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Standard Classifications and Assignments by Analogy

October 30, 2013
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In this edition: Standard classifications and assignment by analogy

One of the challenges faced by underwriters, agent and brokers, and even policyholders, is determining the proper classification for a business operation when there is no classification in Part 3 of the California Workers' Compensation Uniform Statistical Reporting Plan-1995 (USRP) that specifically describes the operation. In these situations, the USRP directs that a classification is assigned by analogy.

The USRP provides the following instructions at Part 3, Standard Classification System, Section III, General Classification Procedures,
Rule 1, Classification Description:

a.)  Any business or operation specifically described by a classification shall be assigned to that classification.
b.)  Any business or operation not described by a classification shall be assigned to the classification(s) most analogous from the standpoint of process and hazard.

The USRP contains over 700 classification descriptions, so the first step is to ensure that there is not an existing classification that describes the business. If there is a classification that specifically describes the business, that classification must be assigned, and assignment by analogy to another classification is not permitted.

For example, Classification 2501(1), Clothing Manufacturing, contemplates cutting and sewing of fabric to produce clothing. Classification 2501(1) is often assigned by analogy to employers that cut and sew fabric to produce other non-clothing items. For this reason, 2501(1) is often the first classification that comes to mind for employers engaged in cutting and sewing operations. Classifications such as 2576, Awning, Tarp or Canvas Goods Mfg., and 2571, Pillow, Quilt, Comforter or Cushion Mfg., also include cutting and sewing operations, and must be assigned to the operation if they more specifically describe the employer's operations.


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