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CLASSIFYING RISK–AMUSEMENT PARKS, CENTERS, AND DEVICES

(April 2019)

INTRODUCTION

Amusements parks include restaurants, grandstands, and live performances in addition to the normal array of roller coasters, other thrill rides, and much more. With all these exposures at a single location, how can all the exposures be rated properly?

AMUSEMENT PARKS

Most amusement parks charge one admission fee that provides access to nearly all the rides and attractions in them. Similarly, the Insurance Services Office (ISO) developed a relatively simple rating approach for amusement parks. It involves a single loss cost that applies to all the activities the park offers or provides. The classification is Class Code 10020: Amusement Parks. The adjusted rate applies to the park's total receipts from all operations, including gate revenues, parking fees, and restaurant, store, and concession sales, to name just a few.

AMUSEMENT CENTERS AND DEVICES

It seems like every family-friendly or family-oriented business or operation has coin operated machines or devices ready and willing to accept coins and currency in return for the treasures offered that small children find so irresistible. These devices may simply be included in the business' primary classifications, but other classifications and rating approaches may be needed.

According to the ISO Commercial Lines Manual (CLM), General Liability Rule 26, Classifications–Scope of Application, amusement centers and amusement devices are not automatically included in any classification unless the note that accompanies the classification states that they are. This means that amusement centers and/or amusement devices in restaurants, hotels, movie theaters, supermarkets, department stores, and others must be classified and rated separately.

Class Code 10015: Amusement Centers applies to arcades with coin-operated games such as pinball, video, and other electronic games. A center can be an independent operation such as an arcade or be part of another operation, such as a restaurant, movie theater, or shopping center. The note that accompanies the classification clearly states that it does not apply to risks located in amusement parks. This means that an amusement park cannot split the receipts from its amusement center or arcade from the rest of the park's revenue to take advantage of this code’s lower rate.

In addition, a casino that uses only machines for its gambling activities uses this classification instead of Class Code 43990: Gambling–Casino or Class Code 43991: Gambling–Incidental to Other Operations.

Related Article: Classifying Risk–Lodging Establishments–Including Casinos

There are three different classifications that apply to amusement devices:

• Class Code 40040: Amusement Devices NOC
• Class Code 40042: Amusement Devices–Operated in Connection With Carnivals or Fairs–Not-For-Profit Only
• Class Code 40041: Amusement Devices–Operated in Connection With Carnivals or Fairs–Other Than Not-For-Profit

Class codes 40042 and 40041 are used with amusement devices that are set up for only short periods of time and operated in conjunction with mobile or traveling shows. The devices move from location to location. These are the kinds of amusement devices seen at county or municipal fairs, in local parking lots, and at school fundraisers. Examples are miniature boat, train, and automobile rides for children, mechanical devices that provide rides or activities for adults and children, and live animal rides.

Note: These classifications apply only to the amusement devices or rides. Circus and carnival companies and other activities involved with such operations must be classified and rated separately.

Class code 40040 is a Not Otherwise Classified (NOC) classification. It applies to amusement devices that do not fall into the operations described in class codes 40042 and 40041. The notes that accompany the classification states that it includes amusement devices located and operated in conjunction with a variety of mercantile establishments such as supermarkets and department stores. It can apply to any amusement device located anywhere, other than an amusement park, provided it does meet the criteria of either class code 40042 or 40041.

Each of these classifications uses sales or receipts as the premium basis. For premium audit purposes, it is important for the insured business to maintain sales records for these operations separately from sales records for all other operations. Premium audit rules require that the highest rated classification be used in cases where the revenue for different operations is commingled or combined. As a result, the sales that should be used as the premium base for Class Code 40040 and its comparatively low rates could be combined with the sales from another classification with a much higher rate if Amusement Devices sales are not recorded and maintained separately from the sales for the higher rated classifications.