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President of Fast Aircraft, Inc.

 

Jim Gardner, President The James A Gardner Company PO Box 680905Marietta, GA 30068 Phone: 678-278-2100Fax: 678-398-7038

The Anatomy of Aviation Insurance

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A Workers Comp Controversy for FBO's

A common practice for many FBO2019s has been to classify their customer service representatives who work behind the counter in the FBO lobby as clerical employees, if for no other reason than this was a logical choice given the work environment of the employee. Some of these FBO2019s have been doing this for years without any comment or exception from their workers compensation insurance company. However, an onsite audit from the NCCI could reveal some surprises. (The National Council on Compensation Insurance 2013NCCI-publishes the NCCI Scopes Manual which most states accept as the standard for employee classification).

Aviation operators have 3 basic class codes assigned by the NCCI to an aviation operation: 8810-Clerical Office Employee; 7403- Aviation Airport or Heliport Operator , and 7422 2013 Aviation Aircraft or Helicopter Operator.

To better understand employee classification for an FBO I solicited clarification and discussion on the 8810 and 7403 class codes from several workers comp underwriters with whom I work.

8810 - Clerical Office Employees

This classification applies to employees engaged exclusively in bookkeeping, in record keeping, in correspondence, or in other office work where books and other records are kept or correspondence is conducted. It applies only to employees who work in areas physically separated from other operations and perform clerical duties exclusively. Rule 1-B-2 defines physical separation as by floors, walls, partitions, counters, or other similar barriers. The definition of clerical office does not include areas where inventory is kept; where products are displayed for sale; or where a customer brings products from other areas for purchase.

Code 8810 includes depositing of funds at a bank; pick up or drop off of mail at a post office; purchasing office supplies; or delivering of paychecks to employees, but only if the employee qualifies as a clerical office employee and such duties are related to their work.

Important note: If an employee has any other duty, the total payroll of that employee shall be assigned to the highest rated classification to which their work pertains.

If a classification phraseology includes "& Clerical," then employees qualifying as clerical office employees are included in that classification and they are not assigned to code 8810. It makes no difference whether the clerical office employees are at a separate location or at the same location where the other operations are conducted.

If classification phraseology includes "All Employees," or similar terminology, but does not include "& Clerical," employees qualifying for assignment as clerical office employees are assigned to code 8810.201D

Important note:If a business is described by code 88102026 any operation (employee) not qualifying as a clerical office operation is assigned to the basic classification that describes that operation.

It is clear and logical to most of us in the aviation industry that the clerical class code could apply to customer service representatives and other office type workers in FBO2019s. The problem, however, is twofold. First, if an auditor chooses to strictly apply the definition of a Clerical Office Employee to an FBO Customer Service Employee, then the 8810 class code will likely not apply. Second, the only place left to place the employee in an Aviation risk category is that of a 7403- Aviation Airport or Heliport Operator, which is the basic classification that describes that operation.

7403 Aviation - Airport or Heliport Operator - All Other Employees & Drivers

Consider the definition and contemplated operations of the 7403 class code.

201C This classification applies to employees of airport or heliport operators involved with the service, maintenance, and repair of aircraft and hangar and terminal buildings, customer service employees such as information or ticket clerks and baggage handlers, and security personnel.201D

Service or maintenance of aircraft includes refueling, cleaning, de-icing, and performing routine maintenance of the aircraft's systems. Maintenance of buildings or grounds includes cleaning bathrooms, washing windows, cleaning and waxing floors, vacuuming, servicing HVAC equipment, and shoveling sidewalks and snowplowing runways. Also included is the maintenance of vehicles used at the airport.201D

The problem here is that the definition is so broad that it applies to employees who clearly have a large diversity in workplace risk. If the auditor decides that a customer service representative works in a terminal environment then that employee is disqualified as a clerical employee regardless of what the job/risk of injury logically entails. Regardless of the classification, a customer service representative who spends 100% of their time behind an FBO counter doing clerical duties does not have the same risk of injury, degree of injury, or frequency of injury as a ramp service worker, aircraft refueler, or aircraft mechanic. Maybe not even as much exposure as the auditor themselves.

There is also a big financial discrepancy. The insurance rate for an 8810 clerical workers is as low as 36 cents per $100 in clerical payroll while the rate for a 7403 can be $4.00 or more per $100 of payroll or more. This speaks for itself.

The bottom line is that there is a huge gap in real risk and classification of some aviation workers with no clear recourse readily available except to appeal the NCCI ruling to the state Insurance Commissioner. In my mind to strictly apply the definition of an 8810 to customer service representatives without a reasonable alternative is unjust and financially punishing to a business that already is experiencing extreme financial hardships.

Historically, the NCCI have been very reluctant to making changes in classifications codes. Unless the evidence has been overwhelming, challenges to the NCCI classifications have not been very successful. Economically, the insurance companies don2019t appear to have much incentive to work for a change. Even so, FBO2019s in Georgia recently got a favorable ruling from the Georgia Insurance Commissioner. In December 2010 an NCCI Circular announced a revision to the Basic Manual Classification for the Georgia aviation classification code 7403. The new classification code definition states:

201C 2026 Ticket sellers and information clerks away from airport locations are to be separately rated as Code 8810. Individuals at the airport location that provide customer service, including but not limited to, telephone duties, reservations, and billing are to be separately rated as Code 8810. If their duties include tagging luggage and baggage check-in or if they are exposed to the operative hazards, the Code 7403 is assigned.201D

This ruling has already been applied to one FBO in Georgia after a 2010 audit was disputed. Originally the insurance company auditor applied the strict definition of the 8810 class code moving all of their 201C behind the counter%u201D CSR%u2019s from the 8810 to the 7403 category which resulted in a large audit premium due. The FBO with the aid of their insurance broker disputed the audit. With the cooperation of the underwriter an independent audit was requested. The NCCI auditor conducting the dispute audit saw that the CSR2019s workspace was enclosed by the counters with clear entry and exit ways. In addition, these CSR2019s did not go out on the ramp or other operational areas. In the past, the NCCI had ruled that because the CSR2019s worked in a 201C terminal area 201D rather than a cubicle or enclosed office, they were precluded from being classified as an 8810 and therefore were defaulted to the 7403 category. In light of the new ruling and with the agreement of the insurance company, the original audit was reversed.

While this is a very important change, it only applies to Georgia. Nor does it address the difference in workplace hazards of a CSR who occasionally walks out on a static ramp to deliver a note or welcome VIP 2019s and the ramp service lineman whose everyday job is working on a dynamic ramp.

Through special training for CSR 2019s like that provided by the NATA 2019s Safety First Program and other risk management measures, you may be able to mitigate the risk of injury to a CSR who occasionally goes out on the ramp. It isn 2019t a final solution, but it may help prevent an accident or injury and keeper your experience modifier low.

Long term the classification issue would require a commitment by the NCCI and insurance underwriters to spread the Georgia 8810 ruling to other states as well as provide another, more realistic classification such as the 201Coutside sales 201D category to the aviation operators.

About the Author:Jim Gardner is a retired US Air Force officer and professional pilot. He currently works as an aviation insurance specialty broker with JSL Aviation Insurance in the Atlanta, GA area. Visit Jim 2019s personal website at www.JimGardnerAviationInsurance.com for other articles and information on aviation insurance.

Copyright. 2010. Jim Gardner. All rightrs reserved.