CREATE AN ACCOUNT
LOG IN

Property Underwriting

A guide to key risks in Washington state: fire, wildfire and earthquakes.


Help Center

Self-serve articles on how to use our products. Available 24/7. 

Commercial Property

Information on Loss Costs, policy rating and assessment tools 


InsuranceEDGE

Weekly newsletter covering the P&C industry, curated by our experts. 

Protection Classes

The evaluation process explained from start to finish.


WSRB Blog

News on emerging risks as well as our latest products. 

Library

In-depth content on essential insurance topics.


Industry Toolkit

Links to help you work smarter and serve your customers.  

To Be Class Rated or Not To Be, Rule 85

August 21, 2018

Can your commercial risk be rated on a class basis, or must it be specifically rated? Rule 85 will tell you. To help you understand when you need to order an inspection to get a specific loss cost, we've updated one of our most popular blog posts. Read on to learn more about Rule 85 and how to apply it.

Rule 85 is a powerful tool, but at 11 pages, it’s not the simplest rule in the Commercial Lines Manual (CLM). We’re going to break it down for you, explaining what Rule 85 is and what you need to know about it.

In addition to determining how to rate a building, Rule 85 also provides Basic Group I (BGI) loss costs for properties eligible for class rating.

Here are the key components of Rule 85, which you can read in full in Division Five of the CLM.

Class rating

Most businesses are eligible for class rating. Similar businesses have similar risks, including exposure to loss and probability of sustaining damage. These risks are statistically analyzed, producing loss costs that reflect the typical chance of loss for a typical business in each class.

Each class is assigned a Commercial Statistical Plan (CSP) classification code. It’s important to note: class loss costs contemplate average conditions of occupancy and maintenance and typical construction.

Several skyscrapers in Seattle, most of which need specific ratingsMany buildings can be class rated, but some must be specifically rated.

 

Related:
WSRB's Essential Guide to Commercial Property Risk Assessment

 

Specific rating

Some risks are not eligible for a class rating. Larger, more complex businesses require specific rating, as do those involved in hazardous operations.

Physical inspections are necessary to develop a specific Basic Group I loss cost, which provides coverage for a particular group of perils, including fire, lightning, explosion, vandalism and sprinkler leakage. A CSP classification code is also assigned as a result of an inspection.

If you are a WSRB Subscriber, you can arrange for an inspection in Washington state free of charge. Simply login to the member site and request one.

Calculating the rate

Once you know if your risk is class or specifically rated and you have your loss cost multiplier, you can apply the variables to calculate the rate. Use this formula for both types of risk:

Rate = Loss Cost x Company filed-and-approved Loss Cost Multiplier

or

LC x LCM = Rate

 

Related:
CSP Classification Codes Explained: What You Need to Know

 

Class loss costs

To determine a class loss cost, the following information is required:

  • Construction of the building as defined in Rule 15 of the CLM, or if the risk has mixed construction, as indicated in Rule 85.
  • Area and height of the building.
  • Protection Class, which you can obtain by logging into the Subscriber portion of our website.
  • The building’s occupant and related CSP class code.

Class rating categories: general, habitational and special

Rule 85 addresses these three categories, which we’ve summarized for you.

General Class Rates

Certain types of occupants are eligible for rating within the General Class Rates category. They include mercantile or non-manufacturing businesses, some light manufacturing and warehouses. Depending on the occupant, area and height restrictions may apply. Keep in mind: only certain CSP class codes are eligible.

Example: A building with frame construction housing a 6,000-square-foot retail store is typically rated under General Class Rates. But, if the same retail store occupied a modified fire-resistive structure, it would not be eligible for a General Class Rating.

Some occupants are not eligible for General Class Rates. Usually, these businesses are engaged in hazardous practices. An auto body shop offering spray painting, for example, is considered a greater risk than an office  because of the volatile chemicals in use.

General Class Rating also comes with area and height restrictions. Generally, buildings can’t be over two stories. Note: basements, sub-basements and mezzanines are not included when determining height and floor area of a building.

Of course, there are exceptions — a building occupied by a church is exempt from the height restriction, and with greenhouses, the area limitation does not apply. Check Rule 85 in the CLM for other exceptions.

If a property can be rated under any of the following areas, it is not to be rated using General Class Rates:

  • The Dwelling Policy Program.
  • Classified under CLM Division Four, Farm.
  • Habitational Class Rates as defined in Rule 85.
  • Special Class Rates as defined in Rule 85.
  • Sprinklered risks.

If multiple occupants inhabit the building, Rule 85 addresses how to assign the correct Basic Group I CSP class code.

 

Related:
RCP Codes Demystified

 

Habitational Class Rates

Rule 85 spells out specific occupants eligible for Habitational Class Rates. These include apartments and condominiums, hotels and motels as well as convents and monasteries and several others.

In general, a Habitational building can also include light service occupants, such as libraries or offices, as well as some mercantile occupancies. But be careful, there’s a restriction on the amount of area these businesses can occupy.

Ineligible occupancies (like spray painting) are listed in the CLM and are basically the same as those not eligible for General Class Rates.

As with General Class Rates, there are properties that are not eligible for Habitational Class Rates. They include properties eligible for:

  • The Dwelling Policy Program.
  • CLM Division Four, Farm.
  • Sprinklered risks (Pro tip: Connect with WSRB so the building can get sprinkler credit).
Special Class Rates

There needs to be a way to rate everything. Special Class Rates accommodate those unique situations — property in the open or a risk that can’t be rated elsewhere, like artificial turf or a swimming pool.

Now you understand the basics of Rule 85. If you need assistance interpreting the complete rule, or have other rating questions, please know we are here to help.

Guy-reading-insuranceEDGE

InsuranceEDGE


Like our blog? Check out InsuranceEDGE. We curate the week’s must-read stories from top industry sources. You stay informed and save time.

START READING

You May Also Like

These stories on policy rating

Sign up for our blog