CLASSIFYING RISK

By Linda D. Ferguson, CPCU

LET THE FUN BEGIN

Finding the right coverage for amusement parks

Today's amusement parks ... include restaurants, grandstands, live performances, exciting roller coasters and so much more. How can all of the exposures ever be rated?

Across the country, the advent of summer and hot weather means crowds at the amusement parks. Whether it's one of the many Six Flags parks or Branson, Missouri's Silver Dollar City or roller coaster capital Cedar Point in Sandusky, Ohio, the crowds are as much a part of summer as baseball, hot dogs and long days at the beach.

Today's amusement parks make early parks pale by comparison. They include restaurants, grandstands, live performances, exciting roller coasters and so much more. How can all of the exposures ever be rated?

Just as most amusement parks now charge one entrance fee to ride all of the rides, ISO has made rating an amusement park incredibly easy by charging one rate for all activities in the park. The code is Amusement Parks - 91135. The rate is based on all sales within the park--gate revenues, parking fees and restaurant proceeds, to name a few.

However, amusement parks are not the only place with rides and coin-operated amusement devices. It seems that whenever a location is intended to be family-friendly, there are machines ready to take quarters and children waiting for the opportunity to ask for just one "something." Are these just part of the classification codes for the particular activity?

According to the General Liability Rule 26, Classifications - Scope of Application, amusement centers and amusement devices are excluded from the scope of any classification unless it is specifically so stated in the footnotes. This means that if such centers are part of a restaurant, hotel, movie theater, supermarket, department store or any other type of operation, a separate classification must be shown and a separate charge must be made.

The Amusement Center Classification uses code 10015. This addresses pinball machines and other coin-operated devices. The center can operate independently as an arcade or can be a part of another operation such as a restaurant, movie theater or a shopping center. The footnote for this classification makes it clear that this code is not to be used along with an amusement park. This means that the amusement park cannot separate the sales from the amusement center and use the lower rate for the center to develop the premium.

There are three Amusement Device classifications. Two are used in connection with carnivals and fairs. Code 40042 is used if the operation is not for profit and 40041 is used if the operation is other than not for profit. The remaining code is 40040 which is a Not Otherwise Classified code.

The codes 40042 and 40041 are used with devices that are mobile in nature and are set up only for short periods of time and then moved and set up at another location for short periods of time. These are the rides that appear at the county fair, on local parking lots and at school fundraisers. It is important to note that these classifications are related only to the rides and that other classifications are needed for the circus and carnival companies and other activities that may be part of the activity.

The final classification is Amusement Devices NOC - 40040. This is meant for the devices that do not fit either the 40042 or the 40041 classification. While the footnote specifically states that the devices that are located outside the supermarkets and department stores are included in the classification, this is not a limiting statement. Amusement devices that are part of this classification may be located anywhere, provided they do not fit into any of the classifications described above.

All of these classifications use sales as their premium basis. It is important that the sales for these operations be kept separate from other operations for auditing purposes. Remember that according to premium audit rules, the highest rated classification is the one used whenever operations are commingled. This can mean that a low rated classification could be charged a substantially higher premium if the amusement device classification sales are commingled instead of kept separate. *

The author

Linda D. Ferguson, CPCU, has 30 years of underwriting experience with national commercial lines carriers. She is vice president of Technical and Educational Products at The Rough Notes Company, Inc.