
due at audit. Also, many carriers will not work with
industrial pluming, process piping, sprinkler and or medical
gas contractors. These distinctions are very important.
Carriers that rate you as a
plumber on your GL may be assuming you are a residential
service plumber. It is important to remember that if a
carrier feels it was not given accurate information about
your activities, they may try to either cancel coverage mid
term if they discover the activity or not pay a claim if it
leads to a loss.
For WC, all of the above
are rated as Plumbing, class code 5183 at $3.88 per 100 of
payroll except Sprinkler work which is class 5188 at $4.689
per 100 of payroll.
For HVAC Operations
What type? ___%
Service ___%
Installation
Why? On the GL, the
classification for doing installation is almost a lower cost
than the plumbing class. I cannot give a specific number on
the GL rates as each carrier has different rates per
classification (unlike WC rates which are set by the state.)
Suffice it to say you want to take advantage of this
separation if you can. On the WC, if a contractor is
providing HVAC service and repair then all of the payroll
can be classified as plumbing on WC at the current rate of
$3.88 per hundred of payroll.
However, if ductwork is
being hung, then the WC classification is changed to
classification 5538 Heating and AC Ductwork at the current
rate of $5.74. For $100,000 of payroll that equals $1,860
difference. What if the contractor has employees performing
both service and installation? For GL, most carriers will
allow you to split the payroll between classes of plumbing
and HVAC work.
Story
continues below ↓
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