NCCI's Classification Inspection Program Update – Top Five Reclassified Codes

                               Boca Raton, FL - As part of its core services, NCCI conducts classification inspections in all NCCI states. This process is called the Classification Inspection Program. The overall intent of the Classification Inspection Program is to monitor the accurate and consistent application of the classification system, thereby maintaining its overall integrity. 

Based on an analysis of inspections completed between 2007 and the end of 2009 across all NCCI states, NCCI has identified the top five classification codes that are commonly reclassified, as well as the classification codes to which the employers are typically moved into.

  Classification Codes Commonly Reclassified

 Reclassified to Classification Code

8292—Storage Warehouse NOC

8018, 8010, 7360, 8107, 8264

3629—Precision Machine Parts Mfg. NOC

3632, 3113, 3145, 3635, 3612

9519—Household and Commercial Appliances—Electrical Installation, Service or Repair & Drivers

5537, 8044, 9516, 5183, 8018 

3179—Electrical Apparatus Mfg. NOC

3643, 3681, 3632, 3685, 8018

8017—Store: Retail NOC

8018, 8010, 8044, 8045, 8008

Code 8292 applies to employers that engage in the warehousing or storage of general merchandise for other business concerns. Merchandise is usually stored over long periods of time. Such employers do not have any equity in the merchandise they store and there is no exposure to constant piling or breaking down of merchandise. If the employer is engaged in the breaking down of a particular product (physical assembling, sorting, and grading of goods; the breaking down of bulk quantities and repackaging into smaller lots), then other classification treatments should be considered.

Code 3629 applies only to employers where the plans or specifications require that 50% or more of all machining operations performed by the employer are held to final tolerances of .001 inches or closer. As indicated by the phraseology, Code 3629 applies to precision machined part manufacturing not otherwise classified and is not intended to complete any subsequent assembly of the machined parts. Code 3629 is intended to apply only to precision machining of single piece parts.

Individual machined parts that are assembled into a larger component are not contemplated under Code 3629, even if the individual machined parts meet the tolerance requirements. Some other conditions regarding Code 3629 are that it:

  • Must not be assigned to an employer engaged in operations described by another classification unless the operations subject to Code 3629 are conducted as a separate and distinct business
  • The machined parts manufactured by the employer are not described by another classification

The confusion caused by this code is generally due to the criteria of machining 50% or more of the parts to the tolerance levels. It is uncommon for employers in the precision machined parts manufacturing industry to engage solely in precision machining; therefore, most machine shops do not qualify for this code.

Code 9519 applies to the installation, service, or repair of portable air-conditioning systems. This code may be reclassified due to the changes made to the heating, ventilating, and air conditioning (HVAC) industry in Item B-1391 and Item B-1397—Revisions to Basic Manual Classifications and Rules. As a result of Item B-1391, HVAC employers were reassigned from multiple codes, including Codes 3724—Machinery or Equipment Erection or Repair NOC & Drivers, 5183—Plumbing NOC & Drivers, 5190—Electric Wiring—Within Buildings & Drivers, 5538—Sheet Metal Work—Shop and Outside—NOC and Drivers, and 5536—Heating and Air-Conditioning Duct Work—Shop and Outside—and Drivers, to newly established Code 5537—Heating, Ventilation, Air-Conditioning, and Refrigeration Systems—Installation, Service and Repair & Drivers (in most states).  Item B-1397 further clarified the use of Code 5537, which is an all-inclusive code for HVAC employers, and included shop and yard operations.

Additionally, because Code 9519 covers household and commercial appliances, the definition of refrigeration is important in applying this code appropriately. Part Two—Classifications, located in NCCI's
Basic Manual for Workers Compensation and Employers Liability Insurance provides the following definition:

A refrigeration system is defined as “domestic” whether located in a residential or commercial setting provided it is a “reach in” refrigeration system having not more than 1/3 h.p. motor or more than 20 cubic feet capacity. All other types of refrigeration shall be considered as commercial.

Installation, service, or repair of “domestic” refrigerator appliances is included in 9519, while other types of refrigeration systems are classified to Codes 3724, 5183, or 5190, as appropriate.

Code 3179 applies to employers that manufacture electrical apparatus, hardware, or wiring devices that are not otherwise classified in the
Basic Manual. Code 3179 is not intended to apply to employers that manufacture devices that control electricity (e.g., circuit breakers, switchboards, etc.). Such employers may be reclassified to Code 3643—Electric Power or Transmission Equipment NOC or Code 3574—Computing, Recording or Office Machine Mfg. NOC for the manufacturing of computer or related computer devices.

The last code most commonly reclassified is Code 8017. This code is considered an “NOC” (Not Otherwise Classified) code. In accordance with NCCI's
Basic Manual, if the classification wording uses the term NOC, it applies only if no other classification more specifically describes the employer's business. In other words, the NOC code should be the code of last resort.  In many instances of change, an examination of types of merchandise sold and related sales percentages support the change to a more specific mercantile classification. 

Strikingly, four of the five codes above are considered NOC codes. Within the
Scopes® Manual, under the description of each NOC code, there is a listing of other codes that should be considered. Additionally, another source that can be referenced is the alphabetical index in the Scopes® Manual.

We are sharing our aggregate findings with our customers to communicate to the industry the trends that we are seeing. We have provided some general information about the codes involved to represent some of the general problem areas we have identified. Without a specific inspection to reference, we can only provide general information on the codes involved.

Source: National Council on Compensation Insurance, Inc.

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