CLASSIFYING RISK–SCHOOLS

(April 2019)

INTRODUCTION

The Insurance Services Office (ISO) Commercial General Liability Manual Classification Table Pages contain more than Class Codes and Classification descriptions. They also contain notes. These notes provide important information on what a classification includes, mandatory endorsements, and exceptions to the Commercial General Liability Manual rules.

Class Code 67508: Schools–Colleges, Universities, Junior Colleges, or College Preparatory–Other Than Not-For-Profit provides an excellent illustration of how notes are used.

EXCLUSIONS NOTES

The notes for this classification have three different entries that clarify the coverage intended for the educational institution by stating coverages that do not apply.

• Medical payments coverage does not extend to students.
• Bodily injury or property damage arising from the use of aircraft, automobiles, school buses or watercraft to transport students is not covered.
• If there is an infirmary with lodging, its professional services are excluded. If there is no lodging, the exclusion does not apply.

This is important information for the underwriter because it limits the exposure that he or she must consider. The problem is that the named insured must also have this same information. The endorsement notes solve this problem.

ENDORSEMENTS NOTES

Saying that an exposure does not apply is irrelevant if the policy is not endorsed to eliminate the exposure. The classification note states that either CG 22 71–Colleges or Schools (Limited Form) or CG 22 72–Colleges or Schools must be attached. These endorsements are identical except that CG 22 71 excludes medical expense coverage for all students.

Example: A student is injured when he slips on a college sidewalk. Medical Expenses coverage does not apply if CG 22 71 is attached. Medical Expenses coverage does apply if CG 22 72 is attached.

The other three sections of the endorsement are identical.

• There is no coverage while a student is being transported.

Example: The school nurse tells a resident advisor to take a student to the hospital emergency room. An accident occurs on the way there. CG 22 71 and CG 22 72 both exclude student transportation, so the Commercial General Liability Coverage Form does not respond if the student is injured. Coverage may be available under the educational institution's hired and non-owned auto liability coverage and/or the resident advisor's personal auto policy.

• There is no professional coverage for the infirmary but only if it has lodging facilities.

Example: The school nurse operates out of the on-campus infirmary that does not have lodging facilities. The school is covered for her professional activities within the context of the CGL coverage form.

• There is no coverage for bodily injury to any person while practicing for or participating in any sports or athletic contest or exhibition if there is no direct management, organization, or supervision of such sports, athletic contests, or exhibitions by any insured.

Example: A student is playing a game of Capture the Flag on the college grounds and runs into a pole. A group of students organized the game and the college sanctioned it. However, no insured provided oversight, so the claim is denied by the college’s insurer because of this endorsement

• The last part of the endorsement adds the trustees and the board of the college to the policy as insureds, along with any student teachers.

ADDITIONAL EXPOSURES AND CLASSIFICATIONS

The classification notes also list several exposures or facilities that must be classified and rated separately. Endorsements are not required to accomplish this. Instead, the classifications are added if there is an exposure. Although they are common to many schools, not every school has them. This approach guarantees that schools with such exposures pay additional premiums but schools without them do not.

• Clinics or hospitals open to the public
• Dormitory facilities
• Stadiums
• Arenas
• Outdoor grandstands or bleachers

If the exposures exist but the classifications were not added to the policy, additional premium will be required when the audit is conducted. If a loss occurs and the exposure was not listed on an application, there could also be misrepresentation issues that could result in possible voidance of coverage.

MANDATORY USE OF ENDORSEMENTS

Using certain forms and endorsements is mandatory and not optional, depending on the language in the classification note. Notes are part of the rate and rule filings ISO makes on behalf of its member and subscriber companies. Arbitrarily altering or disregarding a note violates the filing.

Example: USA Insurance Company always attaches CG 22 71–Colleges or Schools (Limited Form) to policies issued to educational institutions because of the classification note. However, it makes an exception and agrees to not attach it to policies it issues for Agent Bill. As a result, Agent Bill's educational institutions have broader coverage than educational institutions written for any of USA's other agents.

USA Insurance Company does not necessarily have to comply with ISO's classification notes. It could exercise one of a number of legal options instead of what it does for Agent Bill's benefit, such as:

• It could agree to not attach the form and then make a "refer to company" filing for the difference in rate. It would have to determine an appropriate premium charge and make the corresponding rate filing.
• It could decide to not attach the form for any educational institution it insures and make the appropriate filing.
• It could amend the form to include only the last paragraph which adds more insureds. This would require making both a form and a rate filing.

The notes that accompany a given classification point out issues that must be considered when evaluating submissions and assigning proper classifications. When a risk is not classified correctly, both the rate and the coverage are wrong. This means the policy is not constructed correctly and too much coverage applies because exclusions were omitted, or too little coverage applies because an endorsement was not added, or an inappropriate endorsement was used.