Basic Manual—2001 Edition
Part One—Rules
(Exceptions: AZ, NC)
Effective 01 Jan 2013 12:00:01A. Explanation and Application
1. Advisory Loss Cost, Authorized Rate and
Manual Rate
(Additional Rules: CT, FL, GA, NE, OK, VA(A/R)) (Exceptions: TX, VA)
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Advisory Loss Cost is the portion of the rate that represents projected
losses. The carrier adds an increment for expenses to the advisory
loss cost to develop the manual rate.
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Authorized rate is the manual rate or any other rate
that has been authorized by the appropriate insurance regulatory authority
for use by the carrier.
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Manual rate is the rate approved by the appropriate
regulatory authority for use by the carrier. It is the amount of premium
for each $100 of payroll.
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Either the advisory loss cost or manual rate for each
classification is shown on the state pages.
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2. Anniversary Rating Date (ARD)
(Additional Rules: AZ)
(Exceptions: AL, GA, IL, LA, ME, NM, TX) (User's Guide: AL, IL, ME, OR)
The anniversary rating date is the effective month and day of
the policy in effect and each anniversary thereafter unless a different
date has been established by the National Council on Compensation
Insurance, Inc. or other licensed rating organization.
Rules, classifications, and rates are applied on an Anniversary
Rating Date basis for all risks. When a material change in ownership occurs, the ARD
of the previous entity is not used to determine the applicable rules,
classifications, and rates of the new entity. For more information
on ownership changes, refer to the Experience Rating Plan Manual for Workers Compensation
and Employers Liability Insurance.
To determine the proper application, refer to the tables
below:
ARD Table 1
(Exceptions: OR)
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| For a single
policy risk whose . . .
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The insurance
carrier must apply . . .
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Policies have run consecutively,
or,
The risk is a new entity . . .
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The rules, classifications, and
rates effective on the normal ARD for the full term of:
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The policy beginning on that date, or
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Any other policy beginning up to three months after
that date
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Refer to the User's Guide for an example.
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Policy has been cancelled and rewritten,
either by the same or another carrier . . .
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To the rewritten policy, all rules,
classifications, and rates of the rewriting carrier in effect as of
the:
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Normal ARD to the new policy until the next normal
ARD has been reached or until the next ARD is established by the rating
organization.
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Next normal ARD until the expiration date of the rewritten
policy or until the next ARD is established by the rating organization.
Upon the expiration date of the rewritten policy, a new ARD is established
based on the effective date of the rewritten policy. The new ARD becomes
the normal ARD for future policies.
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Refer to the User's Guide for an example.
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ARD Table 2
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For a multiple
policy risk with varying effective
dates . . .
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The insurance
carrier must apply . . .
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That is not a long-term policy
or Three-Year Fixed-Rate Policy . . .
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The rules, classifications, and
rates in effect on the normal ARD until the next normal ARD:
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These rules, classifications, and rates apply to the
portion of each policy falling within the 12-month period, regardless
of their effective and termination dates.
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The renewal rules, classifications, and rates must
be applied in the same manner.
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The ARD is determined by the policy with the largest
standard premium, unless otherwise established by the rating organization.
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Refer to the User's Guide for an example.
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That has been cancelled and rewritten,
either by the same or another carrier . . .
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To the rewritten policy, all rules,
classifications and rates of the rewriting carrier that were in effect
as of the:
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Normal ARD to the new policy until the next normal
ARD has been reached or until the next ARD is established by the rating
organization.
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Next normal ARD until the expiration date of the rewritten
policy or until the next ARD is established by the rating organization.
Upon the expiration date of the rewritten policy, a new ARD is established
based on the effective date of the rewritten policy. The new ARD becomes
the normal ARD for future policies.
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ARD Table 3
(Exceptions: VA)
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| For other
situations such as . . .
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The insurance
carrier must apply . . .
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A long-term policy (issued for
a period longer than one year and 16 days, other than a Three-Year
Fixed-Rate Policy) . . .
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All rules, classifications and
rates to individual units as if a separate policy had been issued.
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Divide the policy into consecutive units of 12 months
each.
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This division will designate either the first or last
unit of less than 12 months as a short-term policy.
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Refer to the User's Guide for an example.
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A Three-Year Fixed-Rate Policy
. . .
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The rates in force on the effective
date of the policy without change until its termination.
Exceptions:
A single
rate revision resulting in an increase of 10% or more on outstanding
policies must be applied to the remaining portion of the policy
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ARD Table 4
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| Applicable Endorsements |
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Use the Standard Anniversary Rating Date Endorsement
(WC 00 04 02) when necessary. The endorsement is used to show the
normal anniversary rating date if different from the policy effective
date.
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Use the Standard Policy Period Endorsement (WC 00
04 05) if the policy period is not a multiple of 12 months. This endorsement
is used to designate the first or last unit of less than 12 months
as a short-term policy.
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3. Cancellation Provisions
(Additional Rules: AZ, OR, TX, VA)
The cancellation condition of the Standard
Policy permits cancellation by the insured or by the insurance carrier.
Most states regulate these cancellations.
b. Reasons for Cancellation and Premium
Determination
(Additional Rules: NH, VA)
The way in which the premium is calculated for cancelled policies
depends on the reason for cancellation:
Cancellation Provisions Table 1
(Exceptions: FL, HI, OR, TX)
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| If . . . |
Then . . . |
| The policy is cancelled by the insurance
carrier . . .
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1.
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Apply authorized rates to the payroll developed during
the period the policy was in effect.
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2.
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Apply an experience rating modification in accordance
with rules of the Experience
Rating Plan Manual for Workers Compensation and Employers Liability
Insurance.
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3.
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Add the pro rata portion of the expense constant,
but not less than $15.
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4.
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The total premium for the cancelled policy must not
be less than the pro rata portion of the minimum premium.
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Cancellation Provisions Table 2
(Exceptions: HI, MD, OR, TX)
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| If . . . |
Then . . . |
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The policy is cancelled by the
insured when retiring from business such that:
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All the work covered by the policy has been completed,
or
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All interest in any business covered by the policy
has been sold, or
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The insured has retired from all business covered
by the policy . . .
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Note: For the purpose of this rule, a change in the ownership of a corporation
that results in the elimination of experience under the rules of the Experience Rating Plan Manual
for Workers Compensation and Employers Liability Insurance. is not considered retiring from the business insured
by the policy.
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1.
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Apply authorized rates to the payroll developed during
the period the policy was in effect.
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2.
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Apply an experience rating modification in accordance
with rules of the Experience
Rating Plan Manual for Workers Compensation and Employers Liability
Insurance.
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3.
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Add the pro rata portion of the expense constant,
but not less than $15.
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4.
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The total premium for the cancelled policy must not
be less than the pro rata portion of the minimum premium.
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Cancellation Provisions Table 3
(Exceptions: HI, OR, TX)
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| If . . . |
Then . . . |
| An assigned risk policy is being cancelled
because the insured replaced coverage through the voluntary market
. . .
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1.
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Apply authorized rates to the payroll developed during
the period the policy was in effect.
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2.
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Apply an experience rating modification in accordance
with rules of the Experience
Rating Plan Manual for Workers Compensation and Employers Liability
Insurance.
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3.
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Add the pro rata portion of the expense constant,
but not less than $15.
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4.
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The total premium for the cancelled policy must not
be less than the pro rata portion of the minimum premium.
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Cancellation Provisions Table 4
(Exceptions: AK, AL, FL, GA, HI, IA, LA, MD, NC, SD, OR, TX, VA, WV) (User's Guide: AK)
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| If . . . |
Then . . . |
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| The policy is cancelled by the insured,
except when retiring from the business . . .
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Unless a different method has been
filed by the carrier and approved by the appropriate regulatory authority,
the premium for the cancelled policy must be calculated by using either
the short-rate percentage or short-rate factor as follows, based on
the Short Rate Cancellation Table located in Appendix B:
Steps based on short-rate percentage:
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1.
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Determine the payroll developed during the period
the policy was in effect.
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2.
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Determine the full policy payroll by using the following
formula:
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3.
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Apply authorized rates to such payroll.
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4.
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Calculate the extended number of days by using the
following formula. If the policy was written for a one-year period,
the extended number of days is the number of days the policy was in
effect:
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5.
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Based on the extended number of days, apply the short-rate
percentage shown in the Short Rate Cancellation Table located in the
Appendix to the full policy premium calculated in step 3. This result
is the short-rate portion of the premium.
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6.
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If applicable:
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Apply any pricing programs
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Apply any experience rating modification
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Apply any premium discount based on the final earned
total standard premium
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Add the short-rate portion of the expense constant
but not less than $15
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Apply catastrophe provisions (if applicable) based
on the earned manual premium.
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7.
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The total earned premium for the short-rate cancelled
policy must not be less than the annual minimum premium applicable
to the policy.
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Steps based on short-rate factor:
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1.
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Determine the payroll developed during the period
that the policy was in effect.
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2.
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Apply authorized rates to such payroll.
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3.
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Based on the number of days that the policy was in
effect, determine the applicable short-rate factor shown in the Short
Rate Cancellation Table located in Appendix B.
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4.
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Apply the short-rate factor to the premium calculated
on the basis of the earned premium for the period that the policy
was in effect in step 2. This result is the short-rate manual premium.
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5.
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If applicable:
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Apply any pricing programs
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Apply any experience rating modification
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Apply any premium discount based on the final earned
total standard premium
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Add the short-rate portion of the expense constant
but not less than $15
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Apply catastrophe provisions (if applicable) based
on the earned manual premium
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6.
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The total earned premium for the short-rate cancelled
policy must not be less than the annual minimum premium applicable
to the policy.
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4. Classifications, Loss Costs or Rates
Subject to Admiralty Law, FELA, and USL&HW Act
(Additional Rules: AK, TX, VA)
a. F-Classification Codes and Admiralty/FELA
Classifications That Include USL&HW Act Benefits
(Additional Rules: FL, TX)
The rates for classification codes followed by the letter “F”
and those admiralty/FELA classifications applicable to Program II—USL&HW
Act benefits include premium for operations that are subject to the
USL&HW Act.
b. Non F-Classification Codes and Admiralty/FELA
Classifications That Do Not Include USL&HW Act Benefits
(Additional Rules: TX)
The rates for non F-classifications and Admiralty/FELA classifications
under Program I and II—State Act do not include premium for
operations subject to the USL&HW Act. If operations assigned to
these classifications include employees that are subject to the USL&HW
Act, apply the following:
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Assign the non F-classification that describes the
duties performed.
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Increase the rate and minimum premium for the non
F-classification by the USL&HW Coverage Percentage found in the
state pages.
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This factor is not applied to expense constants.
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Apply the increased rate to that portion of an employee's
payroll that is subject to the USL&HW Act.
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c. Waters Not Subject to Admiralty Jurisdiction
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Insurance for operations on waters not subject to Admiralty
Jurisdiction must be provided by the Standard Policy and Endorsement Forms
and is subject to the rules that apply to statutory workers compensation insurance.
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Admiralty classifications and rates for Program II apply to
these operations.
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The advisory loss cost for each classification is shown after
its code number in the state pages of this manual
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The manual rate for each classification is the authorized
rate approved by the appropriate insurance regulatory authority for use by
the carrier
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For details on these Acts, refer to Additional
Coverages Summary Table located in F-7 of the User's Guide. For
additional information on classifications, refer to
Program I and Program II Classification Comparison Tables in F-3 of the User's Guide.
d. Extensions of the USL&HW Act
(Exceptions: FL, VA)
Premium for extensions of the USL&HW Act is determined in the same
manner as the premium for the USL&HW Act. Refer to User's Guide B and User's Guide F-7 for more information on these extensions.
5. Combination of Legal Entities, Locations
and Operations
a. Legal Entities
(Exceptions: NM, NV)
Separate legal entities may be insured by one policy only if
the same persons, or group of persons, own the majority interest in
such entities. Where combination of separate entities is permissible,
a single policy may be issued to insure more than one corporation.
For additional details, refer to the Experience Rating
Plan Manual for Workers Compensation and Employers Liability Insurance.
Classifications are applied separately to each legal entity.
b. Locations and Operations
(Additional Rules: KS)
All operations of any one employer at a single location must
be insured on one policy. Separate legal entities at the same location
may be insured on one policy only if the same person(s), or group
of persons, own the majority interest in such entities.
For additional details, refer to the Experience Rating Plan Manual for Workers Compensation
and Employers Liability Insurance.
All locations and operations of the employer in a state must
be insured on one policy if required by the state workers compensation
law.
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Deposit Premium is the initial payment required by an insurance
carrier to provide coverage. This amount is established by the carrier
and is subject to periodic premium adjustment.
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The following rules, as they appear in this manual,
do not apply unless approval for their use is obtained by or on behalf
of the carrier from the appropriate insurance regulatory authority.
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a.
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Adjustment of premium may be on an annual basis or
the policy may provide for interim adjustment and payment of premium
on a monthly, quarterly or semiannual basis.
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b.
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The deposit premium is credited to the final earned
premium or renewal policy. It cannot be credited to any interim premium
adjustment.
For deposit premium determination on Three-Year Fixed-Rate policies, refer to Rule 3-B.
Rule 3-A-6 is not applicable in the residual market. Refer to Rule 4-A and 4-I for residual market deposit
premium rules. Refer to Preface D to determine applicability of these
referenced rules in specific jurisdictions.
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a.
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Supplemental Disease Exposure (Exceptions: TX)
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(1)
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Advisory loss costs and manual rates include premium for the
disease exposures covered by the Standard Policy.
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(2)
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Supplemental disease loading may be added to a manual rate applicable
to an individual risk. The supplemental disease loading proposed must
be based on the carrier's judgment after an evaluation of the operations.
Atomic Energy Radiation Exposure NOC may be subject to a supplemental
disease loading and is applicable for operations that involve exposure
to radioactive materials that are not performed for, or under the
direction of, the Nuclear Regulatory Commission or any governmental
agency. Statistical Code 9985—Atomic Energy—Radiation Exposure NOC is
used for reporting the radiation exposure.
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(3)
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Specific Disease Loading
(Additional Rules: FL, LA, MO, VA)
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The advisory loss costs or manual rates for classification
code numbers followed by the symbol “D” on the state pages
include specific disease loadings. These loadings reflect specific
disease hazards involved in the operations assigned to those classifications.
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A supplemental disease loading that is added to an
advisory loss cost or manual rate that includes a specific disease
load must be for exposure not contemplated within the specific disease
loading.
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The carrier may remove the specific disease loading
from a manual rate when the substance for which the disease loading
was established is not present or is determined by the carrier to
be insignificant in the operations of the insured.
Exception to 7-a(3) above:
For silicosis, the specific disease loading may be removed when
not more than 5% free silica is present.
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(4)
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Partial application of a specific disease loading is permissible
based on the carrier's judgment after an evaluation of the operations.
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b.
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Supplementary Disease (Exceptions: OR, TX)
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(1)
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Supplementary disease advisory loss costs or rates shown on
the state pages reflect hazards involved in foundry, abrasive, or
sandblasting operations.
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Supplementary disease rates for Codes 0065—Incidental
Foundries—Steel, 0066—Incidental Foundries—Non-Ferrous
Metals, and 0067—Incidental Foundries—Iron must be applied
to the payroll of employees exposed to the foundry hazard, except
employees assigned to Codes 3081, 3082, 3085, and 3175.
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Supplementary disease rate Code 0059—Abrasive
or Sandblasting must be assigned to the payroll of employees exposed
to these hazards.
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Effective Date of a policy is the starting date of the policy, the time
at which insurance coverage begins.
9. Estimated Annual Premium
(Additional Rules: MD)
Estimated Annual Premium is based on the estimated payroll for
the policy period. Estimated payrolls for each classification
reflect actual payroll anticipated by the insured during the policy
period. Such estimates are subject to substantiation by the carrier
through evaluation of records or inspections. For details, refer to User's Guide D-2-g(4) or the Example
section.
Refer to the individual state algorithms
for rating elements that are included in the estimated annual premium.
10. Exclusion
of Statutory Medical Benefits—Ex-Medical Coverage
11. Expense Constant
(Additional Rules: AZ) (Exceptions: FL, GA, HI, ID, IL, NM, OK, TX, VA) (User's Guide: ID)
Expense Constant is a premium charge that is applied to every
policy regardless of premium size. The expense constant contributes
to the recovery of expenses common to issuing, recording, and auditing
a policy. The expense constant charged at the inception of the policy
will not change when a state is added or deleted during the policy
term.
In competitive rating jurisdictions, the expense constant is
filed by or on behalf of the carrier. In administered pricing jurisdictions,
the expense constant is shown on the state pages.
Note: The following rules,
as they appear in this manual, do not apply unless approval for their
use is obtained by or on behalf of the carrier from the appropriate
insurance regulatory authority.
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a.
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The expense constant is:
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Not subject to premium discount, experience rating modification, retrospective rating adjustment, or additional charges for
the catastrophe provisions detailed in Rule 3-A-24.
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Included in the minimum premium for each classification
and must not be added to the minimum premium if the minimum premium
becomes the final premium for the policy
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Shown on the Information Page of the policy. For details, refer to User's Guide D-2-g(6).
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Refer to the User's Guide for an example.
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b.
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When more than one state is insured on the same policy,
the highest expense constant must be charged even if that state is
on an “if any” basis. If two or more states have the same
highest expense constant, the expense constant is determined by the
state with the largest amount of standard premium.
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c.
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The expense constant must be excluded from the determination
of standard premium.
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d.
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Full expense constants must be charged for short-term
policies.
Exceptions:
Expense constants are prorated when short-term policies are
issued:
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To replace a binder
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Solely to establish consistent effective dates with
other insurance policies
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e.
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If the policy is cancelled by the insured, except
when retiring from business, the short-rate portion of the expense
constant must not be less than $15.
In addition to the exception to Rule 3-A-11-d above, the pro
rata portion of expense constants are charged when:
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The policy is cancelled:
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By the insurance carrier according to Cancellation
Provisions Table 1
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When the insured is retiring from business according
to Cancellation Provisions Table 2
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When an assigned risk policy is cancelled because
coverage was placed in the voluntary market according to Cancellation
Provisions Table 3
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The amount changes due to a change in the anniversary
rating date
Refer to the User’s
Guide for an example.
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f.
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The pro rated portions of the expense constant in
d. and e. above must not be less than $15.
For expense constant determination on Three-Year Fixed-Rate
policies, refer to Rule 3-B.
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12. Coal Mine Disease Charge (Federal Coal
Mine Safety and Health Act)
(Exceptions: NC, TX) (Additional Rules: VA, VA(A/R))
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a.
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In states where disease coverage is provided for risks
subject to the Federal Coal Mine Safety and Health Act, this coverage
is not subject to:
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Experience rating
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Premium discounts
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Retrospective rating
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Refer to the Statistical
Plan for Workers Compensation and Employers Liability Insurance for the applicable codes to report disease experience where there
is liability under the Federal Coal Mine Safety and Health Act.
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b.
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Advisory loss costs or rates for this coverage and
any underlying state law coverage for disease are shown separately
in the state pages.
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c.
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Advisory loss costs or rates for employers not described
by a coal mine classification and for former coal mine operators are
determined by the carrier, and are not shown separately in the state
pages.
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d.
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In states where there are no coal mines, the state
pages will not include the advisory loss cost and rate information
for this coverage.
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Final Earned Premium is the total premium earned during the
policy term. It is calculated using actual payrolls multiplied by
the rate for each classification. Final earned premium includes the
application of premium elements applicable to the insured.
Final earned premium for the policy must be determined on actual
payroll as determined by the carrier at audit, instead of on estimated
payroll or other premium basis.
Determination of final earned premium is governed by the rules,
classifications, and rates in this manual, subject to modification
by applicable rating plans.
The insurance carrier has the right to calculate earned premium
based on an examination of original payroll records and accounting
records of the insured.
Audited information must coincide with the effective and expiration
dates of the policy. Reasonable deviations from this standard that
do not affect the earned premium are permitted to coordinate the audit
with the first of the nearest month.
Refer to User's Guide for an example.
Refer to Rule 4-G for additional rules
applicable to assigned risk policies.
a. Standard Limits of Liability
(Exceptions: FL, TX)
Standard limits of liability apply to Employers Liability Insurance:
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With or without Workers Compensation Insurance
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For employees subject to Voluntary Compensation Insurance
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For operations subject to USL&HW Act
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For damages under admiralty law or FELA
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Note: All references to FELA
in this rule or other rules in this manual do not apply to assigned
risk policies because FELA is not an available coverage in the residual
market. Refer to Rule 4-G regarding available
coverages for assigned risk policies.
(1) Bodily Injury by Accident
Bodily Injury by Accident (each accident limit) applies to all bodily
injury resulting from a single accident.
(2) Bodily Injury by Disease
Bodily Injury by Disease is represented by two limits:
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Each Employee Limit
Each Employee Limit is the maximum amount of damages that an
insurer will pay for a single employee during the policy year. It applies as a separate limit to bodily injury
by disease to any one employee.
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Policy Limit
Policy Limit is an aggregate limit that applies to all bodily
injury occurring from disease during the term of the policy, regardless
of the number of employees who are injured by disease. An aggregate
limit is the maximum amount of damages that an insurer will pay during
the policy year.
Table for Standard Limits
(Exceptions: OR, TX)
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Employers Liability, Voluntary
Compensation, USL&HW Act and Extensions
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Admiralty Law and FELA |
| Bodily Injury by Accident |
$100,000—each accident |
$100,000 |
| Bodily Injury by Disease |
$100,000—each employee |
Not applicable |
| Bodily Injury by Disease |
$500,000—policy
limit
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$100,000 |
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b. Increased Limits of Liability
(Additional Rules: TX) (Exceptions: TX)
Except for FELA and/or Admiralty coverage for assigned risk
policies as described in Rule 3-A-14-b(4)(c), increased Limits of
Liability are available under Part Two—Employers Liability.
Accordingly, the standard limits may be increased.
Any additional premium for increased limits must be calculated
before application of:
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Expense constant
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Experience rating modification
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Merit rating modification
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ARAP surcharge factor (refer
to Rule 4-E)
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Schedule rating modification
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Premium discount
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Retrospective rating adjustment
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Deductible credit
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(1) Standard Policy
(Additional Rules: FL) (Exceptions: AZ, NE, TX)
Employers Liability (E/L) Increased Limits Percentage is a percentage
that is applied to the manual premium if the employer chooses to increase
its standard limits under Part Two—Employers Liability.
If the limits of liability under Part Two are increased:
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(a)
|
The limits of liability must be the same for all states
specified in Item 3A of the Information Page of the policy.
|
|
(b)
|
The additional premium for increased limits must be
determined by multiplying the total manual premium by the percentage
in Table 1 in Appendix C.
|
|
(c)
|
In competitive rating jurisdictions, the additional
premium must not be less than the minimum premium, if any, filed by
or on behalf of the carrier and approved for use by the appropriate
insurance regulatory authority.
|
|
(d)
|
In administered pricing jurisdictions, the additional
premium must not be less than the minimum premium shown in Table 1
in Appendix C.
|
|
(e)
|
For assigned risk policies, the additional premium
must not be less than the minimum premium shown in Table 1 in Appendix
C.
|
|
(f)
|
The minimum premium for increased limits is in addition
to the policy minimum premium at standard limits of liability and
applies although coverage for increased limits may have been added
during the policy term. Refer to Rule 3-A-16-b
for additional minimum premium information.
Refer to the User’s Guide for an
example.
|
|
(g)
|
When more than one state is insured on the same policy:
| |
| •
|
The applicable increased limits minimum premium for
the policy is that of the state with the highest increased limits
minimum premium, or
|
| •
|
No increased limits minimum premium applies to any
of the states when the premium calculated for all states equals or
exceeds the increased limits minimum premium for the state with the
highest increased limits minimum premium. The combined increased limits
premium for all states would apply.
|
|
Refer to the User’s
Guide for examples.
|
|
Table for Increased Limits*
(Exceptions: AL, FL, IL, LA, OK, OR, TN, TX, WV)
|
| Limits of Liability |
|
Percentage |
|
Minimum Premium
for Increased Limits**
|
| (000 omitted) |
|
|
|
|
| $ 500/500/500 |
|
0.8% |
|
$ 75 |
| 1,000/1,000/1,000 |
|
1.1 |
|
120 |
| 2,000/2,000/2,000 |
|
1.4 |
|
140 |
| 3,000/3,000/3,000 |
|
1.6 |
|
160 |
| 4,000/4,000/4,000 |
|
1.8 |
|
180 |
| 5,000/5,000/5,000 |
|
2.0 |
|
200 |
| 6,000/6,000/6,000 |
|
2.2 |
|
210 |
| 7,000/7,000/7,000 |
|
2.4 |
|
220 |
| 8,000/8,000/8,000 |
|
2.6 |
|
230 |
| 9,000/9,000/9,000 |
|
2.8 |
|
240 |
| 10,000/10,000/10,000 |
|
3.0 |
|
250 |
| *Refer to Appendix
C for additional limits values.
|
| **In Hawaii,
refer to the carrier rate pages for minimum premium.
|
|
(2) Employers Liability Insurance—Without
Workers Compensation Insurance
(Additional Rules: VA) (Exceptions: AR, FL, TN, TX)
| |
|
(a)
|
The standard limits of employers liability insurance
may be increased. If higher limits of liability apply, the premium
is determined on the basis of the rates multiplied by the factors
filed by or on behalf of the carrier and approval for their use is
obtained from the appropriate insurance regulatory authority.
|
|
(b)
|
All references to employers liability insurance without
workers compensation insurance in this rule or other rules in this
manual do not apply to assigned risk policies because employers liability
insurance without workers compensation insurance is not available
in the residual market.
|
|
(3) Voluntary Compensation Insurance
(Additional Rules: IL)
| |
|
(a)
|
The standard limits under Part Two—Employers
Liability Insurance for employees subject to Voluntary Compensation
Insurance may be increased.
|
|
(b)
|
The premium for the increased limits must be determined
by using Table 1 in Appendix C.
|
|
(4) Admiralty Law or FELA
| |
|
(a)
|
The total premium including the additional premium
for increased limits must be determined by applying the factor in
the Table for Increased Limits provided below, or Table 2 in Appendix
C, to the total premium for Admiralty or FELA classifications.
|
|
(b)
|
The minimum premium for increased limits is in addition
to the policy minimum premium at standard limits of liability, and
applies although coverage for increased limits may have been added
during the policy term. Refer to Rule 3-A-16-b for additional minimum premium information.
|
|
(c)
|
For assigned risk policies:
| |
|
i)
|
Increased limits of liability for Employers Liability insurance
are not available for Admiralty coverage, although the standard limit
of liability is available for such coverage.
|
|
ii)
|
Employers Liability insurance is not available for FELA coverage;
therefore, increased limits of liability are also not available for
FELA coverage.
|
|
iii)
|
Rule 3-A-14-b(4)—Table for Limits and Appendix C—Table
2 do not apply.
|
|
Refer to Rule 4-G regarding available coverages
for assigned risk policies.
|
|
Table for Limits*
(Exceptions: AK, TX)
|
| |
Factor |
Minimum Premium** |
| Limit per
Accident
|
Program I |
Program II |
Program I |
Program II |
| $100,000 |
1.00 |
1.00 |
$ 0 |
$ 0 |
| 200,000 |
1.31 |
1.26 |
75 |
100 |
| 300,000 |
1.47 |
1.41 |
75 |
100 |
| 400,000 |
1.56 |
1.50 |
75 |
100 |
| 500,000 |
1.60 |
1.54 |
75 |
100 |
|
1,000,000
|
1.77
|
1.70
|
120
|
150
|
|
5,000,000
|
2.13
|
2.04
|
200
|
250
|
|
10,000,000
|
2.20
|
2.11
|
250
|
300
|
| *Refer to Appendix
C for additional limits values. |
| **In Hawaii,
refer to the carrier rate pages for minimum premium.
|
|
(5) USL&HW Act and Extensions of the
USL&HW Act
Rule 3-A-14-b(1) applies to policies that include coverage for
the USL&HW Act and/or its extensions.
Majority Interest means more than 50%:
| |
|
a.
|
Of voting stock.
|
|
b.
|
Of owners, partners, or members if there is no voting
stock.
|
|
c.
|
Of the board of directors or comparable governing
body if a. or b. is not applicable.
|
|
d.
|
Participation of each general partner in profits of
a partnership. Limited partners are not considered in determining
majority interest.
|
|
e.
|
Ownership interest held by an entity as a fiduciary.
Such an entity's total ownership interest will also include any ownership
held in a nonfiduciary capacity.
|
|
Refer to the Experience Rating Plan Manual
for Workers Compensation and Employers Liability Insurance for more information.
16. Minimum Premium
(Additional Rules: AZ, VA) (Exceptions: FL)
The following rules, as they appear in this manual, do not apply
unless approval for their use is obtained by or on behalf of the carrier
from the appropriate insurance regulatory authority.
a. Standard Policy
(Exceptions: HI, OK)
Minimum Premium is the lowest policy premium that is required
in order to provide insurance under the Standard Policy. Minimum
premium must be shown on the Information Page of the policy. Minimum
premium is not subject to an experience rating modification. For details, refer to User's Guide D-2-g(7).
In competitive rating jurisdictions, minimum premiums are filed
by or on behalf of the carrier. In administered pricing jurisdictions,
the minimum premiums are shown on the state pages.
| |
|
(1)
|
The minimum premium at policy issuance is determined
as follows:
| |
| •
|
For a policy with only one classification, apply the
minimum premium for that classification.
|
| •
|
For a policy with two or more classifications, apply
the highest minimum premium for any classification on the policy.
|
| •
|
For a multiple state policy, the applicable minimum
premium for the policy would be that of the state with the single
highest minimum premium, even if that state is on an “if any”
basis. If two or more states have the same highest minimum premium,
the minimum premium is determined by the state with the largest amount
of standard premium.
|
|
|
|
(2)
|
The minimum premium is subject to final adjustment
at final audit. It is determined on the basis of those classifications
developing premium as follows:
| |
| •
|
If the final earned premium is less than the minimum
premium determined on audit, then that minimum premium must be charged.
|
| •
|
If no classification develops premium, the minimum
premium for Code 8810 must be charged.
|
| •
|
When more than one state is insured on the same policy,
the minimum premium for the state with the single highest minimum
premium must be charged even if that state is on an “if any”
basis. If two or more states have the same highest minimum premium,
the minimum premium is determined by the state with the largest amount
of standard premium.
|
|
|
|
(3)
|
Full minimum premiums are charged for short-term policies,
subject to 4. below.
|
|
(4)
|
The minimum premium is prorated when:
| |
| •
|
A short-term policy is issued to replace a binder
|
| •
|
A short-term policy is issued to establish consistent
effective dates with other insurance policies
|
| •
|
A policy is cancelled by the insurance carrier according
to Cancellation Provisions Table 1
|
| •
|
A policy is cancelled when the insured is retiring
from business according to Cancellation Provisions Table 2
|
| •
|
An assigned risk policy is cancelled because coverage
was placed in the voluntary market according to Cancellation Provisions
Table 3
|
| •
|
The amount changes due to a change in the anniversary
rating date
Refer to the User's Guide for an example.
|
|
|
|
(5)
|
In the event that a policy is cancelled midterm, the
minimum premium for increased limits for employers liability and federal
coverages must be treated the same as the classification minimum premium.
| |
| •
|
Cancellation may occur by the carrier or by the insured
when retiring from business. When this happens, the total premium
for the policy must not be less than the pro rata portion of the minimum
premium.
|
| •
|
If cancellation occurs by the insured, and the insured
is not retiring from business, the total earned premium for the cancelled
policy must not be less than the applicable annual minimum premium.
|
|
|
|
(6)
|
For a policy that provides only employers liability
insurance with increased limits, the minimum premium must be increased
by the factor that applies to the rates for that policy.
All references to employers liability insurance without workers
compensation insurance in this rule or other rules in this manual
do not apply to residual market policies in states where NCCI is the
Plan Administrator.
For minimum premium information for Domestic Workers, refer to Rule 3-C-5-c
|
|
c. Admiralty Law/FELA
(Additional Rules: HI)
A separate minimum premium applies to a policy that includes
classifications for operations subject to admiralty law or FELA if
filed by or on behalf of the carrier, and if approval for its use
is granted by the appropriate insurance regulatory authority. In administered
pricing jurisdictions, it must not be less than the minimum premium
shown in the Table for Increased Limits in Rule 3-A-14-b(4).
| |
| •
|
This minimum premium is the lowest premium for insuring
admiralty or FELA operations
|
| •
|
It must apply in addition to the minimum premium or
premium for other operations on this type of policy
|
| •
|
It is not subject to an experience rating modification
|
|
d. USL&HW Act
(Exceptions: TX)
Rules 3-A-16-a. and b. above apply to policies that include
USL&HW Act coverage.
For minimum premium determination on Three-Year Fixed-Rate policies, refer to Rule 3-B-2.
17. Non-ratable Element
(Exceptions: TX)
| |
|
a.
|
A non-ratable element is a supplementary loading or
percentage included in the development of the manual rate for a particular
classification. It adjusts for the classification's potential for occupational disease or catastrophic losses.
|
|
b.
|
Class codes designated with an “N” on
a state's advisory loss cost or rate pages are part of a ratable/non-ratable
group.
|
|
c.
|
The footnotes to the advisory loss cost or rate pages
provide the separate statistical code for each non-ratable element
to reflect the non-ratable catastrophe loading.
|
|
d.
|
The statistical non-ratable code and corresponding
advisory loss cost or rate are applied in addition to the basic classification
when determining premium.
|
|
e.
|
Premium for a non-ratable element is not subject to
experience rating or retrospective rating.
|
|
18. Other States Insurance
| |
|
a.
|
Premium developed for operations covered under Part
Three—Other States Insurance is based on the workers compensation
rules and rates. Refer to User's Guide A-3 for more information.
|
|
b.
|
All references to Other States Insurance in this rule
or other rules in this manual do not apply to residual market policies
in states where NCCI is the Plan Administrator. For more information, refer to Basic Manual Rule 4-A.
|
|
Premium Discount is a percentage discount that is based on the
size of the total standard premium. Refer
to Rule 3-A-20 for information on standard premium.
| Note:
|
The following rules, as they appear in this manual,
do not apply unless approval for their use is obtained by or on behalf
of the carrier from the appropriate insurance regulatory authority.
|
Premium discount does not apply to the portion of the standard
premium under a Retrospective Rating Plan.
a. Determination of Premium Discount
(Additional Rules: FL, GA) (Exceptions: NM, TX)
A policy qualifies for premium discount when the standard premium exceeds the eligibility
amount authorized by the insurance regulatory authority.
Premium Discount is applied in accordance with the anniversary
rating date. Refer to Rule 3-A-2 for information
on anniversary rating date.
Total standard premium is subject to premium discount as follows:
(1) Without Retrospective Rating
(Additional Rules: KY) (Exceptions: FL, IL)
| |
| •
|
Single State Policy
Premium discount is determined by applying the appropriate discount
percentages to the total standard premium in excess of the authorized
threshold amount.
|
| •
|
Multiple State Policy
Premium discount applies on an interstate basis. It is determined
by applying the appropriate discount percentages to each state's portion
of the total standard premium in excess of the authorized threshold
amount.
Each state's portion of the threshold amount and varying gradations
of premium discount are calculated by multiplying the total
standard premium by the ratio of state standard premium to the total
standard premium.
|
|
Refer to the User's Guide for an example.
(2) With Retrospective Rating
The portion of the standard premium subject to a Retrospective
Rating Plan is not subject to premium discount.
Total the premium of all entities to determine the amount subject
to the Retrospective Rating Plan. The remainder of that standard premium
is subject to premium discount and is calculated as follows:
| |
|
(a)
|
Determine the discount (x) as if none of the premium
is subject to retrospective rating
|
|
(b)
|
Determine the discount (y) for the premium subject
to retrospective rating only
|
|
(c)
|
The premium discount is the difference between (x) and (y)
The total premium discount is distributed by state by allocating the
state portion of standard premium to the premium discount.
Refer to the User's Guide for an example.
|
|
Any other method of determining premium discount may be used as long as the result does not
differ by more than 0.1% of the standard premium from the premium discount produced by the methods outlined in this
rule.
b. Combination of Policies
(Additional Rules: CO) (Exceptions: TX)
For the purpose of calculating premium discount for two or more policies that are issued
to the same insured by one or more carriers that are under the same
management, the total standard premium for those policies must be
combined. This applies unless the insured instructs the carrier otherwise.
If the policies being combined have different expiration dates:
| |
|
(1)
|
The carrier must determine the policy effective date
for application of the premium discount
|
|
(2)
|
All policies in effect before the established effective
date must be cancelled and rewritten as of the established effective
date
|
|
(3)
|
All policies written to be effective after the established
effective date of the combination of policies must be written to expire
on the same date as the other policies in the combination
|
|
c. Wrap-Up Construction Projects
(Additional Rules: AK, CT, MO, NE, SC, TN, VA) (Exceptions: AK, AR, FL, HI, KS, MO, MS, OK, OR, TX)
For purposes of determining premium discount for wrap-up policies
that are issued to two or more legal entities, the following conditions
must be met:
| |
|
(1)
|
All policies must be issued by one or more insurance
carriers that are under the same management.
|
|
(2)
|
None of the policies can be issued on a retrospective
rating basis.
|
|
(3)
|
The policies are limited to providing the insurance
on the large construction project. To limit the insurance to a specific
project, attach the standard Designated Workplaces Exclusion Endorsement
(WC 00 03 02).
|
|
(4)
|
Combinable entities are limited to the following:
| |
|
(a)
|
General contractor, including any owner or principal acting
as a general contractor.
|
|
(b)
|
Subcontractors performing work under contracts let on an ex-insurance
basis.
| Note:
|
If the contract between the owner or principal and
the general contractor is written on an ex-insurance basis, the owner
or principal is eligible under this rule.
|
|
|
Refer to Rule 3-A-19-a(2) for premium
discount determination for policies where a portion of the premium
is written on a retrospective rating basis. Any discounted premium
is allocated to all entities proportionate to their share of the standard
premium. Refer to Rule 3-A-23 for more information on wrap-up construction projects.
|
|
20. Standard Premium
(Exceptions: TX, VA)
Standard Premium is the premium before the application of the
premium discount.
It is the state premium determined on the basis of:
| |
| •
|
Authorized rates
|
| •
|
Disease loadings
|
| •
|
Nonratable elements
|
| •
|
Aircraft seat surcharges
|
| •
|
Premium for increased limits of liability
|
| •
|
Experience rating modification
|
| •
|
Applicable schedule rating modification
|
| •
|
Minimum premiums
|
|
Total Standard Premium is the total premium for all states covered
by the policy excluding expense constant, additional charges for the
catastrophe provisions detailed in Rule 3-A-24, and any disease charge
subject to the Federal Coal Mine Health and Safety Act before the
application of the premium discount.
Refer to state pages concerning the
application of the above rating elements, or any state special rating
elements.
| Note:
|
The Annual Financial Calls for experience, which
are used for ratemaking, contain a different definition of standard premium.
|
21. States Added After Policy Effective
Date
(Exceptions: GA, IL, NM, TX)
| |
|
a.
|
A state may be added after the effective date of the
policy. For the additional state operations, apply:
| |
|
(1)
|
Manual rates in effect on the anniversary rating date of the
policy to which the state has been added
|
|
(2)
|
Any rate change that applies to outstanding policies for the
state being added, and
|
|
(3)
|
Any applicable experience rating modification for the policy
to which the state has been added. Refer to
the Experience
Rating Plan Manual.
|
|
|
|
b.
|
Additional states may be added to the policy only
in accordance with Basic Manual Rule 4-A for residual market policies in states where NCCI
is the Plan Administrator.
|
|
| |
|
a.
|
The premium for this endorsement (WC 00 03 13) is based on a charge determined by the carrier
from its evaluation of the exposures.
|
|
b.
|
In jurisdictions where NCCI is the Plan Administrator,
an additional premium charge is required for the use of this endorsement (WC 00 03 13) on assigned risk policies. The additional premium charge for assigned
risk policies is 5% of the manual premium developed in conjunction
with the work for which that waiver is provided, subject to a $250
minimum premium charge per waiver.
|
|
c.
|
The minimum premium, if applicable, for this coverage
is in addition to the policy minimum premium and applies although
coverage may have been added during the policy term.
|
|
A wrap-up construction project is a large construction, erection
or demolition project for which policies have been issued by one or
more carriers under the same management, to insure two or more legal
entities that are working on the project.
Appropriate classifications are assigned to each separate legal
entity based on the operations performed.
In the instance of wrap-up construction projects, separate policies
must be issued to each eligible entity involved in the project, unless
the same person or group of persons owns the majority interest in
such entities. Refer to Rule 3-A-15 for more information about majority interest.
The Designated Workplace Exclusion Endorsement (WC 00 03 02) should be attached to other insurance policies
issued to the same entities to exclude the wrap-up project from coverage
on those other policies. This eliminates any duplication of coverage.
24. Catastrophe Provisions
(Exceptions: AK, FL, MO, NM, TX, VA)
| |
|
a.
|
Terrorism Risk Insurance Act
(TRIA) of 2002 and any amendments thereto enacted by Congress.
|
|
b.
|
Catastrophe (other than Certified
Acts of Terrorism)
Premium for Catastrophe
(other than Certified Acts of Terrorism) is calculated on the basis
of total payroll according to Rule 2. A risk’s total payroll
in each state is divided by units of $100 and multiplied by the appropriate
value found in the state pages. The calculation is expressed as (Payroll/100
x Catastrophe (other than Certified Acts of Terrorism) Value = Premium).
This premium is applied after standard premium and is not subject
to any other modifications including, but not limited to, premium
discount, experience rating, schedule rating, or retrospective rating.
Unless an “If Any” policy develops premium during
the policy term or at audit, policies issued on an “If Any”
basis will not be charged this premium.
Per capita charges are not subject to premium under this Act.
|
|
c.
|
Terrorism
Premium for Terrorism is calculated on the basis of total payroll
according to Rule 2. A risk’s total payroll in each state is
divided by units of $100 and multiplied by the appropriate value found
in the state pages. The calculation is expressed as (Payroll/100 x
Terrorism Value = Premium). This premium is applied after standard
premium and is not subject to any other modifications including, but
not limited to, premium discount, experience rating, schedule rating,
or retrospective rating.
Unless an “If Any” policy develops premium during
the policy term or at audit, policies issued on an “If Any”
basis will not be charged this premium.
Per capita charges are not subject to premium under this Act.
|
|
NOTICE: Although the formatting of this
online manual, including any state exceptions, may differ from the
hard copy, the content is identical.
©
Copyright 2000–2013
National Council on Compensation Insurance, Inc. All Rights Reserved.PreviousNext