The workers’ compensation insurance rates in Florida have seen many rate revisions over the last couple of years. We have been tracking those changes as you can see from these articles below:

• 2008 Workers Comp Rates
• Upcoming Workers Comp Rates
• January 1st, 2009 Workers Comp Rates
• Changes in 2009 Florida Work Comp Rates
• 2009 Workers Comp Rate Increase
• April 1st, 2009 Workers Comp Rates
• Workers Comp Rates Changing Again
• July 1st, 2009 Workers Comp Rates

We are expecting another upcoming change for January 1st, 2010, because Florida Insurance Commissioner Kevin McCarty made an announcement that he has received a new rate filing from the National Council on Compensation Insurance (NCCI) for workers’ compensation insurance rates. The filing includes an overall average rate decrease of 6.8 percent statewide.

This is good news for landscaping businesses in Florida. “I am very pleased to receive another request for a reduction in workers’ compensation rates,” said Commissioner McCarty. “This is welcome news to Florida employers during these challenging economic times.”

Here is a link to the press release on the website of the Florida Office of Insurance Regulation.

As the owner of a lawn maintenance or landscaping business, you constantly make decisions involving risk. For this article, the term ‘risk’ is defined as uncertainty about outcomes that can be either negative or positive. When you made the decision to start your business, you calculated the risk involved in it. Risk is present in all activities, yet people and organizations are often unaware of risk or the significance of the financial consequences associated with accidental losses. I am sure that when you started your business, that you overlooked or were unaware of many of the risks you would face. As you begin to realize these risks, you also realize the greater importance of risk management. Risk management consists of both controlling risks and financing risks. I will introduce the topic of Risk Control in another article, but right now I want to focus on the subject of financing risks.

Risk Financing has traditionally been dividing into two types of techniques, which are retention and transfer. Retention is a risk financing technique by which losses and variability in cash flows are financed by generating funds within the organization. Transfer is a risk financing technique by which the financial responsibility for losses and variability in cash flows is shifted to another party. Most risk financing measures available are actually combinations of both retention and transfer. Therefore, a major part of the risk financing decision for every loss exposure involves determining the most appropriate retention levels. Once a level of retention has been decided, there are many transfer measures available, some of which are more suited to particular types of loss exposures than others. The most common transfer measures are obtained through purchasing insurance policies.

Before we get into the purpose of purchasing insurance policies, I would first like to touch on the major goals of risk financing. These goals must align with an organization’s overall goal to maximize value for the stockholders or the business owner. The goals of risk financing are to have enough funds to pay for losses, to manage the cost of risk, to manage cash flow availability, to maintain an appropriate level of liquidity, and to comply with legal requirements. Risk transfer through insurance helps landscaping businesses obtain many of these goals and the types of insurance that the organization needs to purchase changes as the organization grows and as their risk exposures change.

The purpose of purchasing insurance aligns with the landscaper’s overall business goals and risk management goals and insurance policies are purchased to strive towards those goals. The purpose of purchasing insurance is to gain the advantages of transferring risk. These advantages are:

• 1. Reducing exposure to large losses – This is the principle advantage of purchasing insurance. Retaining large loss exposures increases the probability that the landscaping business will incur financial distress. Financial distress can have negative effects on relationships with suppliers and customers and may ultimately lead to bankruptcy.
• 2. Reducing cash flow variability – By reducing the effect of losses associated with retaining large loss exposures, insurance helps lessen the variability of cash flows. An annual premium cost is more predictable than the exposure of large losses. More predictable cash flows makes a landscaping business a more reliability source of income for its owners and more attractive to investors, thereby potentially increasing the overall value of the business.
• 3. Gaining ancillary services with the insurance – Insurers often offer risk assessment and control services as well as claims administration and litigation services. The level of efficiency and expertise that some insurance carriers have developed in these areas often makes the risk transfer agreement very appealing to landscaping businesses that cannot provide these services efficiently. Although it is possible to obtain these ancillary services outside of transfer agreements through third-party providers, this can be expensive.
• 4. Avoiding adverse employee and public relations – By purchasing insurance and thus transferring responsibility for losses to the insurance carrier, the landscaping business also transfers responsibility for the claims administration process. Therefore, any issues with claims administration are less likely to harm the reputation of the business and consequently are less likely to generate adverse employee and public relations.

I wrote a previous article about a large example of insurance fraud by a landscaper and said I would do more research about the topic. I came across this report by the Florida Department of Financial Services Division of Insurance Fraud Crime Intelligence Analyst Unit, which I recommend you read if interested in the topic of insurance fraud. It was stated in the report that for almost every type of insurance, that insurance fraud is on the rise. Insurance fraud increased significantly over the past year, indisputably as an impact of the down-turned economy. While there are several products of which exposure has been noted, the greatest measured impacts are as a result of vehicle insurance fraud, mortgage fraud, and workers’ compensation premium fraud. The Coalition Against Insurance Fraud reports that “hard-pressed businesses are finding ways to avoid paying full workers’ compensation premiums. Companies hide workers in shell companies to reduce their payroll…they misclassify workers in high-risk jobs as being low-risk (i.e., landscapers misclassified as clerical office employees).” An analysis of questionable claims submitted by more than 1,000 National Insurance Crime Bureau member companies in the first quarter of 2009 found that cases of workers’ compensation premium fraud increased 71% from reported incidents during the first quarter of last year.

In the report’s conclusion, it stated the following “And, last but not least, it is recommended that we focus efforts on the increase in workers’ compensation premium fraud; specifically we must work diligently to identify employers who are misclassifying workers’ to reduce costs, as well as employers who have elected to avoid payment of premiums altogether, and do so in partnership with the Division of Workers’ Compensation Compliance, not only as enforcers, but as educators, to increase awareness to minimize such instances by reinforcing the potential consequences.”

Insurance fraud is not a victimless crime! It is estimated that insurance fraud costs the US $80 billion dollars or more a year. Those costs get passed down to you, the consumer. The CAIF estimates that cost to be approximately $950 per family. The cost of workers’ compensation fraud is also very high for businesses. Reporting insurance fraud is easy and just a click away. If you are aware of any businesses or individuals that are committing insurance fraud, please report it the Florida’s Division of Insurance Fraud.

I found a recent article about an owner of a landscaping business in Maryland that was accused of falsifying payroll records to pay less on insurance and taxes. According to the article, the landscaper failed to report pay to 39 workers and overtime pay during a three-year period. This resulted in the landscaping business underpaying their workers’ compensation carrier by 51,850 dollars. It also caused the business to not withhold 40,400 dollars in state income tax and underpay the Executive Office of Labor and Workforce Development’s Division of Unemployment Assistance an additional 32,800 dollars.

This tax and insurance fraud was discovered by an auditor for the landscaper’s workers’ compensation insurance carrier. The auditor discovered corporate tax returns that were filed by the owner for nearly 400,000 dollars in payment to subcontractors that were not disclosed during the audit. This was coupled with an insurance claim by one of the 39 employees that were not listed on the payroll. The Insurance Fraud Bureau of Massachusetts then began their investigation of the company.

The owner of the landscaping business has been charged with 10 counts of unemployment fraud, 31 counts of failure to withhold state income tax, three counts of workers’ compensation fraud, and three counts of larceny. I know from experience that this is not a solitary example of insurance fraud and that this happens very frequently. I will do more research and write another article in the next few days about the impact that insurance fraud has on insurance premiums paid by your business.

In a previous article, I recommended insurance to landscapers with one owner and no employees. In this article, I will discuss how the insurance needs change when the landscaping business grows and adds two employees. The primary difference in recommended insurance coverage is that the landscaper should add workers’ compensation coverage to protect the company from the liability of injury to these employees.

For a local landscaping business with one owner and two employees, we recommend that the business carries four insurance coverages: general liability, commercial auto, equipment floater, and workers’ compensation.

1. General Liability: This policy provides protection to your business from many types of lawsuits. We recommend that you obtain limits of $1,000,000 for each occurrence and $2,000,000 for the policy period. For lawn maintenance companies, your premium for this coverage will be around 650 dollars for the year and if you install landscapes, your premium will be slightly higher at around 850 dollars. Depending on your business model and other variables, we have several insurance carriers that might be able to offer lower premiums.

2. Commercial Auto: This policy provides protection for your vehicles and the liability arising out of their use. It is important to move the vehicles you use for your business to a commercial auto policy instead of a personal auto policy. We recommend a limit on this coverage to be $1,000,000 combined single limit, and for small landscapers wishing to save money, we recommend that you should not go below $500,000 combined single limit. For a landscaper with two drivers, one truck worth around 10,000 dollars, and one trailer worth around 5,000 dollars, the premium will vary depending on your radius of operations and driving record. If your drivers have a good driving record, you are looking at a premium in the ballpark of 1,500 dollars to 3,000 dollars depending on all those variables. We have many insurance carriers we use for these policies, but have been very pleased with Travelers’ and Progressive’s commercial auto rates and service for landscapers with fewer than 5 vehicles.

3. Equipment Floater: This policy provides protection for your equipment against a variety of exposures with the highest threat being theft. Lawn mowing equipment and landscape installation equipment can be very expensive for a new business and you want to make sure this equipment is protected. For a landscaper with 15,000 to 30,000 worth of equipment, you can expect a premium on this coverage in the range of 200 dollars to 600 dollars. We often package this coverage in wit the general liability insurance policy, but we can also write it by itself through a few insurance carriers.

4. Workers’ Compensation: This policy provides protection for your business when your employees are injured during the course of employment. It will pay the state regulated hospital expenses and a portion of the payroll from missing time off work. Most states do not require your business to carry workers’ compensation insurance until you have over 3 employees, but we recommend that you carry it regardless. Even if you have one part time employee, our agents recommend that you purchase this coverage to protect your business in the event that an employee gets injured. In Florida, for two employees with an annual remuneration of 30,000 dollars, you are looking at a total premium of 1,470 dollars for your workers compensation coverage if your business operations are landscape maintenance and 2,250 dollars of premium if your operations are landscape installation.

With these four insurance coverages, your small landscaping business will have the protection it needs to avoid the losses that would otherwise end your landscaping career. These policies will allow your business to be protected from most loss exposures, so you can focus on expanding your clientele. For more information or to receive comparative insurance quotes, please contact us or complete the online quote request form. We enjoy working with landscapers of all sizes and look forward to being your insurance advisor as your business grows over time.

Many landscapers ask our insurance agents, “what is the difference between remuneration and the basic payroll I have for my employees?” In all states but one, Workers’ Compensation insurance uses ‘remuneration’ as the exclusive basis for computing premiums (the state of Washington currently allows contractors to use hours worked instead). Although payroll is the most common component of remuneration, it is not the only one. In Florida, the rules about remuneration are written by the National Council on Compensation Insurance (NCCI). But keep in mind that some states are non-NCCI jurisdictions, and there may be some significant differences in how remuneration is defined. In Florida, remuneration is the premium base used to calculate workers’ compensation premiums. It is generally referred to as payroll, but it includes more than the employees’ weekly paychecks as noted in the NCCI definition. Remuneration is defined to mean money and substitutes for money and it includes the following:

• - Wages or salaries, including retroactive wages and salaries
• - Total cash received by employees for commissions, draws against commissions, piecework, profit sharing, and incentive plans
• - Bonuses, including stock bonus plans
• - Pay for holidays, vacations, and sick leave
• - Employees’ share of Social Security and similar statutory plans even if paid by the employer

Remuneration excludes some pay received by employees and the following can be deducted from the total remuneration:

• - Overtime - the extra amount of pay above the regular wages may be excluded for overtime hours that are worked by employees.
• - Tips
• - Payments by employees for group insurance or pension plans
• - Special awards for invention or discovery
• - Severance Pay
• - Executive officers have a minimum and maximum limits for their payroll if they are included on the policy
• - Partners and Sole Proprietors have a fixed amount of payroll if they are included on the policy

Please refer to the article entitled ‘Introduction to Workers Compensation Insurance’ for more information on workers comp insurance for Florida landscaping businesses. If you have any more questions about the difference between payroll and remuneration and how this affects the premium on your workers’ compensation insurance policy, please do not hesitate to contact the agents at BearWise Landscapers.

Lawsuits for employment practices have historically increased during periods of economic recession. These lawsuits are no longer just directed at larger corporations and statistics show in the past ten years that employee litigation against small businesses is growing as well. Projections from Progressive Insurance Company now show that businesses in may industries, including landscapers, are more likely to have an employment claim than a property or liability claim. Claims can be brought by employees, applicants, customers or clients alleging harassment, discrimination or other allegations against your business.

Employment claims are also notorious for incurring high legal expenses. Typical attorney fees for employment cases that even settled prior to trial are 100,000 dollars. According to the 2007 Employment Practice Liability Jury Award Trends and Statistics, the median jury award in employment cases was 200,000 dollars in 2007. These costs are also projected to increase.

Take into consideration the following typical defense costs when an employment related lawsuit is filed against your business:

• $12,000 - $18,000 for attorney fees to file an answer to a lawsuit and to begin the discovery of evidence.
• $20,000 - $30,000 for pretrial filings and preparation. These include additional motions and responses, excessive document analysis and review, written case evaluations or status reports, and settlement-related matters.
• $10,000 - $15,000 for mediation.
• $8,000 - $12,000 for attorney fees involved in a motion for summary judgment filed and the associated reply brief.
• $15,000 - $25,000 for attorney fees during an employment practices related trial. Plus, if you do not prevail in trial, you can incur significant costs of a verdict against you.

With Employment Practices Liability Insurance premiums as low as 500 dollars and still very low for companies with under 100 employees, the value for this type of insurance policy is very good for businesses of all sizes. At BearWise Landscapers, we recommend landscapers with employees to consider carrying this type of insurance coverage, and we highly recommend those with over 5 employees to request an insurance quote and review the advantages of this valuable coverage.

As discussed in multiple agent articles before this one, there have been quite a few changes in the Florida workers’ compensation rates over the past couple of years. In 2009, July 1st will mark the third rate change (the first rate change was on January 1st and another one was effective April 1st). On Wednesday, July 1st, 2009, the following workers compensation rates for landscapers will go into effect and all current policies issued with the April 1st rates will be endorsed to reflect this change. Here are the newest 2009 workers comp rates for landscapers:

• 0042 – This classification is applied to employees that are involved in the installation of landscapes. This classification cannot be used in Florida with employees classified as 9102 unless the operations are conducted by separate work crews. If the work is not separated, then all of the employee payroll must be classified as 0042 since it is the higher rated classification code. To read more details about this classification, please refer to the agent article on class code 0042. The current rate for class code 0042 is 7.11 dollars for every 100 dollars of remuneration.
• 9102 – This classification code is assigned to employees that maintain lawns and gardens. This is your standard lawn maintenance and classification used by most landscaping businesses to rate their workers’ compensation premiums. To read more details about this classification, please refer to the agent article on class code 9102. The current rate for class code 9102 is 4.20 dollars for every 100 dollars of remuneration.
• 0106 – This classification code is used for tree trimmers and specifically it is used for those employees or businesses whose operations involve leaving the ground to trim trees. When ladders, bucket trucks, and any other equipment assists employees to get their feet of the ground to prune or trim trees, then this classification is applied to the remuneration of that job. It also includes the chipping and cleanup activities associated with the tree trimming. To read more details about this classification, please refer to the agent article on class code 0106. The current rate for class code 0106 is 12.95 dollars for every 100 dollars of remuneration.
• 5183 – This classification code is applied to employees of landscaping businesses that engage in the installation or repair of underground lawn sprinkler systems. For a more detailed description of this classification code, please refer to the agent article on class code 5183. The current rate for class code 5183 is 5.14 dollars for every 100 dollars of remuneration.

The employees and operations of most landscaping businesses are classified into the codes listed above. Depending on the nature of work performed, other classification codes may apply to the business. Class code 8810 (rate: 0.28) is used for employees that only do clerical work and 8742 (rate: 0.49) is used for those employees that only have sales duties. Class code 0005 (rate: 5.35) is used for landscapers with employees engaged in nursery operations. We are available to provide you with more information about these classifications and how your own employees should be classified. Feel free to call our office to discuss this rate change and to have one of our agents quote your workers compensation policy.

I read an article the other day in the May issue of Turf Magazine. It gave a basic introduction to understanding how workers’ compensation insurance operates across the country. Here is an excerpt from the article:

It’s one of those parts of the business that nobody likes to deal with, but if you ignore workers’ compensation insurance, it can put your business, and even your personal assets, in jeopardy.

Workers’ comp is mandated by the state governments and is also required by the federal government on federal properties and in maritime operations. At its core, workers’ comp is the statutory requirement that an employer provide an employee coverage for medical costs and some percentage of lost wages in the event they are injured in the “course and scope of employment.” Injuries that occur as a result of the negligence of the employee are still subject to coverage under workers’ compensation. Except in unusual situations, the employee may not sue the employer in negligence for injuries received on the job.

This is a simplified description of workers’ comp, and there are differences between various policies in various states and jurisdictions. It’s important to check the specific regulations in your state.

Keep in mind that this article approaches the topic from a national level and workers’ compensation insurance is governed by the insurance department of each individual state. In Florida, there are specific requirements for workers’ compensation insurance. Landscapers are required to carry workers’ comp when they have over 3 employees, but we recommend that your business has this coverage even if you have one part time employee. Florida has around 600 classifications that are used to group employees by the type of work they do, and the rates to compute the insurance policy premium are set for each of those classifications. The classifications for landscaping employees are 9102, 0042, 0106, 5183, 0005, and a few others can be used as well. The rates in Florida are proposed by NCCI and approved by the state government. The rating system used to compute annual workers’ compensation premium uses a factor that uses past losses and premiums paid. It is called the experience rating modifier and here is another excerpt from this article where the CEO of Amerisafe, Allen Bradley, briefly describes it:

“There are some things businesses can do to control their costs,” says Bradley. One of the things that drives costs for individual accounts, he explains, is their experience rating modifier, or e-mod, a calculation that’s typically done after a company has had premiums over $5,000 for three years. (For a company that has premiums over $15,000, that experience modifier might be calculated after a single year.) “If you’re absolutely average for the industry, your e-mod will be 1.0. If you’re better than average, it might be .9, so you’ll then pay only 90 percent of an average account.”

The e-mod is driven by safety in the workplace and is based on payroll. Those with fewer than expected accidents for that industry/payroll will have a lower e-mod. The number of accidents is more important than the severity of the accidents, says Bradley. “If two companies each have a $100,000 payroll and the first company has seven accidents, none costing more than $5,000, and the other company has one accident totaling $1 million, the latter company will have the lower e-mod. Because the rates assume that bad things are going to happen from time to time in the workplace, but when you have a frequency of claims, the assumption is going to be one of those claims is going to be a bad one at some point.”

At BearWise Landscapers, our agency has a strong history of dealing with workers’ compensation insurance. We even have a sister company that is a third party workers compensation claims administrator and has full time nurses and adjusters on staff. We would like the opportunity to discuss workers’ compensation insurance with your landscaping business and look for ways to reduce costs in the long run through a strong safety program that will reduce your experience rating modifier. We also have access to rich dividend plans and other ways to immediately cut your workers comp premium. If you would like to speak with one of our agents regarding workers compensation questions or if you are simply looking for comparative insurance quotes, please do not hesitate to contact us or complete our online insurance questionnaire.

I read an article in a very old issue (July of 2005) of the Irrigation and Green Industry magazine. The title, ‘Liability Insurance… Read the Fine Print’, caught my eye on their website and the article had some great points. It discussed the costs of general liability insurance and things that had affected the rates. At the end of the article, the author discussed services that insurance agents should offer their clients and that landscapers should ask their insurance agent to provide for their business. Here are the eight services:

Help Reduce Payroll Rates: The larger your payroll, generally the larger are your payroll rates. But there are some guidelines and industry rules that are applied to payroll that most dont know about. You should check with your agent to make sure you dont overpay. For instance, there are different rates for those in the field and those in the office, for full- and part-time employees, and field workers can have lower rates if they also work part-time in sales, in the office, or come to the office for training.

Reduce Vehicle Rates: A lot of liability will fall on automobiles and trucks, says Cason. The more knowledge you have of how rates are determined, the more money you save. For example, where vehicles are garaged affects the rates. If they are parked overnight in a metropolitan area, the rates will be higher. However, if workers drive these vehicles to their homes in small surrounding towns, the rates can be considerably less.

Have Loss Control Service: Landscapers should ask their agents to implement a safety program for loss control, to control risks, and to reduce premiums, says Hartman. Many landscapers are resistant. They may feel they dont have the time or staff. And I think theres a feeling in some, though not all landscapers, that the agents are out to get them and might find something wrong. But if we do find something wrong, we want to help fix it. Were there to help. And if, as a result, you have less equipment theft and fewer accidents, your premiums will be that much less.

Have Your Contracts Reviewed: Theres no reason you should not have your agent review your contracts, says Graham. He should be able to identify areas of concern, make suggestions, strike harmful language, adding this or that. If a renewal is coming up, the carrier might not have certain coverage, so the agent knows perhaps that its time to find someone else. Youd be surprised at what youll find in contracts. Some installation coverage will state that trees, shrubs and plants will not be covered. How would a landscaper feel about that?

Have Your Agent Visit Job Sites: Your agent is a salesman to you, the landscaper, but also your salesman to the underwriter, Graham says. Ask your agent to visit your jobsites, and if he reports to the underwriter that your workplace is great, awesome, wonderful and safe, the cream will rise and that will impress the underwriter. You want an agent who will do more than just fill out forms.

Have Your Agent Provide a Quarterly, Or At Least an Annual Report: If you see where your losses are, especially if there are patterns, you can make adjustments, says Graham. We do what we rarely see anybody else do, and that is prepare graphs for the past five years for accidents, and track it. One landscaper studying the graph and data saw that he had higher claims at the start of the season. Thats when regular employees have been off for a while and are rusty, and new people are hired. He learned to have a special focus on safety at that time of year.

Have Motor Vehicle Reports Made: Expect your agent to flag the department of motor vehicles, says Graham. A stray ticket here and there may not be important. But you want to be aware if any of your employees are having serious driving problems.

Aggressively Manage Claims: Have your agent review all of your claims before they are turned in, Graham says. A lot of claims may not be your fault; they are so small they will give you more trouble than they are worth, as well as other reasons.

If you are unsatisfied with the service you are currently receiving from your insurance agency and would like to understand the variety of services offered by BearWise Landscapers, please contact our office today. We handle the insurance for many landscapers throughout the state of Florida and can provide specialized insurance expertise for your landscaping business.