The EMOD Number That Is Costing You Jobs: What Geotechnical Contractors Need to Know
By Justin MacKenzie | Geotechnical Contractor Insurance
The following is general guidance from an insurance perspective only. Coverage determinations depend on specific policy language, the facts of a claim, and applicable law. Consult a licensed insurance professional and qualified legal counsel for guidance specific to your operations.
Key Takeaways
An experience modification factor above 1.0 is a disqualifying condition on many geotechnical and specialty contractor bids. The proposal may never be read. The number on the prequalification form is often the last thing reviewed before a package is set aside.
The EMOD is a calculated outcome based on payroll data and loss history submitted to NCCI. Errors in that data, including miscoded claims and understated payrolls, can produce a mod that does not accurately reflect a contractor's actual safety performance. These errors are correctable.
When an elevated EMOD cannot be immediately corrected before a bid deadline, a good guy letter from the broker or carrier can provide context to the project owner. It does not guarantee acceptance but it gives the contractor a path to explain the circumstances.
The EMOD is a managed outcome, not a fixed number. Return to work programs, proactive claims handling, payroll accuracy, safety documentation, and correct classification codes all affect where the mod lands. Contractors who treat their EMOD as something that happens to them rather than something they influence are leaving a competitive disadvantage in place year after year.
The proposal package was complete. The pricing was competitive. The contractor had the right equipment, the right experience, and the right references for the job. The package was set aside before anyone read the scope.
The experience modification factor on the prequalification form was 1.08. The project required a mod of 1.0 or below. The contractor did not know that requirement was in the prequalification package until they called to ask why they had not heard anything.
This scenario plays out consistently in the geotechnical and specialty contractor market. The EMOD is one of the first things reviewed in a prequalification submission and on many projects it functions as a hard filter. A contractor whose mod exceeds the threshold does not get a second look regardless of their qualifications, their safety record, or the competitiveness of their price.
This article addresses the EMOD issue directly for geotechnical contractors: why the number matters so much in bid qualification, what causes an elevated mod, what options exist when the mod is above 1.0 and a deadline is approaching, and what the most effective levers are for bringing the mod down over time.
Why the EMOD Threshold Matters More in Geotechnical Work Than in Most Specialties
The experience modification factor is a workers compensation calculation that compares a contractor's actual loss history to the expected losses for their industry classification. A mod below 1.0 means the contractor has performed better than the industry average. A mod above 1.0 means they have performed worse. A mod of exactly 1.0 is average.
For most commercial contractors, the EMOD is primarily a pricing factor. It multiplies the workers compensation premium, so a contractor with a 1.15 mod pays 15 percent more for workers comp than a contractor with a 1.0 mod. That has budget implications but does not necessarily affect the contractor's ability to bid work.
Geotechnical and specialty foundation contractors frequently work as subcontractors to general contractors on significant commercial, industrial, and public works projects. General contractors prequalify their subcontractors before allowing them to bid, and workers compensation safety performance is a standard component of that prequalification. Project owners, particularly public agencies, institutional clients, and sophisticated private developers, often impose their own prequalification requirements on specialty subcontractors as well.
The 1.0 threshold is the standard benchmark in most prequalification requirements. A contractor with a mod above 1.0 is statistically worse than average on workers compensation losses. Many project owners and general contractors treat that as a disqualifying condition, particularly on projects where the specialty contractor will be working in high-consequence environments near existing structures, in confined spaces, or with heavy equipment.
For a geotechnical contractor, the practical consequence of an elevated EMOD is not just higher workers comp premium. It is lost access to the project pipeline. A contractor with a 1.10 mod who would otherwise be the low bidder on a significant micropile or ground improvement project may not get to submit a proposal at all.
How the EMOD Is Calculated and Why Errors Matter
The EMOD is calculated by the National Council on Compensation Insurance (NCCI) in most states using payroll data and loss information submitted by the contractor's workers compensation carrier. The calculation looks back three policy years, excluding the most recent completed year, which means the mod published today reflects experience from roughly one to four years ago.
The calculation compares actual losses to expected losses for the contractor's payroll volume and classification codes. Larger contractors carry more credibility weight in the calculation, meaning their actual experience drives the mod more directly. Smaller contractors are blended with industry averages to a greater degree, which can work in their favor when experience is poor but limits the credit available when experience is excellent.
Two specific aspects of the calculation matter significantly for how the mod is affected by claims.
Medical only versus indemnity claims. Medical only claims, those that do not involve lost time from work, are discounted by 70 percent in the NCCI formula. A medical only claim of ten thousand dollars carries the same weight in the mod calculation as an indemnity claim of three thousand dollars. A claim that is coded as indemnity when the injured worker actually returned to work without lost time is carrying three times the mod impact it should. Identifying and correcting these miscoded claims is one of the most direct ways to reduce an inflated mod.
Payroll accuracy. The expected losses in the mod calculation are based on the contractor's payroll. If the payroll submitted to NCCI was based on estimated figures that were significantly lower than the audited payroll, the expected losses are understated, which makes the actual losses look worse by comparison and pushes the mod higher. Correcting payroll data errors before NCCI publishes the final mod can have a meaningful impact on the calculation.
Both of these errors are correctable if caught before the final mod is published. NCCI publishes a preliminary mod before the effective date, which gives contractors and their brokers a window to identify and dispute errors in the underlying data. Brokers who actively review the payroll and loss data submitted to NCCI by your carrier before the preliminary mod is issued and who are prepared to contact the carrier to correct data errors can prevent inflated mods from becoming permanent. After the final mod is published the correction process becomes more difficult.
When the Mod Is Above 1.0 and a Bid Deadline Is Approaching
A contractor who discovers their EMOD exceeds the prequalification threshold after the preliminary mod has been published but before a bid deadline has limited options. The window to correct data errors has narrowed. The calculation is largely set. But there are steps worth taking.
Review the unit statistical report for errors
Even after the preliminary mod is published, errors in the underlying data can sometimes be corrected before the final mod is issued. The unit statistical report shows the payroll and loss data submitted to NCCI by the carrier. If a claim is miscoded as indemnity when it should be medical only, if payroll figures are based on estimates rather than audited numbers, or if a claim has an inflated reserve that does not reflect actual exposure, these are grounds to contact the carrier and request a data correction before the final publication date. The timeline is short but the correction is worth pursuing.
Request a good guy letter
When the elevated mod cannot be corrected before a bid deadline, a good guy letter from the broker or carrier can provide the project owner with context about why the mod is above 1.0 and why it does not accurately represent the contractor's current safety performance or trajectory.
A good guy letter typically explains the specific circumstances that drove the mod above 1.0, such as a single large claim that is anomalous relative to the contractor's historical experience, a data error that has since been corrected, or a claim that occurred under circumstances that have since been addressed through operational changes. It may also describe the contractor's current safety program, their claims management practices, and the trend in their loss history that supports the argument that the elevated mod is temporary rather than structural.
A good guy letter does not guarantee that a project owner will waive the EMOD requirement. Some owners treat the threshold as a hard rule with no exceptions. Others will consider the context and make a judgment call about whether the contractor's actual safety performance justifies an exception. The letter gives the contractor a path to make that case. Without it, the proposal is simply set aside.
The letter works best when it is specific, factual, and written by someone with credibility in the insurance market. A letter from a broker who specializes in specialty contractor insurance and who can speak to the contractor's actual loss history, their safety practices, and the specific circumstances behind the elevated mod carries more weight than a generic letter. The project owner is being asked to make an exception to their standard requirements. The more substantive the explanation, the more likely the exception is to be considered.
Is your EMOD costing you bids you should be winning?
Get a review of your unit statistical report and mod calculation. justin@fstwest.com
The Levers That Actually Move the EMOD
The most effective approach to EMOD management is not reactive. It is the ongoing operational discipline that keeps the mod below 1.0 consistently rather than scrambling to explain why it is above 1.0 before a bid deadline. The following are the specific levers available to geotechnical contractors who want to treat their EMOD as a managed outcome.
Return to work programs
The single most impactful thing a geotechnical contractor can do to manage their EMOD is convert indemnity claims to medical only claims through a formal return to work program. As noted above, medical only claims are discounted 70 percent in the NCCI formula. An injured worker who returns to modified duty rather than collecting indemnity benefits converts what would be a full-weight indemnity claim into a discounted medical only claim.
For geotechnical contractors whose workforce performs physically demanding work in the field, modified duty programs require creativity. A drilling crew member who cannot operate equipment due to a back injury may be able to perform safety monitoring, flagging, documentation, or site inspection duties. The key is having a formal program in place before an injury occurs so that modified duty options are identified and available rather than improvised after the fact.
Return to work programs also signal to carriers that the contractor is actively managing their claims, which affects how underwriters evaluate the account at renewal.
Proactive claims handling
Open claims with inflated reserves have a direct impact on the EMOD. The NCCI formula uses the value of claims as reported during the experience period, which includes both paid losses and reserves. A claim with a reserve that overstates the likely ultimate cost is carrying more weight in the mod calculation than the actual exposure warrants.
Proactive claims handling means staying engaged with the carrier's adjuster on open claims, providing updated information about the injured worker's status and return to work progress, and requesting reserve reviews when the facts of the claim support a lower reserve. It also means ensuring that claims are closed promptly when the injured worker has reached maximum medical improvement rather than being left open with reserves that continue to influence the mod.
Contractors who treat claims as the carrier's problem once they are reported, rather than actively participating in their management, often find their mods elevated by reserves that do not reflect reality. A broker who regularly reviews open claims with the contractor and advocates with adjusters for accurate reserves is providing meaningful value that shows up directly in the mod calculation.
Safety meetings and documented safety programs
Formal safety programs and documented safety meeting records serve two purposes in the context of EMOD management. The direct purpose is preventing injuries that generate claims. The indirect purpose is demonstrating to carriers and underwriters that the contractor has the operational discipline to sustain low loss rates.
For geotechnical contractors, site-specific safety plans, pre-task planning documentation, toolbox talk records, and incident investigation reports are the evidence that supports favorable underwriting treatment. Carriers who specialize in specialty contractor workers compensation evaluate safety program quality as part of their underwriting and pricing decisions. A contractor who can demonstrate consistent, documented safety practices is a better risk than one whose safety culture exists only informally, even if their loss histories look similar at the moment.
Over time, a genuine safety culture produces fewer injuries, which reduces claims, which improves the EMOD. The documentation is evidence of the culture. The EMOD improvement follows.
Payroll accuracy and classification code review
Classification codes determine how much expected loss is assigned to each dollar of payroll in the EMOD calculation. Correct classification of employees is essential to ensuring the expected loss baseline is accurate. Employees misclassified into higher-risk codes than their actual duties warrant generate inflated expected losses that make the mod calculation less favorable. Employees misclassified into lower-risk codes create an artificially low expected loss baseline that makes actual losses look worse by comparison.
For geotechnical contractors who employ workers in multiple roles, field operators, equipment mechanics, supervisors, engineers, and office staff all carry different classification codes with different expected loss rates. A payroll audit that confirms employees are correctly classified, and that the payroll allocated to each code reflects actual duties rather than administrative convenience, can improve the expected loss baseline and produce a more accurate mod.
Payroll growth also affects the mod in ways contractors do not always appreciate. As a contractor grows their payroll, the expected losses in the mod calculation grow proportionally. A claim from two years ago that was significant relative to the payroll at that time becomes less significant as a percentage of a larger current payroll. Contractors who have grown meaningfully in the past three years may find that their mod improves simply as a result of that growth, even without any change in their loss frequency or severity.
The Timeframe: How Long It Takes to Move the Mod
One of the most important things to understand about EMOD management is that the results of the actions taken today do not show up in the mod immediately. The calculation looks back three years excluding the most recent completed year. Changes in loss experience today begin affecting the mod calculation roughly two years from now and continue to improve it for three years after that.
This means that a contractor whose mod is elevated today because of claims from two and three years ago is already benefiting from any improvements made since then, but those improvements will not be fully reflected in the mod for another year or two. Conversely, a contractor whose recent experience has been poor should expect the mod to continue reflecting that experience for the next several years even if operations have improved significantly.
The practical implication is that EMOD management is not a short-term fix. It is a multi-year operational commitment. Contractors who start implementing return to work programs, proactive claims handling, and rigorous safety documentation today are building a mod trajectory that will show up in their prequalification submissions two to three years from now. The contractors who consistently win bids on significant geotechnical projects at competitive prices are the ones who made those commitments years earlier and have the EMOD to show for it.
Frequently Asked Questions
We just got rejected from a prequalification because our mod is 1.05. Is there anything we can do before the next bid cycle?
Start by asking your broker to pull the underlying data NCCI used to calculate your mod and review it for errors. If there are miscoded claims or payroll errors that are inflating the mod, those may be correctable before the next annual publication date. In parallel, ask your broker to prepare a good guy letter that explains the specific circumstances behind the elevated mod and documents your current safety program and loss trajectory. Some project owners will consider the context, particularly if the mod is only modestly above 1.0 and the explanation is substantive. On the operational side, implement or formalize a return to work program now so that the next injury that occurs has a path to medical only rather than indemnity status. The mod improvement from that change will begin to appear in the calculation within two years.
We had one large claim two years ago that is driving our entire mod. Is there anything we can do about a single large claim?
A single large claim in the experience period can significantly elevate the mod, particularly for smaller contractors where credibility blending gives more weight to actual experience. The most immediate action is confirming that the reserve on that claim accurately reflects the likely ultimate cost rather than a worst-case estimate. Inflated reserves on a single large claim can add significant points to the mod. If the claim is still open, active engagement with the adjuster to manage the reserve and close the claim when appropriate is the most direct lever available. If the claim has closed, the data is set and the path forward is preventing similar claims in the current experience period while the old claim rolls out of the three-year window.
Our carrier submitted wrong payroll data to NCCI. Can that be corrected?
Yes, and correcting it promptly is important. NCCI publishes a preliminary mod before the effective date, which gives a window for corrections before the final mod is issued. If the preliminary mod reflects payroll data that does not match the audited payroll figures, contact your broker immediately. The broker can work with the carrier to submit corrected data to NCCI before the final publication date. After the final mod is published, corrections become more difficult and may require a formal dispute process. The preliminary mod review is a step that should happen every year as a standard part of your renewal process, not only when something looks wrong.
How does a return to work program actually work for a geotechnical contractor whose crew members perform physically demanding field work?
The key is identifying modified duty roles before an injury occurs rather than improvising after. For a geotechnical crew, modified duty options might include safety observation and documentation at the job site, traffic control or flagging, equipment inspection and maintenance documentation, materials receiving and inventory, or project administration support. The specific roles available depend on the contractor's operations, but the principle is that almost any contractor can find meaningful work that an injured employee can perform without the physical demands of their normal duties. Documenting these modified duty options in a formal return to work policy, communicating them to the workforce, and implementing them consistently when injuries occur is what converts the idea into actual mod savings. A carrier who sees a contractor with a formal, documented return to work program and evidence that it has been used successfully will reflect that favorably in underwriting.
About the Author
Justin MacKenzie is a Commercial Lines Producer at First West Insurance, licensed in all 50 states, specializing in insurance and surety programs for ground improvement and geotechnical contractors. Before moving into insurance, Justin spent over two decades in commercial real estate development and construction, working across more than a million square feet of projects with Fortune 500 companies, private equity firms, and national retailers, giving him a firsthand understanding of how construction contracts, subcontractor relationships, and risk transfer obligations actually work in practice. justin@fstwest.com
This article is for general informational purposes only and does not constitute professional insurance or legal advice. Coverage availability, terms, and conditions vary by insurer, jurisdiction, and individual risk characteristics. Consult a licensed insurance professional for guidance specific to your operations.
