SECTION III – GENERAL PROVISIONS

A risk shall qualify for rating under this Plan if the premium developed by the audited payrolls or other exposures of the experience period, extended at current PCRB Loss Costs, is $5,000 or more.

1. 1. Eligibility requirements will be determined without consideration of Maritime Liability, Liability under the Federal Employers’ Liability Act, Excess Limits and Additional Medical Coverage, the nonrateable element for Explosives Manufacturing, and Atomic Energy Projects.
   2. Risks shall be disqualified by a lapse of insurance of two years or more until they again qualify for experience rating following the lapse.
   3. The RED may differ from a risk’s policy effective date for reasons including, but not limited to:
      • Short–term policies
      • Cancellations
      • Gaps in Coverage
      • Changes in ownership or combinability status
      • Multiple policy effective dates
      • A policy that is longer than one year and 16 days
      • Late receipt of current policy information by the PCRB

To determine a risk’s RED, the PCRB will review the most recent full–term policies and unit statistical data. For purposes of this rule, a full–term policy is written for 12 months and is not cancelled prior to its expiration date.

The application of Rules 2 and 3 of this section is subject to the provisions of Section V “Tabulation of Experience” of this Plan.

The experience period, except as otherwise provided in Rules 3 and 4 of this Section, shall be not more than three (3) years, commencing four (4) years prior and terminating one (1) year prior to the date for which an experience modification is to be established, but in no event shall be less than the one policy year (twelve months) commencing two (2) years prior and terminating one (1) year prior to the date for which an experience modification is to be established. Completed policy periods only shall be used and all such periods wholly within the experience period shall be used.

If for any reason a part of the earliest policy period falls outside of the normal three (3) year maximum period, such earliest policy period shall be retained in full provided the entire experience period does not then exceed three and three-quarters (3¾) years and shall be rejected in full if its retention serves to increase the experience period beyond three and three-quarters (3¾) years.

If the experience used in rating a risk involves two or more policies varying in expiration date, the experience period shall be determined for each entity separately in accordance with the foregoing rules, except that the experience for each non-controlling entity shall close with the completed policy period beginning more than one year and terminating not less than six months prior to the date for which an experience modification is to be established.

The experience of the risk (except as otherwise provided in Rule 5 of section of IV and Rule 1 of Section V of this Plan) incurred within the experience period on all its operations, whether such operations are normal to the business or otherwise, shall be reported and used in determining the experience modification. The PCRB will verify any or all the data from which the experience modification is to be determined.

The experience of self-insurers may be accepted by the PCRB provided the experience on self- insured operations is submitted on the approved form, giving the required information with respect to payrolls and losses. Such statement shall be secured, verified and submitted by an interested carrier.

Self-insured experience shall not be used in rating a risk unless the operations that produced such experience are to be insured under a Standard Workers Compensation and Employers’ Liability Policy.

Ownership interest shall be deemed to be vested in a fiduciary when a fiduciary is involved. However, “Fiduciary” shall not include a debtor in possession or a trustee under a revocable trust or a franchisor. Ownership interest held by an entity in a fiduciary capacity and ownership interest held by the same entity in a non-fiduciary capacity shall be deemed to be ownership by the same entity.

1. 1. Affiliates shall not be combined for rating purposes if: provided, however, that combination shall be made as respects entities in each of which the same person, or group of persons, or corporation owns a majority interest and
      1. The affiliates involved constitute the component parts of an enterprise performing a continuous and/or integrated process or operation, or
      2. There is interchange of employment (other than office and salesmen) between two or more of the affiliates involved in the combination.

Separate policies may not be issued to affiliates, which are required to be combined under this rule.

1. 2. Affiliates which are not required to be combined under Rule 8(a) may be combined upon the mutual agreement of the risk and the carrier(s) involved. If such combination is agreed to, insurance may be provided either by a single policy insuring all affiliates, or by separate policies for each affiliate issued by one or more insurance carriers. In the latter case, the experience modification established for the entire risk shall apply on each policy to each affiliate. If all affiliates are not combined, then each affiliate not otherwise subject to Rule 8(a) shall be insured under a separate policy and rated on its own experience, providing it meets the qualifications for experience rating as specified in Rule 1 of this Section.
   3. When one or more mandatory combinations of affiliates under Rule 8(a) exist, insurance for each such combination may be provided by a single policy. Each mandatory combination and any other affiliates which are not required to be a part of any mandatory combination pursuant to Rule 8(a) may be separately rated and separately insured. Exception: If any one or more affiliates not required to be combined under Rule 8(a) or mandatory combinations voluntarily choose to be insured under a single policy, then all affiliates shall be insured under a single policy and the experience modification established for the entire risk shall apply to each affiliate.

Example: Five legal entities are commonly owned. Company A and Company B have an interchange of employees. Company C and Company D have a continuity of operations. Company E is unrelated except through ownership.

By Rule 8(a), Company A and Company B must be combined for rating and must be covered by a single policy. Similarly, by Rule 8(a), Company C and Company D must be combined for rating and must be covered by a single policy. Company E may be separately rated and covered by a separate policy.

If any combination of these separate policy coverages is elected, then all commonly-owned entities must be combined for Experience rating and must be covered by a single policy. Thus, if Companies A and B desire to be combined with Company E, they must also combine with Companies C and D, and all must be covered by a single policy.

1. 4. If an entity owns a majority interest in another entity which, in turn, owns the majority interest in another entity, all entities so related shall be considered as being under the same ownership for the purposes of this rule, regardless of the number of entities in succession.
   5. Separate legal entities organized for religious purposes within the same religious denomination shall not be combined for Experience rating purposes, provided, however, that combination may be made as respects all such entities in each of which the same central authority appoints or controls the appointment of the board of trustees or similar body and exercises direct, complete and active control over the finances, properties, operations and activities.
      In the term “majority interest,” as used in this rule, “majority” shall mean more than 50 percent.
      If an entity other than a partnership:
      1. has issued voting stock, majority interest shall mean a majority of the issued voting stock.
      2. has not issued voting stock, majority interest shall mean a majority of the members.
      3. has not issued voting stock and has no members, majority interest shall mean a majority of the board of directors or comparable governing body.

If an entity is a partnership, majority interest shall be determined in accordance with the participation of each general partner in the profits of the partnership.

Note: If a combination of entities is required or has been elected and if two or more different combinations are possible in accordance with the provisions of this rule, the combination involving the greatest number of entities shall be made. The experience of any entity used in such a combination shall not be used in combination with any other entity.

The experience to be used in any combination for purposes of the Experience Rating Plan shall be subject to the provisions of the Rule 8, “Ownership Changes,” of this section.

1. 6. Affiliates combined for rating voluntarily (i.e., not a mandatory combination), which wish to change their rating option and have each affiliate separately rated based on its individual experience, may petition the PCRB to do so. Upon PCRB approval, separate policies must be issued for each affiliate. Unless the PCRB is provided with the segregated experience needed to produce separate ratings for each affiliate in an acceptable format, each affiliate will continue to be rated using combined experience for any policy period(s) for which segregated experience is not available and its own separately reported experience for policy period(s) subsequent to the separation.

1. 1. For purposes of this Plan, a change in ownership includes any of the following:
      1. sale, transfer or conveyance of all or a portion of an entity’s ownership interest
      2. sale, transfer or conveyance of an entity’s physical assets to a purchasing entity which takes over the operation of the selling entity and wherein the selling entity
         1. becomes entirely inactive with no employees or
         2. retains a few employees for the purpose of closing out its affairs prior to dissolution as a legal entity or
         3. retains a few clerical employees for the purpose of carrying on operations in connection with investment of its financial assets
      3. merger or consolidation of two or more entities
      4. formation of a new entity subsequent to the dissolution or non-operative capacity of an entity
      5. voluntary or court mandated establishment of a trustee or receiver, excluding a debtor in possession, a trustee under a revocable trust or franchisor
   2. Reporting Requirement. When an ownership change occurs, the 90 Day Reporting Requirement – Notification of Change in Ownership Endorsement (W C 00 04 14 A) requires any change in ownership and/or combinability status be reported in writing by the employer to its carrier within ninety (90) days of the date of the change. This can be accomplished by submitting a completed Confidential Request for Information Form (ERM-14 form) or by providing the information in narrative form on the letterhead of the insured, signed by an officer of the entity.
   3. Failure to report changed in ownership in line with Endorsement WC 00 04 14 A may be considered modification evasion. See Section 111, 9-h.
   4. Continuation of Experience. Unless excluded under paragraph (d), the experience for any entity undergoing a change in ownership shall be transferred to the experience of the acquiring, surviving or new entity. The date of revision will be the later of the following two dates: 1) the effective date of the policy in effect at the time the PCRB receives a completed ERM-14 form outlining the ownership change or 2) the date on which the change in ownership occurred.
      1. Partial Sale: If an entity disposes of a part of its assets or operations but otherwise continues to operate its business, all experience incurred prior to the sale shall be used in future ratings of the entity.

Future experience ratings of a risk shall retain all experience for any part of its operations which may have been discontinued or self-insured.

1. 5. Exclusion of Experience. The experience of any entity undergoing a change in ownership shall be retained and used in future experience ratings unless one or both of the following requirements (i) and (ii) are met at the same time of the ownership change:
      1. A change in majority interest occurs and the change in majority interest is accompanied by a complete change in operation and function sufficient to result in a change of governing classification and the change in majority interest is accompanied by a change in the process and hazard of the operation
      2. A change in majority interest occurs and the change in majority interest is accompanied by a change in employees such that all or a substantial portion of the employees of the new ownership are not retained from the prior ownership.
   6. If the experience of an entity undergoing a change in ownership is to be excluded from future experience ratings for the entity, the experience modification no longer applies as of the date of the ownership change unless the entity is acquired by another entity which has an existing experience modification. In that case, the modification of the acquiring entity shall apply.
   7. Multiple Entities. When two entities under substantially the same ownership have been insured under a single policy, and the ownership of one or both of them is changed so that there is no longer any connection between them, the procedure shall be as follows:
      1. If the experience of the entities has been combined for rating purposes during the entire experience period, the experience incurred prior to the change shall not be used for future ratings, unless
         1. the insurance carrier or carriers request that new modifications be established, and
         2. the PCRB is furnished with the experience required for the calculation of such modifications submitted in an acceptable format.
      2. If the experience of the entities has been combined for less than two years at the time of the change, so that the experience for each entity is available during the period they were separately insured, the experience for each entity shall be used for the purpose of calculating new experience modifications.

When three or more entities under substantially the same ownership have been insured under a single policy, and the ownership of one of the entities has been changed so that there is no longer any connection between it and the remaining entities, the existing experience modification shall continue to apply to the entities whose ownership has not changed. The entity whose ownership has changed shall not be subject to experience modification unless it has been purchased by an entity which has an applicable experience modification.

When three or more entities under substantially the same ownership have been insured under a single policy and the ownership of two or more of the entities has been changed so that common ownership no longer is present, the experience incurred prior to the date of the change shall not be used for future ratings, unless

(a) the insurance carrier or carriers request that new modifications be established, and

(b) the PCRB is furnished with the experience required for the calculation of such modifications submitted in an acceptable format.

1. 8. Evasion Of Experience Rating Modification.
      1. Actions. Employers, or their representatives, at times take actions for the purpose of avoiding an experience rating modification. They may also take actions for otherwise legitimate business reasons that nonetheless result in the improper application of an experience rating modification. Regardless of intent, any action resulting in the miscalculation, misapplication or omission of an experience rating modification determined in accordance with this Plan is prohibited. These actions can include, but are not limited to:
         1. Failure to report changes in accordance with Endorsement WC 00 04 14
         2. A change in ownership
         3. change in combinability status
         4. Creation of a new entity
         5. Misrepresentation on audits or failure to cooperate with an audit
      2. DCRB Response. In such circumstances the PCRB may obtain information that indicates evasion or improper calculation, application or omission of experience rating modifications due to actions included, but not limited to, those listed above. The PCRB will act to ensure the proper calculation and application of experience rating modifications impacted by these actions. This may include, but is not limited to the:
         1. Combination of experience that would otherwise not be combinable
         2. Separation of experience that would otherwise be combinable
         3. Exclusion of experience that would otherwise be included
         4. Continuation of experience that would otherwise be withdrawn
         5. Issuance of experience rating modifications that were not originally issued
         6. Revision and/or retraction of experience rating modifications

When two or more risks associate for the purpose of undertaking one or more projects as a joint venture, the premium for the operation involved shall not be subject to experience modification until such time as the joint venture qualifies for experience rating in accordance with the provisions of Rule 1 of this Section, subject, however, to the following conditions:

1. 1. The contracts shall be awarded in the name of the associated risks as a joint venture.
   2. The joint ventures shall share responsibility for, and participate in the control, direction and supervision of all work undertaken.
   3. The joint ventures shall maintain a common bank account, payroll and business records.
   4. When the joint venture becomes subject to experience rating, all applicable experience modifications shall be based exclusively on the experience of the joint venture. The experience developed under a joint venture shall be excluded from the future rating of the individual ventures.