CLASSIFYING RISK–HABITATIONAL PROPERTIES

(April 2019)

INTRODUCTION

Everyone lives in a habitational property. Personal lines coverage forms and policies insure a habitational property occupied by the same person who owns it. However, commercial lines coverage forms and policies insure such properties that a business or person owns and that others occupy.

CLASSIFICATIONS

Assigning residential classifications is subject to Commercial General Liability Rule 31. It states that the proper classification is the one that best describes either the occupancy or the ownership of the particular premises. The first listed class code is the Not Otherwise Classified classification. This code is to be used ONLY if none of the other classifications apply.

• Class Code 60010: Apartment Buildings (NOC)
• Class Code 60011: Apartment Buildings–Garden
• Class Code 60012: Apartment Buildings or Hotels–Time Sharing–Less Than Four Stories
• Class Code 60013: Apartment Buildings or Hotels–Time Sharing–Four Stories or More
• Class Code 60015: Apartment Hotels–Less Than Four Stories
• Class Code 60016: Apartment Hotels–Four Stories or More
• Class Code 61000: Boarding or Rooming Houses
• Class Code 63010: Dwellings–One-Family (Lessor's Risk Only)
• Class Code 63011: Dwellings–Two-Family (Lessor's Risk Only)
• Class Code 63012: Dwellings–Three-Family (Lessor's Risk Only)
• Class Code 63013: Dwellings–Four-Family (Lessor's Risk Only)
• Class Code 64500: Housing Projects–Federal, State, Local

HOUSING PROJECTS

We start with this classification because it is the most inclusive. Class Code 64500: Housing Projects–Federal, State, Local must be used when a federal, state, or local governmental unit or entity owns or manages the premises, regardless of the type of residential occupancy. This applies even if the particular building fits within one or more of the other habitational classifications.

GARDEN APARTMENTS

The notes for Class Code 60011: Apartment Buildings–Garden in the General Liability Classification Tables explain when to use this code. Buildings may contain single or multiple units, but they must meet all three of the following criteria:

• Two stories or less
• Subject to the same management
• Tenants must have access to the same community facilities.

Another classification must be considered if the risk does not meet all the criteria.

Example:

Marcy Village consists of fourteen cottages. Five of the cottages are two-family dwelling units and the rest are single family dwellings.

Scenario 1: Marcy Village, LLC owns all fourteen units. It maintains the premises, including the common sidewalks and landscaping. Marcy Village is rated as a garden apartment.

Scenario 2: The single-family dwellings are each owned by different owners and rented out. Marcy Village, LLC owns the two-family dwellings. Marcy Village manages the entire Village, including the common sidewalks and landscaping. Marcy Village is rated as a garden apartment.

Scenario 3: The ownership is the same as in scenario 2 but the owner of each dwelling maintains its own premises and there is no common landscaping or maintenance. This is not a garden apartment and each property must be considered separately.

APARTMENT HOTELS

An apartment provides long term rental while a hotel provides daily rental. An apartment hotel is a combination of the two but not all combinations are considered an apartment hotel. When ANY units are rented on a daily basis the risk is no longer an apartment. When fewer than 15% of the units are available for daily rental, the risk is classified as an apartment hotel. If more than 15% of the units are available for daily rental, the risk is no longer considered habitational and must be classified as a hotel.

BOARDING OR ROOMING HOUSES

Boards or rooming houses are not defined in the classification manual. However, ISO PAAS manual explains that a boarding or room house is group housing that offers common bathroom facilities instead of providing such facilities in each unit. The length of occupancy is not a criterion in this classification.

DWELLINGS

Dwellings that the named insured owns and rents to others are rated using one of the dwelling codes above. However, this is only if they do not meet the criteria established in the Garden Apartments classification. It is important to note that, according to the notes, a dwelling may be an apartment or dwelling that a corporation owns and provides to employees or others for use without a lease and without payment. It also includes time-share apartments that corporations own that are used exclusively by their employees and executives.

NOT OTHERWISE CLASSIFIED

Class Code 60010: Apartment Buildings (NOC) can be used ONLY if all the other listed habitational classes have been reviewed and the particular risk does not fit.

SUMMARY

When a business operation involves habitational locations, it is very important to evaluate each location carefully. A risk that may appear to be multiple dwellings could actually be a garden apartment. A risk that may appear to be an apartment may be an apartment hotel. It is important to ask questions and review the classification to make sure the fit is correct.