Focus on Frequency with a Small Work Comp Deductible

Author, Drew Garcia, Vice President of the Landscape Group, Rancho Mesa Insurance Services, Inc.

Economies of scale create leverage for landscape businesses as they grow. The Bureau of Labor Statistics (BLS) 2022 table of incident rates notes that the landscape industry has an incident rate of 3.4 per 100 full time employees. Landscape is classified by BLS under Administrative and Support and Waste Management and Remediation Services; this sub class has an incident rate of 1.9. The average for all other industries is 3.0.

With frequency typically being high for the landscape industry, it’s important to continue to focus on ways to minimize injury, prevent severity and focus on return to work opportunities when an injury does arise.

While commercial auto, general liability, and umbrella have been stuck in a hard market, workers’ compensation has relatively been in a soft market. Combined ratios for private insurance carriers on workers’ compensation was published at 87% in 2021 and 84% in 2022, according to the National Council on Compensation Insurance (NCCI) State of the Line Report. This impact on carrier profitability has led to decreased pressure on rates for landscape employers across the country.

Like all things cyclical, it is expected that the workers’ compensation market will reverse and begin to harden.

As the market hardens, landscape employers operating in the middle market (i.e., businesses with an annual workers’ compensation premium between $300,000 and $1,500,00) should consider a small workers’ compensation deductible to tackle the high likelihood of frequency.

Small deductibles vary by carrier from $1,000 to $25,000. Collateral might be required and the ability to apply an aggregate to the policy will also vary by carrier.

A small deductible allows the landscape company an opportunity to take the predicable layer of injury cost while still transferring severity to the insurance carrier. 

As your company grows and/or market conditions change, consider a small workers’ compensation deductible to maximize your insurance program.

To discuss implementing this strategy for your business, contact me at (619) 937-0200 or  drewgarcia@ranchomesa.com.

WCIRB Files for Workers’ Comp Rate Increase

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

Earlier this month, the Workers’ Compensation Insurance Rating Bureau (WCIRB) recommended a nominal .9% increase in the advisory pure premium rates. The reason given, increased loss development for medical costs and higher claims adjustment expenses. This recommendation is now sent to the California’s Insurance Commissioner Ricardo Lara for approval. If approved, the increase in rates then take effect September 1, 2024.

Recognizing that a .9% increase is not very significant and in 2023 the WCIRB requested a similar increase which ultimately was denied by Commissioner Lara, the message remains clear that  workers’ compensation rates have probably bottomed out.

This does not mean every business will see an increase. There will still be reductions in some class codes pure premium rates and pricing will be more tied to Experience Modification Rate (EMR) decreases and an individual company’s claims experience. For distressed accounts, companies whose EMR is increasing and have had poor claim experience, will likely see an increase in their rates.

In order to stay ahead of this, we recommend companies review their key performance indicators (KPIs) that measure and compare a company’s frequency and severity of claims to their peers within the same governing class code. These metrics allow a company to identify trends, design programs that will address specific training needs, and project claims costs that will ultimately impact their EMR.

In addition, we recommend working closely with your claim advocate to assist in monitoring open workers’ compensation claims, and identify any open claims under your company’s primary threshold that could be closed prior to your unit stat filing that can impact your EMR.

If you would like to learn more about the pure premium rate’s impact by class code or evaluate your specific KPIs, I can be reached at (619) 937-0167 or via email at sclayton@ranchomesa.com.

Property Insurance in California Continues to be a Ticking Time Bomb

Author, Jeremy Hoolihan, Partner, Rancho Mesa Insurance Services, Inc.

Insurance industry experts and legislators continue to work with Insurance Commissioner Ricardo Lara and the California Department of Insurance (CDI) to address the overwhelming crisis in the insurance property market. On March 26th, 2024, there was a public hearing to address the crisis.

The hearing appeared to be a step in the right direction in adopting Lara’s Sustainable Insurance Strategy which is designed to restore insurance markets to competitive health by making it easier for insurers to get adequate rates and timely rate decisions. 

The hearing also brought expert commentary from Sheri Scott, a Principal and Consulting Actuary at Milliman, one of the nation’s leading actuarial firms. Scott urged the CDI to amend its regulations to include a more comprehensive reconciliation checklist. The idea is to streamline the process and ensure that insurance company filings were complete, and also to limit its evaluations to issues that could impact potential rates. Scott suggests the CDI only focus on underwriting material that has a clear impact on rates they utilize and all other non-rate related items be evaluated separately.

While this hearing had some positive points, there is still a lot of work to be done. On April 23rd, 2024, the CDI hosted a public workshop on a proposal that would allow insurers to use catastrophic loss modeling in their rate making applications. As it currently stands, California is the only state that requires insurers to base rate requests solely on their own individual losses over the last 20 years rather than projecting future losses based on analysis.

The CDI and Commissioner Lara are clearly feeling the pressure to improve and streamline the rate approval process. With the FAIR Plan exposure now at $366 billion across California ($25 billion just added in January and February), it is ill equipped to handle any major disasters. The FAIR Plan has just $700,000 in cash on hand, $200 million in surplus and about $2 billion dollars in reinsurance available. The Plan also has nearly 400,000 policy holders and are fielding over 2,000 calls a day. The CDI and Lara seem to agree that California and the FAIR Plan are a major wildfire away from needing emergency help. 

Obviously, the inability for insurance companies to have rates approved in a timely fashion has caused several insurance companies to leave California. The result is fewer insurance carrier options and in many cases having to rely on the FAIR Plan. Stay tuned for updates on the progress being made with Commissioner Lara’s Sustained Insurance Strategy.

If you have any questions about your commercial property insurance, please feel free to contact me at (619) 937-0174 or jhoolihan@ranchomesa.com.

Rising Reconstruction Costs and the Impact on Building Owners

Author, Kevin Howard, Partner, Rancho Mesa Insurance Services, Inc.

The continuing trend of catastrophic claim activity over the last several years, rising number of nuclear settlements due to increased litigation funding, and hyperinflation are impacting all economic sectors. One of those sectors is the commercial property insurance market and the rapid increase in reconstruction costs. Per Verisks’s recently released Reconstruction Costs Analysis, from January of 2023 to January of 2024 the total reconstruction costs have increased by 4.1%. Since the 2020 pandemic, reconstruction costs have increased over 25% nationwide. For commercial property owners, these statistics require additional due diligence with their broker when evaluating the replacement cost of their respective portfolios during the pre-renewal process.

With interest rates still elevated and the demand for quality tenants still present, the last thing a property management group or single building owner needs is an underinsured claim that compromises cash flow.

Factors that have driven up reconstruction costs include:

• Demolition and debris removal

  Removing existing landscaping, debris and existing buildings add costs to a project. Balancing this work within the bounds of other occupants/tenants can also compromise timelines.

• Site

  New construction starts with a clean foundation. Reconstruction does not have a clean site, it may have foundations that need to be removed in order to add/replace plumbing, sewer, underground pipelines, etc.

• Labor

  The cost of labor has skyrocketed with higher wages, cost of living, medical benefits, etc. Those costs translate directly to contractor margins and have increased reconstruction project estimates.
  

• Hyperinflation

  Gas, rental equipment, and building materials have all been directly impacted by inflationary trends, further elevating reconstruction costs.

The above examples represent only some of reasons why property owners must re-evaluate and most likely increase property limits on their statement of values (SOV). Working with a broker who can utilize data analytics while also providing comparative models can help to identify appropriate coverage that complements the changing world of reconstruction.

To learn more about our detailed process for evaluating your risk exposure, contact me at khoward@ranchomesa.com or (619) 729-5173.

Navigating Contractor Challenges in 2024: Insights from the Surety Association of San Diego

Author, Andy Roberts, Surety Account Executive, Rancho Mesa Insurance Services, Inc.

In a recent special StudioOne™ Podcast episode, I’m joined by my three fellow board members of the Surety Association of San Diego as we explore some of the biggest challenges facing contractors in 2024 and beyond.

Challenges Ahead

As we look ahead, contractors are bracing for significant hurdles, including:

• Inflation and Material Costs

• Supply Chain Disruptions

• Labor Shortages

• Bonding Capacity Constraints

All of these issues can have a direct effect on a contractor’s bonding capacity, making it important that they get the most out of their surety relationship.

Maximizing Your Bond Program

To navigate these challenges effectively, contractors can take proactive steps to maximize their bond program:

• Work with Experienced Surety Agents

• Financial Preparation and Accounting Processes

• Transparency about Financials and Backlog

• Regular Meetings with Underwriters

By taking a proactive approach to identifying and addressing current and potential future challenges, contractors can maximize their bond program and position themselves for success in 2024 and beyond. By working closely with experienced surety agents, optimizing financial management practices, and fostering open communication with underwriters, contractors can navigate the complexities of the construction industry with confidence.

Empower Your Crew: The Importance of Heat Illness Training and Preparedness

Author, Greg Garcia, Account Executive, Rancho Mesa Insurance Services, Inc.

As the calendar turns to April and warmer weather into spring time, now is a great time to take a look at your current Heat Illness Prevention Plan (HIPP), as well as make sure all crew members are up to date on their heat illness training.

As the months get hotter, it is important to remember three things: water, rest and shade. It is crucial that crews have access to all three. Adequate water for all crew members, regular rest periods, and identified shade areas around the jobsite or a portable canopy are all considered best practices, and when temperatures heat up, are often a requirement.

With rising temperatures, we anticipate, as has been the case in the past, there will also be a rise in heat-related injuries within the landscape industry. Having an HIPP not only will keep you compliant with state regulations, but more importantly keep your employees safe.

There are certain criteria and templates that all HIPP need to follow. For example, they need to be written, they need to be available in English as well as any other languages that are used at the company. And finally, it needs to be available at the worksite. The HIPP should include:

• Procedures supplying and accessing water

• High heat procedures

• Emergency response

• Acclimatization methods and procedures.

It is also important that leaders including foreman keep a regular eye on the crew, looking for signs of heat stress. The signs could be as minor as rashes or cramping to as severe as fainting. Any signs of this with a crew member should be reported immediately.

Knowing the hotter months are coming, now is a great time to dive into your company’s HIPP, make any updates to it, and begin to stress the importance of heat illness prevention.

Rancho Mesa clients can train their employees on heat stress and heat illness prevention with both online courses in English and Spanish, and a variety of toolbox talks in the SafetyOne™ website and mobile app.  Clients can distribute their HIPP through the mobile app ensuring foreman and crews have access to the document along with any other related resources when they’re at the jobsite.

Every year, Rancho Mesa hosts Heat Illness Prevention workshops and webinars to assist in educating clients and their employees. A recorded version of the workshop can be accessed online.

Contact me at ggarcia@ranchomesa.com or (619) 438-6905 to discuss how to mitigate heat illness and other potential risks.

Dual Wage Thresholds Set to Increase Again

Author, Matt Gorham, Account executive, Rancho Mesa Insurance Services, Inc.

In an effort to keep up with wage inflation, California’s Workers’ Compensation Insurance Rating Bureau (WCIRB) has recommended increases to all 16 construction dual wage thresholds, which, if approved, would impact policies beginning on September 1, 2024 and could drive up insurance premiums for those unaware.

Dual wage thresholds help carriers evaluate risk of employee injury by correlating average hourly wage with experience on the job. The general notion is that employees with more experience command higher wages and are less likely to get injured at work, while employees with less experience are paid a lower wage, are less familiar with safety and jobsite protocols, and therefore more likely to be injured at work. This difference in risk leads to a difference in cost for insurance premiums, with higher paid employees costing their employers comparatively less in premium.

Using the base rate of $31 or more per hour from one carrier, consider the example of a plumber: a plumber earning $30 per hour will cost their employer $9.31 per $100 of payroll, while a plumber earning $31 per hour will cost their employer $4.35 per $100 of payroll. That is roughly a 47% higher cost in premium per $100 for an employee earning 3% less per hour.

Since the last time the WCIRB suggested an increase to the dual wage thresholds in December 2021, inflation and labor shortages have continued to drive up wages in the construction industry. According to the St. Louis Fed, average hourly earnings in construction have increased from $33.60 to $37.53 – more than 11% in that time. While wages are going up, the experience of employees is not keeping pace, leaving insurance carriers exposed. To address this disparity, the proposed threshold increases from the WCIRB range from $1 for plumbing, automatic sprinkler, concrete work, and painting/waterproofing to $4 for sheet metal/HVAC work.

To get ahead of this proposed change, business owners should consider whether it is more beneficial to award employees with raises or to pay more in insurance premiums. With increased overhead costs likely coming either way and quality employees already in short supply, not only could strategic raises offer relative savings, they could strengthen the loyalty from your team.

While this proposed change still needs final approval by the insurance commissioner, it is expected to have a major impact on wages and potentially premiums within the construction industry.

To evaluate the impact of the proposed dual wage threshold increase on your business, contact me at (619) 486-6554 or mgorham@ranchomesa.com.

National Ladder Safety Month: Preventing Injury Through Education

Author, Megan Lockhart, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

March is National Ladder Safety Month. Spearheaded by the American Ladder Institute (ALI), this month is dedicated to promoting safe ladder use. 

Tens of thousands of injuries and hundreds of deaths are caused by the improper use of ladders annually. The construction industry is particularly at risk for ladder injuries. Year after year, its one of the top 10 most common OSHA violations in the nation, so this is a good opportunity to evaluate your company’s ladder training and safety protocol. 

Rancho Mesa offers resources in the SafetyOne™ app with online training courses such as general Ladder Safety and Ladder Safety in Construction Environments.

The platform also has the following ladder safety toolbox talks that supervisors can administer to employees:

• Job Built Ladder Safety

• Ladder Types

• Ladder Usage

• Ladder Safety for Landscape Contractors

• Ladder Tips

• Five Ways to Prevent Electrocutions from Portable Ladders

• Ladders and Stairways

Rancho Mesa is also hosting an in-person Ladder Safety workshop on Friday, March 22, which will be recorded and available to view on our website in the coming weeks.

For questions about accessing the online resources in SafetyOne, clients can reach out to their Client Technology Coordinator.

Litigation Funding Contributes to Higher Claim Amounts and Premiums

Author, Sam Brown, Vice President, Human Services Group, Rancho Mesa Insurance Services, Inc.

The first quarter of 2024 is in full swing and the insurance industry is already feeling the rising cost of insurance claims, often referred to as social inflation. Commonly discussed reasons for social inflation include socioeconomic, legal, and behavioral trends that produce costly lawsuits, according to research conducted by The Institutes. In addition to these familiar observations, a relatively new factor is now playing a role in large lawsuits: third-party litigation financing.

Litigation financing refers to the practice of private equity companies, hedge funds, and other investors taking a calculated risk to invest in lawsuits, according to The State Bar of California Standing Committee on Professional Responsibility and Conduct. The Insurance Information Institute estimates that $30 billion will be invested in litigation financing by 2028.

A simple example that typifies the arrangement is an investor paying for legal expenses in exchange for a portion of the settlement. A plaintiff may agree to this in hopes of increased damage awards.

The downsides to litigation financing include prolonged litigation, litigants receiving only a fraction of the award, litigants demanding higher settlements to cover the cost of the investments, and funding agreements impacting an attorney’s judgement when representing a client. The ultimate downside occurs when underwriters charge higher policy premiums or reduce appetite, making coverage very difficult or impossible to obtain.  

As the practice of third party litigation financing grows more common, legislation and regulation must catch up and may need to implement guidelines to better protect the interests of both policyholders and insurers.

If you have questions regarding social inflation and the impact on your policy premiums, please contact me at 619-937-0175 or sbrown@ranchomesa.com.

Performance Bonds for Private Equity Contractors

Author, Matt Gaynor, Director of Surety, Rancho Mesa Insurance Services, Inc.

We have entertained several recent submissions from our construction division prospects looking for bonding support of their companies that are majority owned by a private equity firm. The traditional surety market will push back on private equity submissions pointing out the goodwill and large amount of debt listed on the balance sheet. Throw in the limited indemnity package offered in support of the bond program and we have created a perfect storm for the account to be declined without any actual underwriting taking place. But there is hope!

Let’s first take a step back. For our standard construction bond program, we preach the retention of capital and net profit as the best way to increase your bonding facility. The bond company will also look to company and personal indemnity to ensure they are protected in the event of a bond claim. This is in deep contrast to the private equity arena where the payment of monthly interest on debt and write-off of goodwill often translates into a net loss on the income statement translating into reduced net worth. Also, no personal indemnity is afforded to support the bond program. In fact, only limited indemnity from the principal is available.

Fortunately, a number of large commercial surety carriers are willing to look beyond the net worth underwriting roadblocks and concentrate more on cash flow, available bank credit, and other working capital items to consider a bonding program. 

By providing quarterly financial updates, work in progress schedules exhibiting strong gross profit margins, and generating advance discussions of potential acquisitions, the broker and client can get out ahead of potential underwriting distractions.

If you would like more information or want to discuss what is needed in support of a bond program for your private equity owned company, please contact me at (619) 937-0165 or mgaynor@ranchomesa.com.

California Rainy Season Offers Online Training Opportunity for Employees

Author, Megan Lockhart, Client Communications Coordinator, Rancho Mesa Insurance Services, Inc.

Californians have experienced record storms this year along with other parts of the United States. However, with Spring on the horizon, construction companies are preparing for rainier months still ahead. When job sites close due to rain and flooding, it's a good opportunity for employees to use that time to revisit safety and operational skills with online training.

When the weather is hazardous and construction jobs must close, it's common for employers to send workers home. This can cause a financial setback not only for the business, but also for the employees who were depending on working those hours.

“On days where it would be unwise to expect employees to get up on a roof or scale a building wall, offer virtual training sessions so your employees can still earn a living, and you skill up your workforce,” Eric Mochnacz, Director of Operations at Red Clover HR, said in his article.

To prepare for days when the weather restricts jobsite work, employers can compile a list of training that can be assigned to employees, such as operation skills and safety procedures relevant to their work in the field. 

“There’s lots of opportunity and potential in planning for bad weather days by building a strong library of virtual training,” Mochnacz said. “When your ability to meet business goals is directly tied to the weather, having contingency plans is crucial for business continuity.”  

Rancho Mesa offers tools for employee online training via both the SafetyOne™ platform and the RM365 HRAdvantage™ Portal. SafetyOne holds a library of online training on a wide range of topics in construction safety. RM365 HRAdvantage Portal online training topics include professional development and compliance.

For more information on utilizing Rancho Mesa’s resources, contact your Client Technology Coordinator.

How to Strategically Grow Your Construction Company

Author, Casey Craig, Account Executive, Rancho Mesa Insurance Services, Inc.

One of the biggest ongoing challenges in the construction industry today is hiring and retaining quality employees that can help build on a company’s foundation. Growing a construction company in a sustainable way through internal promotions while also integrating new hires can separate one company from its competitors.

Employees are a company’s most valuable asset and making sure the right people are in the right positions is vital to profitable growth. There are high performing laborers at every construction firm but just because they are successful in one position does not necessarily mean that they will transition successfully into becoming a great estimator or superintendent. So, it is critical to promote the right people into the right positions for the success of the company.

Promoting from within is typically more cost effective than an outside hire and leads to a boost in company morale. The promoted employee already knows your company culture and safety expectations, and they can pass their knowledge onto new hires. So, finding the right internal people to elevate into leadership positions is the logical path, when available.  

Having assessment tests and specific steps for how to be promoted in your employee handbook is a great way to provide both new and seasoned employees a clear path for career growth.

Identify employees that can handle stressful situations and are poised problem solvers. Do not wait for a need to arise; start including these valued employees in meetings to make sure they are prepared to take on a new role when the company is ready to grow or there is an opening due to an employee retirement. This can alleviate some of a leader’s workload allowing them to deal with big picture issuing facing the firm.

Take advantage of both safety and professional development courses to grow your existing employees. Rancho Mesa’s SafetyOne™ platform provides online safety courses for employees, while the RM365 HRAdvantage™ Portal offers online courses to help employees hone the soft skills they will need to grow their careers.

While this topic remains one of the most challenging aspects of running a construction company, do not let this problem be compounded by being unprepared. Stay diligent in the hiring process and pay attention to the employees you do have with the right traits. This can lead to lower insurance costs as more efficient employees in management positions can directly assist with building a safer culture with more preparedness when claims arise.

If you have any questions pertaining to this article or any other insurance questions, do not hesitate to reach out. You can contact me at ccraig@ranchomesa.com or call at (619) 438-6900.

Optimizing Landscapers’ Commercial Auto Insurance

Author, Drew Garcia, Vice President of the Landscape Group, Rancho Mesa Insurance Services, Inc.

Lawn and landscape professionals across the country have seen the direct impact of a very difficult and challenging commercial auto market. In particular, green industry businesses who specialize in service and maintenance, which require a larger fleet, have felt more of the direct market pressure.

In general, large employers (due to their economies of scale), have always been able to navigate tough market conditions by taking on more upfront risk via large deductibles or self-insured retentions in exchange for an upfront premium savings. These businesses are then able to reinvest those funds back into their businesses to better manage and mitigate risk. Like the large employers, there are options for mid-sized employers to optimize their auto insurance.   

Rancho Mesa’s focus on the middle market segment of the green industry (which has a rough annualized property and casualty premium between $200,000 and $1,500,000) has led our team to critically take on this challenge and come up with solutions.

As a result of this focus, I recently was invited to present a webinar in conjunction with Wilson360 addressing the contributing factors to the rising costs of commercial auto insurance and some solutions.  I discuss:

• Why commercial auto insurance costs continue to increase

• How to baseline your premium to help track premium fluctuation

• Indicators to track and reduce claim frequency

• Things to consider when optimizing your commercial auto policy

Fortunately, this webinar is now available to everyone. Register to watch the webinar.

View Webinar

To discuss how to optimize your company’s commercial insurance, contact me at (619) 937-0200 or drewgarcia@ranchomesa.com.

Top 5 OSHA Violation Trends and Solutions

Author, Sam Clayton, Vice President, Construction Group, Rancho Mesa Insurance Services, Inc.

Every year, Federal OSHA conducts thousands of inspections and issues costly citations to companies. So, it is imperative for business owners and safety managers to be aware of the most common citations and how to avoid them through effective safety programs.

Back in September 2021, Rancho Mesa highlighted the top Cal/OSHA citations issued during the 2019/2020 reporting period in podcast Episode 136. Now that the 2023 Federal OSHA data is available, we can analyze the citations that were most common across the United States to see what’s changed and evaluate our safety programs to avoid being another statistic.

Although OSHA violations can be issued for numerous reasons, the most common five violation in 2023 were:

1. Fall Protection-General Requirements (Standard 1926.501)

This standard outlines where fall protection is required, which systems are appropriate for given situations, the proper construction installation of safety systems, and the proper supervision of employees to prevent falls. It is designed to protect employees on walking/working surfaces (horizontal or vertical) with an unprotected side or edge above 6ft.
There were 7,271 fall protection violations in 2023 up from 5,260 in
2022. To help avoid fall protection citations, take advantage of Rancho Mesa’s proprietary SafetyOne™ mobile app and website’s fall protection resources like the online awareness course, multiple toolbox talks, various risk observation checklists, and sample Fall Protection Program that is designed to reinforce the company’s policies.

2. Hazard Communication (Standard 1910.1200)

This standard addresses chemical hazards, both those chemicals produced in the workplace and those brought into the workplace. It also governs the communication of those hazards to workers.

There were 3,213 hazard communication violations in 2023. Proper hazard communication in construction environments can save lives. Consider utilizing the variety of hazard communication resources in our SafetyOne platform with online trainings, toolbox talks, and sample policies and checklists.

3. Ladders (Standard 923.1053)

This standard covers general requirements for all ladders.

There were 2,978 ladder violations in 2023, more than 800 more than 2022’s 2,143 violations. The RM365 Advantage Safety Star™ Program’s Ladder Safety module provides an in-depth practical overview of ladder safety from seasoned risk control experts. Utilize the SafetyOne platform’s online training courses, toolbox talks, risk observations and sample policies to ensure your employees are compliant with your company policy.

4. Scaffolding (Standard 1926.451)

This standard covers general safety requirements for scaffolding, which should be designed by a qualified person and constructed and loaded in accordance with that design. Employers are bound to protect construction workers from falls and falling objects while working on or near scaffolding at heights of 10ft or higher.

There were 2,859 scaffolding violations in 2023. Safety is everyone’s responsibility, so utilizing Rancho Mesa’s SafetyOne sample scaffold policy to provide a framework of best practices to help comply with OSHA Standard 1926.451. Reinforce your policy through toolbox talks, online courses and help prevent unsafe conditions with scaffold risk observations.

5. Powered Industrial Trucks (Standard 1910.178)

This section contains safety requirements relating to fire protection, design, maintenance and use of fork trucks, tractors, platform lift trucks motorized hand trucks and other specialized trucks powered by electric motors or internal combustion engines.

There were 2,561 violations in 2023. OSHA mandatory guidelines include operator training and certification, pre-shift inspections and operating environment restrictions. The best way to avoid these types of citations, is by using the risk observations in SafetyOne to document your equipment inspections. Ensure employees are trained by utilizing the toolbox talks and online training courses.

Rancho Mesa knows these top five citations can be avoided by reviewing safety programs often and ensuring they are effective. Clients can take advantage of the RM365 Advantage Safety Star™ Program that specifically addresses some of the most common citations.

To discuss your safety program, workers’ compensation or other insurance needs, contact me at (619) 937-0167 or sclayton@ranchomesa.com.

Unlocking Working Capital in Construction: Options for Reducing or Releasing Retention

Author, Andy Roberts, Surety Account Executive, Rancho Mesa Insurance Services, Inc.

Retention is a very common practice within the construction industry that typically involves 5-10% of each payment to the subcontractor being withheld until the project has been completed. The purpose behind this is simple, it is designed to make sure that subcontractors satisfy their contractual agreements before they receive their last payment for the work they have done.  While this practice serves a real purpose, it can cause significant issues for subcontractors if the payments are delayed.

Regardless of the reasons why a retention payment could be delayed, whether it be overall project completion delays or if there are issues with the work performed, the delay in payment can cause significant cash flow issues.  For subcontractors that do a lot of bonded work, cash flow issues will have a direct impact on their working capital which can have a negative impact on their bonding program.  However, there are some strategies that subcontractors can employ to get their payments released sooner, like negotiating the terms of the retention release in the contract. 

Prior to signing the contract, it is important that a subcontractor review and attempt to negotiate any unfavorable retention release terms. One option is negotiating a 10% retention down to 5% in the contract.  Should that not be achievable, subcontractors can provide performance and payment bonds which might convince the project owner and/or general contractor to lower the retention amount or release the retention sooner.

Performance and payment bonds protect the project owner and the general contractor in case the subcontractor fails to fulfill their contractual obligations, which is the main reason that retention is being withheld.  Therefore, the presence of bonds on the project may allow a subcontractor to negotiate terms that are more favorable to them, potentially lowering the percentage withheld from each payment, or even getting it released at earlier points within the project.   

While retention remains a standard practice within the construction industry, it can cause significant issues for a subcontractor should those payments be delayed.  So, negotiating these terms in all contracts is vital while also using the ability to provide bonds on the project as a solution to getting more favorable terms. 

Should you have any questions about this or you are having issues with retention being withheld, reach out to me at aroberts@ranchomesa.com or 619-937-0166.

Navigating the Construction Labor Shortage: Factors and Strategies for Success

Author, Kevin Howard, Partner, Rancho Mesa Insurance Services, Inc.

Construction companies nationwide are grappling with a shared challenge: a labor shortage propelled by various factors. In this article, we will explore these factors and highlight key areas that can contribute to managing bottom lines effectively.

Factors Contributing to the Labor Shortage

Focus on College over Skills Training. Younger people have been opting for academic paths rather than entering the trades. For years, students have been encouraged to attend college in order to have a successful career. Therefore, fewer recent high school graduates have opted to enter trade apprenticeship programs which has significantly reduced the number of people being trained to enter these vital fields.

Retiring Workforce. The imminent retirement of the baby boomer generation (born from 1946-1964) poses a significant challenge. Skilled workers, including superintendents, project managers, and jobsite managers, form a substantial portion of those exiting the workforce. This creates a demand for skilled workers and necessitates a heightened focus on training apprentices.

Inflationary Costs and Higher Wages. Attracting and retaining skilled workers has become a budgetary challenge. Pandemic-induced wage inflation has led to an increase in payroll, resulting in both higher training costs and salaries. Additionally, prevailing wage rates have reached historic highs, contributing to a slower pace in hiring entry-level trade positions for budgetary reasons.

Strategies for Success

As the construction industry struggles with the ongoing labor shortage, business owners must strategize to protect their bottom lines. While challenges persist, focusing on key areas can help mitigate the impact on productivity and costs. Some central aspects that merit attention and investment include:

Safety Training. With an influx of new, unskilled workers, prioritizing comprehensive safety training becomes paramount. This not only helps prevent injuries but also contributes to a safer and more efficient work environment.

Rancho Mesa’s SafetyOne™ mobile app and website provides proactive safety orientation training for new hires plus ongoing safety training for all employees.

Insurance Cost Management. Implementing robust safety measures can positively influence insurance costs. By minimizing workplace accidents and demonstrating a commitment to safety, construction companies can negotiate more favorable insurance premiums.

Using Rancho Mesa’s SafetyOne™ mobile app to monitor safety on the jobsite through risk observations provides the data to show they are committed to safety.

Claim Reviews and XMOD Management. Engaging in claim reviews in regular intervals with your broker to address lingering workers' compensation claims can serve as an effective strategy for minimizing insurance costs, particularly in terms of mitigating XMOD increases and improving overall loss ratios.

Rancho Mesa’s claim advocacy approach remains a critical tool for Rancho Mesa clients.  Jim Malone, the company’s claim advocate, communicates regularly with adjustors and helps advance claims to closure, thus helping insulate XMODS.

Strategic Workforce Planning. Develop long-term workforce plans that account for the aging workforce and the need for skilled labor. This may involve targeted recruitment efforts, partnerships with vocational schools, and apprenticeship programs.

While the construction industry faces substantial challenges due to the labor shortage, proactive measures in safety, insurance management, and strategic workforce planning can help businesses weather the storm and maintain a healthy bottom line.

For more information on these proactive strategies, reach out to me at (619) 438-6874 or  khoward@ranchomesa.com.

Cracking the Code: Deciphering the Primary Threshold’s Impact

Author, Greg Garcia, Account Executive, Rancho Mesa Insurance Services, Inc.

Every business owner understands the correlation between their Experience MOD (XMOD) and what they will pay in workers’ compensation premiums.  When the XMOD increases, there is a good chance that the workers’ compensation rates or premiums will rise as well.  This is why it is so crucial to really hone in on company safety procedures to limit work-related injuries as much as possible.  The reality is that even the safest company that does everything the right way is going to run into a workers’ compensation claim from time to time.

So, when the inevitable workers’ compensation claim happens, what are you supposed to do?  What impact will this have on the XMOD?  The first component that business owners need to understand is that there is a cap to how much any single workers’ compensation claim can impact the XMOD.  That cap is called the primary threshold.  The primary threshold varies from company to company and is based off of the company’s payroll.  The more payroll a company has the higher the primary threshold.

For this example, a company has a primary threshold of $15,000 where the maximum number of points that any one claim can impact the XMOD once reaching the threshold is 10 points.  This means that a claim that costs $15,000 and a claim that cost $150,000 will have the same impact (10 points against the XMOD).  However, this does not mean that claims that exceed the primary threshold can be disregarded, because the higher claim cost you have will impact your current and 5-year loss ratio (incurred claim cost/premium paid).  Additionally, if a claim that was reserved higher than the primary threshold and can be closed or decreased lower than the primary threshold, XMOD points can be shaved off of that claim.

Knowing the importance of the primary threshold, we designed our proprietary the KPI dashboard that allows our clients to see their primary threshold number and corresponding maximum impact to the XMOD any one primary threshold claim would have. 

If you have any questions about your XMOD or would like us to create a KPI for your company, please feel free to reach out to me at (619) 438-6905 or ggarcia@ranchomesa.com.

The Billion-Dollar Cost of Working at Height: The Critical Questions to Ask Before Climbing a Ladder

Author, Casey Craig, Account Executive, Rancho Mesa Insurance Services, Inc.

Every year, OSHA publishes a “top 10 most frequently cited standards” list. Without question, ladders and fall protection consistently make the list. A Liberty Mutual 2023 workplace survey found that $6.26 billion was spent on falls as a result of working at height. Working at height is inherently dangerous but becomes more so when the incorrect ladders are used or improper setup for a job. Sending your employees to a jobsite without conducting a proper analysis to guarantee you have the proper equipment is setting yourself up to have preventable claims.

Before choosing a ladder at for a job, ask yourself:

• Will the ladders on site reach your desired height safely?

• Do the pads need to be replaced on the feet of the ladder?

• Do I have a faulty ladder?

• Should I be using fiberglass or metal?

• Is the ground level or should I have a ladder with adjustable outriggers?

• Do I need a guardrail system on my ladder?

• Am I able to get the proper angel needed for an extension ladder?

• Do my employees have the proper footwear?

All potential claims from ladders are theoretically preventable if we take the time to prepare properly. Your employees can be working at height for long periods of time, sometimes on very hot or cold days and need to be alert both while at height and especially when getting down. A vast majority of claims we see from ladder falls come from slipping or missing the last rung on a ladder. Looking further into these accident investigations, we see that many employees are not getting enough breaks so they can stay mentally and physically alert.

Most contractors are equipped with step stools, step ladders and extension ladders but these might not be all that is needed to get the job done properly. Each of these serve a purpose and are the most common on job sites for a reason which is why most work can be completed using just these three types of ladders. However, just because we are able to reach our desired height does not mean that it is the most efficient way to get there. Having more intricate ladders available for certain projects has become increasingly more valuable.

According to the Bureau of Labor Statistics, fatal injuries from movable ladders has decreased by nearly 17% from 2019 to 2020 while non-fatal ladder injuries remained consistent (this is the newest data available published in April of 2022).  Things appear to be trending in the right direction with more information and safer ladders available. That said, ladder safety needs to be at the forefront of your safety program as those contractors working at height are always one slip away from a claim that can drastically change the live of an employee along with your insurance program.

If you have any questions on how to improve your ladder safety program or any other insurance questions, do not hesitate to reach out. You can contact me at ccraig@ranchomesa.com or call at (619) 438-6900.

Need a License, Permit, or Court Bond? Rancho Mesa Can Help

Author, Matt Gaynor, Director of Surety, Rancho Mesa Insurance Services, Inc.

During our recent budget discussions for the 2024 fiscal year, the Rancho Mesa Surety Department looked at a breakdown of the bonds we wrote in 2023.  As expected, 90% of our bond revenue was represented by the typical performance and payment bonds, subdivision bonds, bid bonds, bond riders, and consents of surety for our construction clients.

One area that surprised us was the volume of bonds classified as “non-contract” that we provide for both our construction and human resource clients.  While these type of bonds are small in size (bond amounts are usually $25,000 or below) they make up a large volume of bonds since many of our accounts require at least one or two of these.  Below I have identified four categories of non-contract bonds and several examples:

1. Court and Fiduciary: Plaintiff bonds include attachment, replevin, mechanic’s lien, and garnishment. While defendant bonds include appeal, supersedes, release of lien, and temporary restraining order bonds. We also placed various probate bonds to cover executors, administrators, guardians, and conservators.

2. License and Permit: Businesses and professionals may need mortgage brokers bonds, CA contractor license bonds, sales and use tax bonds, alcohol bonds, and compliance bonds.

3. Federal Official and U.S. Government: There are several types of bonds including public official bonds, U.S. customs bonds, and notary public bonds for those doing business with or for government entities.

4. Miscellaneous: Additional miscellaneous bonds could include financial guarantee bonds, utility deposit bonds, insurance program bonds, and lost securities bonds.

With over 1,000 types of bonds classified as “non-contract,” it can be overwhelming to determine which category of bond might fit a certain circumstance. That is where a Rancho Mesa bond agent brings value to provide direction and assist in placing the correct form of coverage.   

If you would like more information on various miscellaneous bonds that you might encounter, please contact me at 619-937-0165 or mgaynor@ranchomesa.com.

The Final Chapter: Addressing Training, Access and Recordkeeping in the IIPP

Author, Jack Marrs, Associate Account Executive, Rancho Mesa Insurance Services, Inc.

In this third installment of exploring an Injury and Illness Prevention Program (IIPP), we will be taking a closer look at: Providing employee training and instruction, procedures to allow employee access to the program, and recordkeeping and documentation.

Providing Employee Training and Instruction

Providing clear and effective training for both employees and supervisors is essential for the success of an IIPP. All employees are required to be fully aware of the workplace hazards they may face. Comprehensive and well-conducted trainings can help reduce the likelihood of work-related injuries and illnesses. An article from The State Fund suggests “If you are unable to conduct your own required trainings, you should reach out to an outside consultant, Cal/OSHA consultation, vendors, your insurance carrier, and/or broker for assistance.” The more knowledgeable and prepared employees are, the safer the work environment becomes.

Take a look at the training resources that are available to your organization. Rancho Mesa clients can access the online safety training courses in the SafetyOne™ platform.

Procedures to Access the IIPP

All employees are required to have access to the written IIPP. This will ensure that all employees are fully aware of the safety protocols and hazard prevention strategies used to minimize workplace accidents and illnesses and thus, maintain a safe workplace.

According to Cal/OSHA, employers can meet this requirement by:

1. Unobstructed access through a company server or website, which allows employees to review, print, or email a copy of the IIPP

2. When requested, provide a printed copy of the IIPP (unless the employee agrees to receive an electronic copy)

The IIPP can be made accessible to users of the SafetyOne mobile app. It allows organizations to upload digital files into a file cabinet that is available only to their users.  For employees who aren’t SafetyOne app users, they could scan a QR code or complete a webform to request the IIPP from their administrator.  However your organization decides to distribute the IIPP, it should be easy for employees to access or request.  

Recordkeeping and Documentation

Recordkeeping and proper documentation are crucial components of the IIPP. By maintaining accurate records, employers can learn from past incidents and identify injury and illness trends. This knowledge allows for necessary corrections and improvements in future operations, which will improve overall workplace safety. There are 5 steps required by the OSHA for a compliant recordkeeping system:

1. Each employer (unless exempt by size or industry) must record each fatality, injury, or illness that is work-related, is a new case, or meets one or more of the general recording criteria specified in Title 8, Section 14300.

2. Record each injury or illness on the Cal/OSHA Log of Occupational Work Related Injuries and Illnesses (Form 300) according to its instructions.

3. Prepare an Injury and Illness Incident Report (Form 301), or equivalent.

4. Annually review and certify the Cal/OSHA Form 300 and post the Summary of Work-Related Injuries and Illnesses (Form 300A) no later than February 1 and keep it posted where employees can see it until April 30.

5. Maintain the last five years of these records in your files.

A simple way to collect the incident information required for the OSHA logs (Form 300, 300A and 301) can be obtained by utilizing SafetyOne’s mobile forms. Either through the mobile app or via a QR Code or web link, employees can complete accident investigation forms and witness statements digitally.  Then, the person responsible for documenting and maintaining the OSHA logs, can review the reports that came in through the mobile app and document the OSHA logs in the RM365 HRAdvantage Portal.

Rancho Mesa will host several webinars in the coming months to assist clients with understanding the best practices for completing their OSHA logs using SafetyOne™ and the RM365 HRAdvantage Portal.

Cal/OSHA has a Guide to Developing Your Workplace Injury and Illness Prevention Program that is helpful for organizations that need some assistance with getting started.

Rancho Mesa also has a 6-page Sample Injury and Illness Prevention Overview for California Employers available through our RM365 HRAdvantage Portal.

Following these steps is a proactive approach to building a safer working environment for all employees. The bottom line, it’s all about mitigating accidents before they happen and building a safe work environment.

Please contact me with any questions regarding the IIPP at (619)-486-6569 or via email at jmarrs@ranchomesa.com.