RULE IV – CLASSIFICATIONS

Item 4 of the Information Page

Objective

The objective of the classification system is to group employers into classifications so that the rating value for each classification reflects the exposures common to those employers (See Rule IV, C. 2. & C.3.). Subject to certain exceptions described later in this rule, it is the business of the insured within Delaware that is classified, not the separate employments, occupations or operations within the business.

Classifications are listed numerically in Section 2 (Classifications) of this Manual. The classification description, if applicable, and Underwriting Guide entry immediately below a classification’s title pertain to that classification.

Each temporary staffing classification is a one-to one match with a direct employment classification. Temporary staffing classifications are identified by a four-digit number that is 2000 greater than the associated direct employment classification. For example, for direct employment classification 323, the corresponding temporary staffing classification is 2323.

1. Direct Employment Classifications
   All classifications in this Manual, other than the standard exception classifications and the temporary staffing classifications, are direct employment classifications. The direct employment classification description, if applicable, and Underwriting Guide entry immediately below a direct employment classification’s title pertain to the classification. Direct employment classifications describe an employer’s field of business as illustrated in the following examples:

   INDUSTRY	EMPLOYER’S FIELD OF BUSINESS	DIRECT EMPLOYMENT CLASSIFICATION
   Manufacturing	Wood Furniture Manufacturing	323, Furniture Mfg.- Wood
   Process	Screen Printing	281, Printing, N.O.C.
   Construction or Erection	Residential Carpentry	652, Carpentry – Residential
   Service	Airport Operation	7428, Airport Operation – Ground Employees

2. Subclassifications – Carrier Option
   House Bill 430 of 2004 (amending Section 2607, Title 18 of the Delaware Code) permits an insurer to develop subclassification(s) to the DCRB’s classification system as approved by the Insurance Commissioner. The developing insurer shall file any such subclassification(s) with the DCRB and the Insurance Commissioner at least thirty (30) days prior to the proposed effective date for such subclassification(s). The insurer’s filing shall demonstrate that payroll and loss data produced under any proposed subclassification(s) can be reported to DCRB consistent with the DCRB’s uniform classification plan and statistical plan. The Insurance Commissioner must disapprove any subclassification filing for which such demonstration is not made.
3. Temporary Staffing Classifications
   A temporary staffing contractor hires employees and assigns those employees to an unrelated business for temporary work assignments varying in duration from one day to any period less than one year. Subject to specified exceptions, temporary staff provided by a temporary staffing contractor to a client shall be assigned to the temporary staffing classification corresponding to the client’s assigned direct employment classification. Each temporary staffing classification is a one-to-one match with a direct employment classification. Temporary staffing classifications are identified by a four-digit number that is2,000 greater than the associated direct employment classification. The corresponding temporary staffing classification for each direct employment classification, where applicable, is identified in the direct employment classification’s entry in the Section 2 – Alphabetic Classification Underwriting Guide. Examples of temporary staffing classifications are shown below:

   DIRECT EMPLOYMENT CLASSIFICATION	CORRESPONDING TEMPORARY STAFFING CLASSIFICATION
   323, Furniture Mfg. – Wood	2323, Furniture Mfg. – Wood – Temporary Staffing
   281, Printing, N.O.C.	2281, Printing, N.O.C. – Temporary Staffing
   652, Carpentry – Residential	2652, Carpentry – Residential – Temporary Staffing
   7428, Airport Operation – Ground Employees	9428, Airport Operation – Ground Employees –Temporary Staffing

   Refer to the Temporary Staffing Contractors entry in the General Auditing & Classification Information section of this Manual for additional details regarding the classification procedure for temporary staffing contractors

4. Standard Exception Classification
   
   Some occupations are common to so many businesses that special classifications have been established for them. They are called standard exception classifications. Employees within the definition of a standard exception classification are not included in a basic classification unless the basic classification specifically includes those employees. The standard exception classifications are defined below:
   a. CLERICAL OFFICE EMPLOYEES – Code 953 – are employees exclusively engaged in keeping the books or records of the insured or conducting correspondence or who are engaged wholly in office work where such books or records are kept or such correspondence is conducted.This classification shall be applied only to employees herein described who work exclusively in separate buildings or on separate floors or in departments on such floors which are separated from all other workplaces of the employer by floor to ceiling partitions except for retail stores where a partition at least five feet high is required and within which no work is performed other than clerical office duties as defined in this rule. Office employees shall be separately classified except in connection with those classes which are designated “all employees including office.”If any clerical office employee (including drafting employees) has any other regular duty, the entire payroll of that employee shall be assigned in accordance with the class to which the business is assigned.

   COVID 19 CORONAVIRUS EXCEPTION:
   An employee’s job duties may be temporarily reclassified to Code 822 – Telecommuting Clerical Employees during any emergency orders, laws, or regulations issued due to COVID–19(Coronavirus), if separate, accurate, verifiable records are maintained. If such records are not maintained, the employee is assigned to the classification applicable to their duties prior to any emergency orders, laws, or regulations issued due to COVID–19 (Coronavirus) pandemic. Once normal business operations resume, appropriate classifications should be applied.This exception is applicable for new, renewal and in-force policies effective on March 1, 2020 through June 30, 2023.This exception does not apply to new or renewal policies with effective dates on or after July 1,2023.

   This classification does not apply to:

   (1) The clerk, such as a counter, front desk, lobby, mall kiosk, time, stock or tally clerk or librarian, whose work is necessary, incidental or part of any operation of the business other than clerical office. Such clerk should be assigned to the basic classification of the business.

   (2) A cashier who is responsible for accepting payment for merchandise or services rendered. The cashier’s physical location may include but is not necessarily limited to: a booth, behind a counter or on a sales floor. The cashier or any employee whose regular and frequent duty is accepting payment for merchandise or services rendered should be assigned to the basic classification of the business regardless of the physical work location.

   b. TELECOMMUTING CLERICAL EMPLOYEES – CODE 822 are employees who work from their personal residence by use of the internet, email and telephone to perform clerical office work. The personal residence of the telecommuter must be separate and distinct from the business location of the employer. Telecommuters shall be exclusively engaged in clerical office type work including but not necessarily limited to: keeping the books or records of the employer, conducting correspondence and telephone duties (including inside sales by telephone).

   An employee who interchanges between performing clerical office work at the employer’s place of business and performing clerical office work by telecommuting shall be assigned to Code 822 when more than 50% of the employee’s time is spent telecommuting. Such employees shall be assigned to Code 953 when 50% or less of their time is spent telecommuting.
   c. SALESPERSONS – OUTSIDE, Code 951 – are employees either exclusively engaged in sales or collection work away from the employer’s premises or who regularly and frequently (as defined in Section 2 of this Manual) engaged in sales or collection work away from their employer’s premises and devote the balance of their time to clerical office duties. Salespersons, collectors or messengers shall be separately classified except in connection with those classifications designated either “all employees including office’ or “all employees except office.

   This classification does not apply to:

   (1) Employees delivering merchandise or products. Even though such employees may also collect or solicit, they shall be assigned in accordance with the employer’s applicable business classification.

   (2) Floor and/or counter salespersons. Such employees shall be assigned in accordance with the employer’s applicable business classification.

   (3) Messengers employed by a messenger or courier service company. Messengers employed by other establishments whose field of business is not that of a messenger or service company shall be assigned to Code 951 except in connection with those classifications designated either “all employees including office” or “all employees except office”.

   (4) Employees who sell or solicit exclusively by telephone. Such employees shall be assigned to Code 953 or to code 822 except in connection with any classification designated “all employees including office”.

   (5) Salespersons in connection with a business classified to Code 814 and automobile auctioneers in connection with a business classified to Code 820. Such employees shall be classified to Code 819. See Code 819 for additional details.

5. General Inclusions.
   a. Some operations appear to be separate businesses, but they are included within the scope of all classifications other than the standard exception classifications. These operations are called general inclusions and are:

   (1) Commissaries, restaurants or stores operated for an insured’s employees except in connection with construction, erection, lumbering, mining or the recovery of petroleum and/or natural gas.

   (2) Manufacturing of containers such as bags, barrels, bottles, boxes, cans, cartons or packing cases (and the incident printing thereon) to be used by the employer in the packaging of its products.(3) Medical facilities operated by the insured for its employees.

   (4) Maintenance or repair and/or cleaning of an insured’s buildings, or vehicles or equipment when performed by employees of an insured.

   (5) Printing or lithographing by an insured on its products.

   (6) Stamping or Welding – when an integral technique that is a part of an overall manufacturing process.

   (7) Drilling or Blasting – when conducted by the employees of a surface or underground non-coal mine operator to facilitate mineral extraction. Drilling, redrilling or deepening conducted by an entity whose field of business is the recovery of petroleum and/or natural gas shall be separately classified.

   (8) Quality control of an insured’s products or research laboratories engaged in developing and/or improving products manufactured by an insured.

   (9) Drivers, chauffeurs and their helpers including all employees whose principal duties are the operation and/or the repair of vehicles.

   (10) Tools, dies, molds or fixtures made and/or repaired by an insured that are used in the insured’s product manufacturing operations.

   (11) Aircraft travel by employees, other than members of the flying crew, including employees whose payroll is assigned to the Standard Exception Classifications.

   (12) Child day care services operated by the employer for his employees.

   (13) Warehousing by an employer of its merchandise, products and/or raw materials.

   (14) Security guards protecting their employer’s premises and property.

   (15) Heat treating by an insured on its products.

   (16) Counter personnel.

   (17) Cashiers.

   b.  Any operation described by a General Inclusion shall be separately classified only if:

   (1) Such operation constitutes a separate and distinct business of the insured as provided in Rule IV – C. below or

   (2) It is specifically excluded by the classification wording, or

   (3) If the principal business is described by classifications defined as Standard Exceptions, the payroll of all employees not specifically included in the definition
   for such Standard Exceptions shall be separately classified to Code 971.

6. General Exclusions
   Some operations in a business are so unusual that they are excluded from basic classifications. They are separately rated unless specifically included in the basic classification wording. These operations are called general exclusions and are:
   (1) Aircraft operation – all operations of the flying and ground crews.
   (2) New construction or structural alterations by the insured’s employees.
   (3) Sawmill Operations – sawing logs into lumber by equipment such as circular carriage or band carriage saws, including operations incidental to the sawmill.
   (4) Stevedoring, including tallying and checking incidental to stevedoring.
   (5) Mining and Quarrying, Clay, Gravel or Sand Excavation and Dredging. 

1. Object of the Classification Procedure
   a. The objective of the classification procedure is to assign the one basic classification which best describes each distinct business enterprise of the insured within Delaware. Subject to certain exceptions described in this Rule, each classification includes all the various types of labor found in a distinct enterprise. It is the business which is classified, not the individual employments, occupations or operations within a business. Additional classifications shall be assigned as provided below.
   b. House Bill 430 of 2004 (amending Section 2607, Title 18 of the Delaware Code) permits an insurer to develop a subclassification(s) to the DCRB’s classification system as approved by the Insurance Commissioner. The developing insurer shall file any such subclassification(s) with the DCRB and the Insurance Commissioner at least thirty (30) days prior to the proposed effective date for such subclassification(s). The insurer’s filing shall demonstrate that payroll and loss data produced under any proposed subclassification(s) can be reported to the DCRB consistent with the DCRB’s uniform classification plan and statistical plan. The Insurance Commissioner must disapprove any subclassification filing for which such demonstration is not made.
2. Assignment of a Classification
   
   a. The policy shall contain only classifications approved by the Delaware Compensation Rating Bureau, Inc. and in accordance with this Manual.Each classification is presumed to describe an entire business enterprise. Any policy which contains more than a single classification cannot contain any classifications representing a payroll less than that of one full- time employee, but this rule will not apply in classifications involved in Construction, Erection, Stevedoring, Part-Time Aircraft Operations or if the business’ basic and major operations are described by the Standard Exception classifications and there are employees whose job duties are not assignable to the Standard Exceptions, except as specified in classification phraseology.
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   b. Single Enterprise. If a risk consists of a single operation or a number of separate operations which normally occur in the business described by a single manual classification, or separate operations which are an integral part of or incidental to the main business, that single classification which most accurately describes the entire enterprise shall be applied. The separate operations so covered may not be assigned to another classification even though such operation may be specifically described by some other classification or may be conducted at a separate location. Division of payroll shall be made as provided in respect to General Exclusions, Standard Exceptions or Special Class Wording. For construction or erection work, see special procedure set forth in Rule IV, C.EXCEPTIONWhere a retail outlet is located at the same or contiguous premises a business’ manufacturing facility, the applicable retail store classification shall apply to the payroll of the retail outlet, provided that such retail outlet is operated in an area physically separate from other operations by a floor-to-ceiling partition, and it is separately staffed.

   c. Authorized Classifications. When the classification of any insured has been established by the DCRB, no policy shall be issued or endorsed nor adjustment of premium made under any other or conflicting classification.

   In any instance where the established classification does not describe the current operations of the insured, the insuring carrier or insured shall draw the matter to the attention of the DCRB inwriting with full particulars prior to the application of any other classification. The reclassification shall not take place until the DCRB has received and reviewed such documentation and has replied in writing to the insured or insuring carrier agreeing with their position or otherwise advising on which class(es) to assign.

   The insuring carrier is not relieved of the obligation to apply the class authorized for an insured because of lack of knowledge that the DCRB has established an authorized classification for that insured.

3. Assignment of Additional Classifications.
   a. Multiple Classifications/Multiple Enterprises(Not construction or erection operations – see paragraph 6.Additional classifications may be used only when valid evidence supports their authorization or inconformity with the rules stated under “Standard Exceptions” and “Exclusions.” Additional classes may not be added without DCRB authorization when their use is in violation of Manual Rules or an existing DCRB data card. Additional classifications shall be assigned to an insured only if the following conditions exist:(1) If the classification wording requires the assignment of an additional classification for specified employees or operations.(2) If there are distinct enterprises (meaning thereby businesses, which are specifically classified in this Manual, but not operations that normally occur in the business described by the assigned classifications, nor operations described by any of the General Inclusions), conducted in a given plant by the same insured and the entire work in each enterprise is conducted either in a separate building or on a separate floor or floors of a building, or on the same floor in separate departments divided by floor to ceiling partitions without interchange of labor and the insured conducts each of such enterprises as a separate undertaking with separate records of payroll, then such separate undertakings shall each be separately classified, (and the proper carrier rating value applied to each).

   (3) See Governing Classification rules for assignment of incidental operations that support more than one distinct enterprise.

   b. Governing Classification

   The governing classification is that classification other than the standard exception classifications (which may never be the governing class) which carries the largest amount of payroll exclusive of payroll of miscellaneous employees as defined below.

   (1) This concept shall be utilized not in the initial classification assignment process but to determine how to classify miscellaneous employees when an insured is assigned two or more classifications.

   Miscellaneous employees are employees that either supervise or support all the various undertakings of the insured. The functions performed by miscellaneous employees may include but are not necessarily limited to: maintenance, mailroom, shipping and receiving, yard operations, security power plant operations, lobby or front desk personnel, elevator operators, porters, foremen, superintendents or timekeepers.

   (2)The entire remuneration of miscellaneous employees is assignable to the governing classification.

   (3) The governing classification in the case of construction or erection operations shall be determined on a job basis within each policy period if payrolls are kept separately by job within the policy period; otherwise on the basis of the entire policy period.

   (4) If the basic and major operations are described by classifications defined as Standard Exceptions, the payroll of all employees not specifically included in the definition for such Standard Exceptions shall be separately classified to Code 971.

4. Assignment By Analogy
   Any enterprise which is not described by a classification in this Manual shall be assigned to th classification or classifications most analogous from the standpoint of process and hazard. The limitations and conditions of the classification or classifications so assigned and all Manual rule pertaining to the classification shall be applicable.
5. Payroll Assignment – Multiple Classifications – Interchange of Labor
   Some employees who are not miscellaneous employees may perform duties directly related to more than one classification. When there is such an interchange of labor, the entire payroll of employees who interchange shall be assigned to the insuring carrier’s or the residual market’s highest-valued classification representing any part of their work.The payroll of one employee shall not be divided into two or more classes except where specifically described in classification wording as “to be separately rated” or “separately rate” and with no requirement for separate staff. See the paragraph immediately below for the auditing procedureGeneral Exceptions to C. 5. above
   For Construction, Erection, Temporary Staffing or Stevedoring, the payroll of any individual employee may be divided and allocated to more than one such classification provided the entry on the original records of the insured discloses an allocation of each such individual employee’s payroll. Estimated or percentage allocation of payroll is not permitted. Only a single stevedoring class shall be applied to all payroll developed in the loading or unloading of a single vessel. For further reference see the material under Stevedoring in Section 2 of the Manual. For Executive Officers see Rule IX, A. 4.
6. Construction or Erection Operations
   Each distinct type of construction or erection operation at a job or location shall be assigned to the classification which specifically describes such operation provided separate payroll records are maintained for each operation. Estimated or percentage allocation of payroll is not permitted.Any such operation for which separate payroll records are not maintained shall be assigned to the insuring carrier’s highest-valued classification which applies to the job or location where the operation is performed.A separate construction or erection classification shall not be assigned to any operation which is within the scope of another classification assigned to such a job or location which is assignable to a construction classification designated “all work to completion.” All operations of the insured contractor at that job or location shall be assignable to such classification.
   
   
7. NOC Please see Definitions – Section 2.
   
   
8. Changing Classifications 

           a. The DCRB is empowered to determine, revise or modify the classification(s) assigned to any individual insured. No written application by the carrier, agent of record or an insured to change an insured’s authorized classification(s) shall be considered by the DCRB until the carrier has issued and filed a copy of its policy Information Page written in accordance with an insured’s authorized classification(s). The classification(s) shown in any policy shall be subject to correction or modification, or both, if the DCRB finds by survey or otherwise that the classification(s) shown n the policy are inappropriate to the insured. No written application to change the classification(s)for an insured on the grounds that the insured has been improperly classified shall be considered by the DCRB unless such written application is filed directly with the DCRB by the insured, agent of record or the carrier during the policy period with respect to which the application is made, or within 12 months after the termination thereof.

          b.(1) A change in an insured’s classification that results from a recent change in the insured’s operations (i.e., an operations change that has taken place during the current policy year or the policy year that has just expired) will be applied pro rata as of the date of the change in the insured’s operations, regardless of the premium impact to the insured. When a DCRB review discloses the insured’s recent operations change, the DCRB will make written notice to the carrier-of-record, changing the insured’s authorized classification(s) for the current policy year and, if warranted, for the policy year that has just expired. When the carrier becomes aware of such recent operations change, the carrier shall make written application to the DCRB to change the insured’s authorized classification(s) during the current policy year and, if warranted, for the policy year that has just expired.

(2) A correction of a misclassification which results in a premium decrease shall be applied tothe insured’s policy in effect when the application for correction is made and to the prior policy within 12 months after the termination thereof.

(3) A correction of a misclassification which results in a premium increase shall be applied to the employer’s first policy effective at least six months subsequent to the date of the DCRB’s written misclassification notice.

(4) When the temporary interruption or suspension of normal business activities caused by COVID–19 results in a change in business operations, an employer may be temporarily reassigned to an alternate classification if separate, accurate, verifiable records are maintained. If such records are not maintained, the operations are assigned to the classification applicable to the business prior to any emergency orders, laws, or regulations issued due to the COVID–19 (coronavirus) pandemic. Once normal business operations resume, appropriate classifications should be applied.

This exception is applicable for new, renewal, and in-force policies effective on March 1,2020 through June 30, 2023.

This exception does not apply to new or renewal policies with effective dates on or after July 1, 2023.

     c. Any correction of a misclassification arising from discovery by the carrier of a material misrepresentation or intentional omission by the insured, its agent, employees, officers or directors shall be applied effective the date upon which it would have applied had such material misrepresentation or intentional omission not been made. It is recommended that a carrier claiming material misrepresentation or intentional omission as contemplated in this Rule secure a declaratory judgment from the appropriate Court establishing same prior to proceeding with application of this Rule.

       d. The reallocation of payroll by a carrier among an insured’s authorized classifications or the DCRB requiring a carrier to reallocate payroll among an insured’s authorized classifications or to report payroll under an insured’s authorized classifications for an insured’s current policy or for the insured’s prior policy within 12 months after the termination thereof does not constitute a class change or correction.

     e. Any reclassification pursuant to a revision in classification procedure that DCRB has electronically submitted to and that has been approved by the Insurance Commissioner shall be effective only upon any insured’s first policy effective date on or later than the effective date for the revision approved by the Insurance Commissioner.

9. Classification Appels

The DCRB’s assignment of an individual risk to a particular classification may be appealed pursuant to Rule XVI, APPEALS FROM APPLICATION OF THE RATING SYSTEM PROCEDURE, Section 1 of thi Manual.

10. Mercantile Business/Stores

Where a store or dealer sells several types of merchandise, each of which may be subject to a different classification, such store or dealer shall be assigned on the basis of the principal category of merchandise sold. The term “principal” means more than 50 percent of the gross receipts. For further information please see “Wholesale/Retail Mail Order House Or Internet Sales – Definitions” in the General Auditing & Classification Information section of this Manual. For mercantile businesses, such as stores or dealers, the single applicable store or dealer classification is determined separately for each location.

Show the proper classification wording, with or without notes, and show the code number in Item 4 of the Information Page. Capitalized classification wording may be used instead of the entire wording. Section 2 of this Manual, Classification Underwriting Guide, may be used for such wording.

1. “New Business” is defined for purposes of this section to be all workers compensation insurance policies except those policies underwritten by an insurance group which also insured the same employer for a policy period expiring immediately prior to the effective date of the policy in question. An insurance group is defined as either a set of individual insurers under a common ownership or an individual carrier which has no other companies under common ownership.
2. Within the first 90 days of the effective date of a “New Business” policy, the employer has the right to request from the carrier a review of the classification assignments of each of its employees with the classifications on the policy. This request shall be presented in writing.
3. If an employee classification review is requested by the employer, the employer must provide the carrier with a list of all the employer’s employees showing individually their specific duties. The carrier has the right in conjunction with the employee classification review to conduct an audit and/or inspection to determine the proper classification assignment of the employees.
4. Within 60 days of the employer’s request, the carrier shall provide the employer with a report which will show the classification assignment of each listed employee. The carrier will be obligated to use these classification assignments for premium determination purposes for the “New Business” policy period unless review by the Delaware Compensation Rating Bureau, Inc. indicates lower-rated classifications are applicable to an employer’s business or employees. Changes in the employer’s operations, duties of employees listed or the addition of new employees will not be subject to the classification assignments specified in this report.
5. If the employer does not agree with the carrier’s employee classification report, the Delaware Compensation Rating Bureau, Inc. shall review the employer’s request, the insurer’s response and will determine the appropriate classification assignments for the listed employees.
6. This Section applies only to the assignment of classifications to listed employees whose duties during the policy period are fully and accurately specified at the time of the request for an employee classification review. This procedure does not otherwise limit a carrier’s right or obligation to properly classify an employer’s operations based on the actual nature of those operations during the policy period.
7. The carrier will send to its “New Business” insureds a “Policyholder Notice” explaining to the insured the procedure that must be followed to request an employee classification review.