SECTION IV APPLICATION OF MERIT RATING PLAN ADJUSTMENT

A Merit Rating Plan adjustment for a qualified risk shall be determined annually (except as provided in Rules 3 and 4 of this section) and shall be effective as of the RED of the risk. No more than one Merit Rating Plan adjustment shall apply to a risk at the same time. Subject to the exceptions noted below, the Merit Rating Plan adjustment shall be applied to the premium developed by the use of carrier rates in force on the effective date of the policy.

EXCEPTIONS:

1. 1. Premiums Not Subject to the Merit Rating Plan:
      1. Expense constants
      2. The policy minimum premium
      3. Premium under the National Defense Projects Rating Plan
      4. Premium under Rule 1 of the Atomic Energy Procedure
      5. The surcharge premium under Rule 2 of the Atomic Energy Procedure
      6. Premium developed under Code 9740 – Terrorism
      7. Premium developed under Code 9741 – Catastrophe (other than Certified Acts of Terrorism)

The Merit Rating Plan adjustment shall be effective for a period of 12 months (except as provided in Rules 3 and 4 of this section) and shall apply to all the operations of the risk, regardless of whether the current or any new operations are assigned to the same classifications as were used in establishing the Merit Rating Plan adjustment.

If a risk is covered by a single policy, the following procedure shall apply:

1. 1. The Merit Rating Plan adjustment effective as of the RED shall apply for the full term of the policy which becomes effective on such date and also for the full term of any policy which becomes effective within three months after such date.
   2. If a policy is written for a period of one year but is extended for a period of not more than 16 days, the carrier rates and Merit Rating Plan adjustment in effect as of the original termination date shall remain in effect until the termination date of the extended policy. The carrier rates and Merit Rating Plan adjustment which would have become effective as of the RED shall apply for a period of one year from the effective date of the renewal policy.
   3. If a policy becomes effective on a date more than three months after the RED,
      1. the outstanding Merit Rating Plan adjustment shall apply to the new policy for the period corresponding to the unexpired term of the rating.
      2. a new Merit Rating Plan adjustment then shall apply for the unexpired term of the outstanding policy.
      3. thereafter, a new Merit Rating Plan adjustment shall apply annually as of a new RED. The new RED shall be the date 12 months after the effective date of the new policy

If a risk is covered by several policies (as provided in Rule 8. of Section III of this Plan) which differ as to inception dates, the following procedure shall apply:

A single Merit Rating Plan adjustment shall be computed to be effective for a period of twelve months beginning on the RED to be established by the PCRB. The PCRB may, however, authorize the application of an existing Merit Rating Plan adjustment for a period not to exceed fifteen months or a new Merit Rating Plan adjustment for a period greater than three months and less than twelve months for the purpose of establishing a RED. Any policy effective prior to the new RED established by the PCRB shall be canceled as of such date and rewritten for a period of twelve months. Any policy effective subsequent to the new RED established by the PCRB shall be written to expire concurrently with the next ensuing RED or shall be canceled as of that date. Any policies subject to this rule which are extended beyond the new period of twelve months shall be subject to the provisions of Rules 3(b) and 3(c) of this section.