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What Does The LCF Designation Mean In My Workers Comp Policy?

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LCF Designation Question – Workers Comp Policy

We have received this question in the last month from two risk management consultants.  What does the LCF designation stand for in our Workers’ Comp policies?  The question pops up now and then when talking with larger companies.

One definition covers Retrospective Rating Plans and the other covers PEO policies usually in California.

Picture of Atlas Air LCF Designation 747
Public Use License – Eric Salard -747 LCF

LCF Designation – Retrospective Rating Plans

The LCF designation here can be written as L/C/F.  The term is defined by the workers’ comp rating bureaus – (NCCI, WCIRB, and others) as:

Loss Conversion Factor – The loss Conversion Factor is a claims handling fee included for the administrative cost the carrier assumes when handling the claims. The Loss Conversion Factor is usually a percentage of losses, typically 10 percent to 15 percent. Tax Multiplier reflects state premium taxes, licenses, fees, and miscellaneous assessments that the insurer must pay on the premium it collects.

Your policy – which you probably already know – is a retrospective policy.  The retrospective premium usually referred to as retro premium has the LCF designation as one of its main components.

The WCIRB (CA) provides a great example of a retro premium policy here.   The example covers 49 pages and is CA-specific.   The terms covered are a great place for reference.

In PEO Policies

One of the lesser-known terms that causes confusion is the LCF contained in PEO policies.   PEOs are Professional Employer Organizations.   NAPEO provides a great definition:

PEOs provide human resource services for their small business clients—paying wages and taxes and often assisting with compliance with myriad state and federal rules and regulations.  In addition, many PEOs also provide workers with access to 401(k) plans, health, dental, and life insurance, dependent care, and other benefits not typically provided by small businesses. 

In PEO policies, the Client policy in name of Labor Contractor AND “Leased Coverage For” or the acronym “LCF” is  followed by the client’s name in Item 1 of the policy (declarations page)

A great example

An “LCF” designation (“Leased Coverage For”) in the far left box on a WCIRB coverage sheet reflects an approved
arrangement where the employees of a leasing company are covered while working at a client of the leasing company. For example: “ABC LEASING, INC. LCF A-1 TIRES & DONUTS” means the insurer of ABC Leasing has agreed to provide coverage to ABC’s client (Tires & Donuts), which will be specifically listed within the insurance policy.  

You may see the LCF designation on any certificates of insurance issued by the carrier or you may also see the PEO’s name as the first line of the insured with the A-1 Tires and Donuts listed second.

This LCF designation on the Dec Pages sometimes appears in other states than California.

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications

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