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c a l i f o r n i a California Workers Compensation Experience Rating Plan 1995 Title 10, California Code of Regulations, Section PDF
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1 Workers Compensation Insurance Rating Bureau of California c a l i f o r n i a California Workers Compensation Experience Rating Plan 1995 Title 10, California Code of Regulations, Section Effective January 1, 2016
2 2015 Workers Compensation Insurance Rating Bureau of California. All rights reserved. No part of this work may be reproduced or transmitted in any form or by any means, electronic or mechanical, including, without limitation, photocopying and recording, or by any information storage or retrieval system without the prior written permission of the Workers Compensation Insurance Rating Bureau of California (WCIRB), unless such copying is expressly permitted in this copyright notice or by federal copyright law. No copyright is claimed in the text of statutes and regulations quoted within this work. Each WCIRB member company, including any registered third-party entities, (Company) is authorized to reproduce any part of this work solely for the following purposes in connection with the transaction of workers compensation insurance: (1) as necessary in connection with Company s required filings with the California Department of Insurance; (2) to incorporate portions of this work, as necessary, into Company manuals distributed at no charge only to Company employees; and (3) to the extent reasonably necessary for the training of Company personnel. Each Company and all agents and brokers licensed to transact workers compensation insurance in the state of California are authorized to physically reproduce any part of this work for issuance to a prospective or current policyholder upon request at no charge solely for the purpose of transacting workers compensation insurance and for no other purpose. This reproduction right does not include the right to make any part of this work available on any website or on any form of social media. Workers Compensation Insurance Rating Bureau of California, WCIRB, WCIRB California, WCIRB Online, X-Mod Direct, escad and the WCIRB California logo (WCIRB Marks) are registered trademarks or service marks of the WCIRB. WCIRB Marks may not be displayed or used in any manner without the WCIRB s prior written permission. Any permitted copying of this work must maintain any and all trademarks and/or service marks on all copies. To seek permission to use any of the WCIRB Marks or any copyrighted material, please contact the Workers Compensation Insurance Rating Bureau of California at
3 Memorandum Regarding the January 1, 2016 Revisions of the California Workers Compensation Experience Rating Plan 1995 Revisions Approved Effective January 1, 2016 Section I, General Provisions 1. Rule 2, Effective Date, was amended to show the effective date of the Experience Rating Plan is 12:01 AM, January 1, Section II, Definitions 2. Rule 10, Pure Premium Rates, was eliminated as experience modification eligibility will no longer be dependent on pure premium rates. Section III, Eligibility and Experience Period 3. Rule 1, Eligibility Requirements for California Workers Compensation Insurance, was amended to change the eligibility threshold to be predicated upon expected loss rates rather than pure premium rates and to include the amount of the eligibility threshold. Section VI, Tabulation of Experience 4. Rule 4, Losses, and Rule 6, Contract Medical Losses, were amended to reflect the addition of Table I that includes Expected Loss Rates and D-Ratios and Table II that includes credibility values, average death value and the maximum loss value and for clarity. Section VII, Rating Procedure 5. Rule 2, Credibility Primary (Cp) Value, Rule 3, Expected Primary (Ep) Losses, Rule 5, Credibility Excess (Ce) Value, and Rule 7, Expected (E) Losses, were amended to reflect the addition of Table I that includes Expected Loss Rates and D-Ratios and Table II that includes credibility values, average death value and the maximum loss value and for clarity. Section VIII, Inquiries, Complaints and Requests for Action, Reconsideration and Appeals 6. Rule 3, Complaints and Requests for Action, was amended to reflect the WCIRB s new address and add an contact. Table I, Expected Loss Rates and Full Coverage D-Ratios 7. Table I was added to incorporate the plan values into the plan and reflect the most current data available. Table II, Credibility Primary and Credibility Excess Values 1. Table II was added to incorporate the current credibility values into the plan. Memorandum 1
4 Memorandum [This page intentionally left blank.] Memorandum 2
5 Table of Contents Section I General Provisions 1 1. Authority 1 2. Effective Date 1 3. Ownership Information 1 4. Applicability 1 5. Amendment of Policy Term 1 6. Subterfuge 1 7. Rating Forms 2 Section II Definitions 3 1. Audited Payroll 3 2. Base Premium 3 3. Change in Ownership 3 4. Classification(s) 3 5. Entity 3 6. Immediate Family 3 7. Insurer Classification(s) 3 8. Loss-Free Rating 4 9. Ownership Rates Risk Uniform Statistical Reporting Plan WCIRB 5 Section III Eligibility and Experience Period 7 1. Eligibility Requirements for California Workers Compensation Insurance 7 2. Experience Period 7 3. Experience to be Used for Rating California Workers Compensation Insurance Risks 7 4. Non-Member Insurers Data 8 5. Self-Insurers Data 8 6. Cost Plus Contracts 8 7. Lapse in Insurance Coverage 8 Section IV Change in Status and Combination of Entities 9 1. Change in Status (Ownership, Operations and Employees) 9 2. Combination of Entities Time Limit on Application of Rules 1 and 2 10 Section V Application of Experience Modification General Application of Experience Modification Application of Experience Modification to a Single Policy Application of Experience Modification to Multiple Policies Application of Experience Modification to Policies Covering Employee Leasing Arrangements Notification of Experience Modification Experience Modification Corrections Effective Dates 13 Section VI Tabulation of Experience Data Used for Experience Rating Experience Rating Forms Payrolls 15 i
6 Table of Contents 4. Losses Accidents Involving Two or More Persons Contract Medical Losses Non-Compensable Claims Subrogation or Partially Fraudulent Claims Compromised Death or S Claims Joint Coverage Claims Terrorism Claims Closed Claims Revision of Losses Moral Responsibility 18 Section VII Rating Procedure Actual Primary (Ap) Losses Credibility Primary (Cp) Value Expected Primary (Ep) Losses Actual Excess (Ae) Losses Credibility Excess (Ce) Value Expected Excess (Ee) Losses Expected (E) Losses Experience Modification Formula 20 Section VIII Inquiries, Complaints and Requests for Action, Reconsideration and Appeals Purpose and Time Limitation Inquiries Complaints and Requests for Action Reconsideration and Appeals to the Insurance Commissioner 22 ii
7 Section I General Provisions Section I General Provisions 1. Authority The rules of this Plan, which have been approved by the Insurance Commissioner of the State of California pursuant to Article 2 of Chapter 3, Part 3, Division 2, of the California Insurance Code, shall govern the experience rating procedure to be followed in connection with California workers compensation insurance. 2. Effective Date The rules and rating values of this Plan are effective at 12:01 AM, January 1, When an amendment to this Plan is approved, a notice summarizing the amendment and its effective date, as specified by the Insurance Commissioner, will be published by the WCIRB. This Plan and all amendments thereto, unless otherwise specifically provided, shall be applied as of the first anniversary rating date of the risk, as established by the WCIRB, which occurs on or after the effective date of the amendment. (See Section II, Definitions, Rule 12, Risk, for the definition of Risk, and Section V, Application of Experience Modification, Rule 1, General Application of Experience Modification, for information on the anniversary rating date). No policy may be cancelled or rewritten to avoid application of this provision. 3. Ownership Information The insurer shall provide the WCIRB with all information relevant to a complete analysis of a risk s ownership and/or operations to ensure the proper application of an experience modification in accordance with this Plan. 4. Applicability An experience modification promulgated in accordance with this Plan shall be applied to the base premium developed in connection with the coverage provided during the effective period of the experience modification. 5. Amendment of Policy Term It shall not be permissible by cancellation or rewriting, or by the extension of the policy term, to alter an existing contract for the purpose of enabling the risk to qualify for, or avoid, application of this Plan. 6. Subterfuge The use of subterfuge or device in any form to evade the promulgation or application of an experience modification determined in accordance with this Plan is prohibited. Whenever the WCIRB has good cause to believe or receives any complaint that the application of an entity s experience modification is being or has been evaded, it shall investigate the matter. Any such complaints shall be submitted in writing no later than twelve (12) months after the expiration date of the policy in question and shall include a detailed statement of facts. If, after investigation, the WCIRB determines that the application of an entity s experience modification is being or has been evaded, it may take any action permitted by law to preclude such evasion, notwithstanding any other provision of this Plan or the Uniform Statistical Reporting Plan. 1
8 Section I General Provisions Any such determination or decision of the WCIRB may be appealed in accordance with Section VIII, Inquiries, Complaints and Requests for Action, Reconsideration and Appeals, of this Plan. 7. Rating Forms WCIRB Experience Rating Forms, together with any revisions thereof, are a part of this Plan and shall govern the details of procedure. 2
9 Section II Definitions Section II Definitions The definitions set forth in this Section shall govern the construction and meaning of the terms and phrases used in this Plan. 1. Audited Payroll Payroll or other basis of exposure reported from an audit conducted pursuant to Part 3, Standard Classification System, Section VI, Administration of Classification System, Rule 4, Audit of Payroll, of the Uniform Statistical Reporting Plan. 2. Base Premium The amount derived from summing the application of the insurer classification rates to the payroll or other basis of exposure, excluding any premium charges arising from the Terrorism Risk Insurance Act of 2002 as amended by the Terrorism Risk Insurance Program Reauthorization Act of Change in Ownership For the purpose of experience rating, change in ownership is defined as follows: a. All or a portion of the ownership in an entity is sold, transferred or conveyed from one person to another. b. An entity is dissolved or non-operative and a new entity is formed. c. Two or more corporations undergo a statutory merger or consolidation. d. All or most of the tangible or intangible assets of an entity are sold, transferred or conveyed to another entity. e. A trusteeship or receivership is set up, either voluntarily or at the direction of the courts, to operate a business. 4. Classification(s) A classification of occupations, employments, industries and businesses contained in the alphabetical listing of standard classifications located in Part 3, Standard Classification System, Section VII, Standard Classifications, of the Uniform Statistical Reporting Plan. (See also Insurer Classification(s).) 5. Entity An individual, joint venture, partnership, limited liability partnership, corporation, limited liability company, unincorporated association or fiduciary operation (e.g., trust, receivership or estate of deceased individual). 6. Immediate Family For the purpose of experience rating, immediate family shall mean father, mother, husband, wife, son, daughter, stepson, stepdaughter, grandson or granddaughter. 7. Insurer Classification(s) Classifications of occupations, employments, industries and businesses used by an insurer in connection with its workers compensation insurance coverage. (See also Classification(s).) 3
10 Section II Definitions 8. Loss-Free Rating A hypothetical calculation on the Experience Rating Form showing what the experience modification would have been if no losses were incurred by the risk. This calculation is for informational purposes only. 9. Ownership For the purpose of experience rating, ownership shall be determined as follows: a. If an entity is a partnership, ownership shall be determined as though each general partner owns an equal share of the partnership. b. If an entity is a joint venture, ownership shall be determined as though each joint venturer owns an equal share of the joint venture. c. If an entity is a limited liability company, ownership shall be determined as though each member owns an equal share of the limited liability company. d. If an entity other than a partnership, joint venture or limited liability company (1) has issued voting stock, ownership shall be determined by the number of voting shares each person owns; (2) has not issued voting stock, ownership shall be determined as though each member owns an equal share of the entity; (3) has not issued voting stock and has no members, ownership shall be determined as though each member of the board of directors or comparable governing body owns an equal share of the entity. e. If a trust is set up to operate an entity, ownership shall be determined as though each trustee owns an equal share of the entity, unless the grantor retains the right to modify or terminate the trust, or the right of the trustee to exercise complete discretion with respect to the operations, assets or management of the entity is subject to approval of the grantor, in which case the grantor shall be determined to be the owner. f. If an entity is subject to bankruptcy or receivership proceedings, ownership shall be determined as though each trustee or receiver owns an equal share of the entity, unless the entity is named debtor in possession, in which case ownership shall be determined as though the entity was not being operated under a trusteeship or receivership. g. If all or a portion of a business is owned by an entity, the interest owned by the entity shall be treated as though it is owned by the person or persons who own the entity in proportion to each person s ownership interest in the entity. 10. Rates The insurer s filed cost per exposure base unit, prior to any application of individual risk variations based on loss or expense considerations, excluding minimum premiums. 11. Risk All insured operations of any entity within California and, if two or more entities are combinable for experience rating purposes in accordance with Section IV, Rule 2, Combination of Entities, all operations of such entities within California, regardless of whether such operations or any part of them are insured by one or several insurers. 4
11 Section II Definitions 12. Uniform Statistical Reporting Plan The California Workers Compensation Uniform Statistical Reporting Plan 1995, approved by the Insurance Commissioner of the State of California, Title 10, California Code of Regulations, Section WCIRB The Workers Compensation Insurance Rating Bureau of California, a rating organization licensed by the California Department of Insurance and designated as the Insurance Commissioner s statistical agent in accordance with the provisions of Sections et seq. of the California Insurance Code. 5
12 Section II Definitions [This page intentionally left blank.] 6
13 Section III Eligibility and Experience Period Section III Eligibility and Experience Period 1. Eligibility Requirements for California Workers Compensation Insurance A risk shall qualify for experience rating of its California workers compensation insurance premium under this Plan if the amount produced by applying the approved expected loss rates shown in Table I of this Plan to the total remuneration that would be used in the experience rating calculation for the risk is greater than or equal to the eligibility threshold of $10,300. Only completed policy periods shall be used in determining eligibility. Any risk eligible for experience rating shall be experience rated. 2. Experience Period The experience period shall be three (3) years, commencing four (4) years and nine (9) months prior and terminating one (1) year and nine (9) months prior to the date for which an experience modification is to be established. 3. Experience to be Used for Rating California Workers Compensation Insurance Risks The entire California workers compensation insurance experience of a risk (except as hereinafter provided) developed under any policy that provides California workers compensation insurance coverage for all or a part of the risk s operations and that incepts within the experience period shall be reported and used in determining its experience modification. The experience of any such policy shall be used whether the operations covered by such policy are normal to the risk s business or otherwise. Only completed policy periods shall be used. The following experience shall not be used: a. Experience of a policy previously used in determining experience modifications that applied to the risk for more than two (2) years and six (6) months. b. Experience developed under construction or erection projects lasting more than 180 calendar days outside the United States, its Territories or the Dominion of Canada. c. Experience developed under coverage provided private residence employees. d. Experience arising out of workers compensation insurance written under the laws of any other jurisdiction. e. Experience arising out of any class of insurance other than California workers compensation insurance. f. Experience of a policy written by an insolvent insurer with a required month of valuation on or after the date of liquidation of the insolvent insurer, unless the experience previously was used in a rating and no revaluation is required to be filed pursuant to Part 4, Unit Statistical Reporting Requirements, Section VII, Rule 1, of the Uniform Statistical Reporting Plan. g. Unaudited payroll. The WCIRB may, at its discretion, verify any or all of the data from which the experience is to be determined. Subject to the other provisions of this Plan, if the owners of a risk sell, transfer, convey, discontinue, selfinsure or otherwise dispose of all or part of the operations of the risk, all experience incurred prior to such action shall be used in determining experience modifications that shall be applied to any remaining operations and to any new operations in which the owners of the risk own a one-half or greater interest. 7
14 Section III Eligibility and Experience Period 4. Non-Member Insurers Data Experience data of (non-member) insurers that have discontinued business (which has not been used in previous ratings) shall be accepted subject to verification of the completeness and accuracy of the information to the satisfaction of the WCIRB. 5. Self-Insurers Data The experience of self-insurers may be accepted by the WCIRB provided the experience of self-insured operations is submitted on Form 701, Report of California Self-Insured Data for Experience Rating Purposes, giving definite information with respect to payroll and losses. Such statement shall be secured, verified and submitted by an interested insurer and supported by affidavit of the employer. Self-insured experience shall not be used in rating a risk, unless the operations that produced such experience are currently insured under a workers compensation and employers liability insurance policy that has been received by the WCIRB. The self-insured data is subject to all the relevant rules of this Plan, the Uniform Statistical Reporting Plan and the Miscellaneous Regulations for the Recording and Reporting of Data An experience modification will not be promulgated with partial self-insured data. If the selfinsured data (original report) includes open claims, all such claims must be revalued and subsequent reports must be submitted annually to the WCIRB in accordance with the rules in the Uniform Statistical Reporting Plan. 6. Cost Plus Contracts Where a contractor performs a construction job on a cost plus basis and a policy is issued to cover the insurable interest of both the contractor and the principal, the contractor s experience modification shall apply to the premium developed under the policy and the experience incurred under such policy shall be considered to be the experience of the contractor. 7. Lapse in Insurance Coverage Any experience prior to a lapse in California workers compensation insurance coverage of more than two consecutive years shall not be considered, unless such lapse in coverage resulted from the risk having been self-insured, in which event the entire experience prior to the lapse in insurance coverage shall be used if the experience for the period of self-insurance has been accepted by the WCIRB. 8
15 Section IV Change in Status and Combination of Entities Section IV Change in Status and Combination of Entities 1. Change in Status (Ownership, Operations and Employees) The following rules govern the use of past experience in future experience ratings whenever a change in ownership, management, control, operations or employees occurs. Experience of the past shall be used in future experience ratings, unless a material change in ownership, as specified in paragraph a, is accompanied by a material change in operations or employees as specified in paragraph b. a. Change in Ownership A change in ownership is material only if the owner or owners prior to the change in ownership own less than a one-half interest after the change in ownership. An ownership interest acquired by a member of the immediate family of a prior owner shall be treated the same as though the ownership interest was acquired by the prior owner. b. Change in Operations or Employees (1) A change in operations is material only if: (a) the operations (that underwent the material change in ownership) were changed during the first ninety (90) days following the material change in ownership to such an extent that the process and the hazard to which the employees (who conduct such operations) are exposed differ substantially from the process and the hazard to which they were exposed prior to the material change in ownership, and (b) the change in operations results in a reclassification of the operations by the WCIRB. (2) Where all of the risk undergoes a material change in ownership, a change in employees is material only if: (a) a majority of the employees who conduct the operations (that underwent the material change in ownership) for any period of time within the first ninety (90) days following the material change in ownership were not employed to conduct such operations for any period of time within the ninety (90) days immediately preceding the material change in ownership, and (b) a majority of the payroll earned by the employees who conduct the operations (that underwent the material change in ownership) for any period of time within the first ninety (90) days following the material change in ownership was earned by employees who were not employed to conduct such operations for any period of time within the ninety (90) days immediately preceding the material change in ownership. (3) Where less than all of the risk undergoes a material change in ownership, a change in employees (with respect to that portion of the risk that underwent the material change in ownership) is material only if: (a) less than one-half of the employees employed by the entire risk for any period of time within the ninety (90) days immediately preceding the material change in ownership are also employed for any period of time within the first ninety (90) days following the material change in ownership to conduct the operations that underwent the material change in ownership, and (b) the payroll earned during the first ninety (90) days following the material change in ownership by those employees who conduct the operations that underwent the material change in ownership and who were also employed by the risk for any period of time 9
16 Section IV Change in Status and Combination of Entities within the ninety (90) days immediately preceding the material change in ownership is less than one-half of the payroll earned by all employees of the risk during the ninety (90) days immediately preceding the material change in ownership. 2. Combination of Entities Separate entities shall be combined for experience rating purposes when the same person or persons own a majority interest in each of the entities. A risk in bankruptcy or receivership shall not be combined with any other entity for experience rating purposes, unless (a) the other entity is a part of the same bankruptcy or receivership proceeding and under the same trustee or receiver or (b) the risk is being operated by the Debtor in Possession and the other entity is combinable with the debtor. Except as specified in the immediately preceding paragraph, a trust shall not be combined with any entity for experience rating purposes except: (a) if the parent or parents are the only trustees of a trust set up for the benefit of their minor children, the trust shall be combined with the operations of the trustee; and (b) two or more trusts having identical trustees and identical beneficiaries shall be combined. If two or more different combinations are possible in accordance with the provisions of this Rule, the combination producing the greatest amount of expected losses during the experience period shall be made. If two or more entities are no longer combinable as a result of a change in ownership that is not material, the entire experience developed by the combined entities prior to the change and during the experience period shall be used in developing experience modifications for each of the entities after the change. If two or more entities are no longer combinable as a result of a change in ownership that is material, the experience incurred prior to the change and during the experience period shall be used in developing the experience modification for each of the entities that has not undergone a material change. When a combination is made, the experience used in the combination shall be subject to the provisions of Rule 1, Change in Status. Rule 2 applies only where the entities are, or have been, operating and insured concurrently in California. It does not apply where concurrent operations are for a short period of time, not exceeding one year, provided the operation of the original entity during the period both entities were operating was restricted to the completion of contracts entered into prior to the new entity commencing operations. Rule 1 applies in all situations where Rule 2 is not applicable. 3. Time Limit on Application of Rules 1 and 2 Experience modifications shall not be subject to revision or withdrawal because of the application of Rule 1 or 2 of this Section, unless one of the following applies: a. The notice of withdrawal or revision is released during the effective period of the experience rating affected or the insurer is notified during such period that this action is forthcoming. b. Either the insurer or the insured requests, in writing, such action within one year of the expiration date of the experience modification to be affected. 10
17 Section V Application of Experience Modification Section V Application of Experience Modification 1. General Application of Experience Modification Commencing on the anniversary rating date, an experience modification shall be effective for a period of twelve (12) months (except as provided in Rules 2 and 3 of this Section) and, during that period, shall be applicable 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 such modification. However, the risk experience modification shall not be applicable to the premium developed for coverage provided private residence employees, nor to the premium of separate policies written to cover construction or erection projects lasting more than 180 calendar days outside the United States, its Territories or the Dominion of Canada. The anniversary rating date of a policy shall be controlled by the effective date of the preceding policy except as noted below: a. Where the WCIRB has established an anniversary rating date pursuant to Rule 2 or Rule 3 of this Section, such date shall govern. b. Where the WCIRB has not established an anniversary rating date for experience rating purposes and the preceding policy has lapsed, been cancelled, or expired and no policy issued for a period of ninety (90) days beyond such date of lapse, cancellation or expiration, the policy shall be considered new business. Where successive lapses occur, this Rule shall be applied to the most recent date. 2. Application of Experience Modification to a Single Policy If a risk is covered by a single policy, the following procedure shall apply: a. The experience modification determined for the anniversary rating date shall apply throughout the full term of a policy that becomes effective on the anniversary rating date. Such experience modification shall also apply to the full term of a policy that replaces the original policy on an effective date no later than three (3) months after the effective date of the experience modification. b. With respect to a policy that becomes effective on a date more than three (3) months after the anniversary rating date, the experience modification determined for such rating date shall apply until a date twelve (12) months therefrom, at which time a new experience modification shall be determined to apply for the unexpired term of any then outstanding policy; a new modification shall be determined annually as of the new anniversary rating date that shall be determined by the date twelve (12) months after the effective date of such outstanding policy. c. This Plan does not permit the establishment of more than one experience modification on a single risk at the same time. 3. Application of Experience Modification to Multiple Policies If a risk is covered by several policies that differ as to expiration dates, the following procedure shall apply: a. A single experience modification shall be computed once every twelve (12) months on an anniversary rating date to be determined by the WCIRB and shall be applicable to all policies for the portion of their terms that falls within the period such modification is in force, regardless of the effective or termination date of such policies. At the end of that period, a new modification shall be computed that will apply to the unexpired term of any policy issued during the preceding period and to policies issued within twelve (12) months until the next anniversary rating date. 11
18 Section V Application of Experience Modification b. If the policy controlling the anniversary rating date established by the WCIRB has been terminated by cancellation or is not renewed, a new anniversary rating date shall be established in accordance with Rule 2a of this Section. c. This Plan does not permit the establishment of more than one experience modification on a single risk at the same time. 4. Application of Experience Modification to Policies Covering Employee Leasing Arrangements As used in this Rule, employee leasing arrangement means any arrangement, under contract or otherwise, and whether or not terminology such as lease is used by the parties, whereby an entity utilizes the services of a third party to provide its workers for a fee or other compensation. The third party providing the workers shall be referred to as the labor contractor. The entity to which the workers are provided shall be referred to as the client. a. If a client enters into an employee leasing arrangement, other than as noted in d below, then: (1) a separate policy providing workers compensation benefits for the workers provided to the client by the labor contractor must be written; provided, however, that such policy may also provide workers compensation benefits for the client s employees; (2) the experience modification of the client shall apply to the separate policy; (3) the experience reported in connection with the separate policy shall be used in the future experience ratings of the client and shall not be used in the future experience ratings of the labor contractor; and (4) the separate policy shall name either the labor contractor or the client as the named insured. (a) If the labor contractor is the named insured, the separate policy may not provide coverage for the client s employees. (b) If the client is the named insured, the separate policy shall be endorsed with the labor contractor s name, address, and an indication that the policy covers the workers provided to the client by the labor contractor. In addition, the labor contractor shall be endorsed as an additional insured on the separate policy. b. If a policy names a labor contractor, who has entered into one or more employee leasing arrangements subject to this rule, as the named insured, the policy must be limited and restricted as follows: (1) If the policy provides coverage for workers provided to a client by the labor contractor, the policy must be limited and restricted to provide coverage only for the workers provided to the client by the labor contractor. (2) If the policy provides coverage for employees of a labor contractor, other than those employees provided as workers to clients pursuant to one or more employee leasing arrangements subject to this rule, the policy must be limited and restricted to exclude coverage for all workers provided to clients pursuant to one or more employee leasing arrangements subject to this rule. c. If a policy names the client of a labor contractor as the named insured with respect to those employees of the labor contractor provided as workers to the client, and such policy does not also provide coverage for the client s employees, the policy must be limited and restricted to provide coverage only for the employees of the labor contractor provided as workers to the client. 12
19 Section V Application of Experience Modification d. This rule does not apply to an employee leasing arrangement whereby workers are provided by the labor contractor solely to assist the client in meeting temporary staffing needs such as employee absences, skill shortages, or seasonal workloads. 5. Notification of Experience Modification If a risk is subject to experience rating, the WCIRB shall publish notice of the experience modification either electronically or on hard copy. Such notice shall be published by issuing one copy of the Experience Rating Form or experience rating form data to either the insurer of record during the effective period of the experience modification or the insurer of record at the time the experience modification is issued. For informational purposes only, the notice shall also reflect the Loss-Free Rating and a summary explanation of the experience modification computation. The insurer of record shall be entitled to two hard copies of the Experience Rating Form without charge. Additional copies of the Experience Rating Form or experience rating form data may be made available to authorized parties at a fee and in a manner to be determined by the WCIRB. The WCIRB shall provide each experience rated risk a single copy of its current Experience Rating Form free of charge upon request. An insurer is not relieved of the obligation to apply an experience modification because of lack of knowledge that notice has been published by the WCIRB. 6. Experience Modification Corrections Effective Dates This Rule does not apply to experience modifications that are corrected or revised due to the application of Section I, Rule 6; Section IV, Rules 1 and 2; Section V, Rule 4; or Section VI, Rule 13b, of this Plan. In the event of the discovery of an error in the current experience modification or the two immediately preceding experience modifications, a revised experience modification shall be published and be effective as follows: a. The revised experience modification shall be effective as of the effective date of the erroneous modification, provided: (1) The revised experience modification is less than the erroneous experience modification; (2) The revised experience modification is published within three (3) months of the effective date or publication date of the erroneous modification; (3) The WCIRB was notified, in writing, within three (3) months of the effective date or publication date of the erroneous experience modification of a possible error; or (4) The WCIRB notified the carrier of record, in writing, within three (3) months of the effective date or publication date of the erroneous experience modification that the erroneous experience modification was under review. b. Except as provided in paragraph a, the revised experience modification shall be effective as of the date it is published provided, however, that the revised experience modification shall not be applied if it is published three (3) months or less prior to its expiration. 13
20 Section V Application of Experience Modification [This page intentionally left blank.] 14
21 Section VI Tabulation of Experience Section VI Tabulation of Experience 1. Data Used for Experience Rating The data used for experience rating purposes shall be the individual risk experience data reported in accordance with the provisions of the Uniform Statistical Reporting Plan on every policy that, in accordance with Section III, Rule 3, Experience to be Used for Rating California Workers Compensation Insurance Risks, is to be used in determining the experience modification. Except as specifically provided in this Section, the data used shall be the data reflected in the latest unit statistical report (first, second or third), which, in accordance with the Uniform Statistical Reporting Plan, was due to be filed with the WCIRB no later than one month prior to the effective date of the experience rating. 2. Experience Rating Forms The prescribed data shall be tabulated by the WCIRB and shall be exhibited together with the details of the computation of the experience modification on the Experience Rating Forms. Such forms shall not be inconsistent with the Experience Rating Forms that have been made a part of this Plan. 3. Payrolls The audited payroll for each classification for the experience period shall be tabulated by policy periods. 4. Losses Incurred losses, paid and outstanding, shall be tabulated by policy year as follows: a. Unless otherwise noted, the indemnity and medical incurred on each claim shall be combined, and the total combined incurred cost, limited to the maximum loss value shown in Table II of this Plan, shall be listed for rating purposes in accordance with the procedure set forth in the following paragraphs, b to j inclusive, and also Rules 7 through 14 of this Section. b. Disability claims on which there have been no subrogation recoveries and on each of which the combined indemnity and medical cost does not exceed $2,000 shall not be listed individually, but shall be summarized and reported in the aggregate by policy year. c. Disability claims on which there have been no subrogation recoveries and on each of which the combined indemnity and medical cost exceeds $2,000 shall be individually listed at such amounts, but not in excess of the maximum loss value. d. Accidents involving two or more persons shall be tabulated in accordance with Rule 5 of this Section. e. Contract medical shall be summarized by classification and tabulated in accordance with Rule 6 of this Section. f. Claims reported as non-compensable, including those that may have been reported with incurred loss amounts, shall not be listed. g. Death claims reported as clearly within the scope of the workers compensation laws of California shall be individually listed at the average death value shown in Table II of this Plan. h. Any claim reported as a subrogation or a partially fraudulent claim, as well as all claims reported as closed death claims compromised over the sole issue of the applicability of the workers compensation laws of California ( Compromised Death or S Claims ), shall be individually listed in accordance with the provisions of Rule 8 or 9 of this Section. 15
22 Section VI Tabulation of Experience i. Claims reported as joint coverage claims shall be individually listed and tabulated in accordance with the provisions of Rule 10 of this Section. j. A claim involving both employers liability and workers compensation coverages will be listed at a value reflecting the total incurred loss of the claim to the maximum loss value shown in Table II of this Plan. k. All claims directly arising from the commercial airline hijackings of September 11, 2001 and the resulting subsequent events with accident dates of September 11, 2001 through September 14, 2001 reported with a Catastrophe Code 48 pursuant to the Uniform Statistical Reporting Plan shall not be listed. l. All claims directly arising from certified terrorism losses, as defined by the Terrorism Risk Insurance Act of 2002 as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2007, reported with a Catastrophe Code assigned pursuant to the Uniform Statistical Reporting Plan shall not be listed. 5. Accidents Involving Two or More Persons For accidents involving injuries to two or more persons, the total incurred cost for each claim, limited to the maximum loss value, shall be split into (a) the primary value and (b) the excess cost. The excess cost shall be the difference between the total incurred cost for the claim, limited to the maximum loss value, and the primary value. The total primary losses chargeable to the accident and employed in the experience rating shall be limited to twice the maximum loss primary value. Primary losses in excess of twice the maximum loss primary value shall be included in the risk excess losses, but the total of the excess losses chargeable to the accident and employed in the experience rating shall be limited to twice the maximum excess losses. 6. Contract Medical Losses Where contract medical amounts are reported, the amount of loss included for experience rating purposes shall be the full contract medical amount reported and shall be apportioned to primary and excess based on the appropriate D-Ratio(s) for the classification(s) for which the contract medical amounts are reported. Contract medical losses are not subject to the maximum loss value shown in Table II of this Plan. 7. Non-Compensable Claims Where a claim has been reported as a non-compensable claim pursuant to the rules of the Uniform Statistical Reporting Plan, none of the reported incurred loss amounts shall be reflected in the computation of the experience modification. 8. Subrogation or Partially Fraudulent Claims Where a claim has been reported as a subrogation claim or a partially fraudulent claim pursuant to the rules of the Uniform Statistical Reporting Plan, the treatment shall be as follows: a. In the case of accidents other than those involving death and where the total incurred cost is less than the maximum loss value, only the net loss shall be tabulated and shall be apportioned to primary and excess in the same proportion as exists in the full incurred loss. b. In the case of accidents involving other than death and where the total incurred cost exceeds the maximum loss value, the amount of loss included for experience rating purposes shall be such proportion of the maximum loss value as the net loss bears to the total loss and shall be apportioned to primary and excess in the same proportion as exists in the maximum loss value. 16
23 Section VI Tabulation of Experience c. In the case of accidents involving death, the amount of loss included for experience rating purposes shall be such proportion of the average death value as the net loss bears to the total loss and shall be apportioned to primary and excess in the same proportion as exists in the average death value. The net loss tabulated for experience rating shall be determined pursuant to the rules of the Uniform Statistical Reporting Plan. Claims involving recoveries by injured employees against third parties shall be treated in accordance with the provisions of this Rule. 9. Compromised Death or S Claims Where a claim has been reported as a Compromised Death or S Claim pursuant to the rules of the Uniform Statistical Reporting Plan, the amount of loss included for experience rating purposes shall be such proportion of the average death value as the amount of the settlement bears to the total loss that would have resulted if the death had clearly been within the scope of the workers compensation laws of California and shall be apportioned to primary and excess in the same proportion as exists in the average death value. 10. Joint Coverage Claims Where a claim has been reported as a joint coverage claim pursuant to the rules of the Uniform Statistical Reporting Plan, the treatment shall be as follows: a. Death Claims. The total amount tabulated for one or more claims resulting from injuries that contributed to the death of the same individual shall be the same proportion of the average death value as the total amount assigned to policies covering the insured during the experience period bears to the full incurred loss. The amounts shall be apportioned to primary and excess in the same proportion as exists in the average death value. b. Accidents Not Resulting in Death of the Injured Party. If the claim does not involve death and the full incurred loss does not exceed the maximum loss value, only the amount assignable to each policy covering the insured during the experience period shall be tabulated, and each amount shall be apportioned to primary and excess in the same proportion as exists in the full incurred loss. If the claim does not involve death and the full incurred loss exceeds the maximum loss value, the total amount tabulated shall be the same proportion of the maximum loss value as the total amount assigned to policies covering the insured during the experience period bears to the full incurred loss. The amount tabulated shall be apportioned to primary and excess in the same proportion as exists in the maximum loss value. 11. Terrorism Claims In the case of a claim directly arising from the commercial airline hijackings of September 11, 2001 and the resulting subsequent events with accident dates of September 11, 2001 through September 14, 2001 reported with Catastrophe Code 48 pursuant to the Uniform Statistical Reporting Plan, or a claim directly arising from certified terrorism losses, as defined by the Terrorism Risk Insurance Act of 2002 as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2007, reported with a Catastrophe Code assigned pursuant to the Uniform Statistical Reporting Plan, none of the reported incurred loss on the claim should be reflected in the computation of the experience modification. 17
24 Section VI Tabulation of Experience 12. Closed Claims Whenever a. a claim that has been used in an experience rating is subsequently reported as closed on or after January 1, 1998 pursuant to Part 4, Unit Statistical Reporting Requirements, Section VII, Subsequent Reports, Correction Reports, and Reporting Methods, Rule 1, Subsequent Reports, of the Uniform Statistical Reporting Plan; and b. the aggregate value of all closed claims reported on policies required to be used in the rating is less than 60% of the aggregate of the highest value at which each closed claim was previously used in a rating, then the WCIRB shall revise the rating subject to the provisions of Section V, Rule 6, Experience Modification Corrections Effective Dates, based on the data reflected in the latest unit statistical reports (second, third, fourth, fifth, and sixth) required to be filed with the WCIRB no later than one month prior to the next anniversary rating date, provided the latest unit statistical report data for all policy data required to be used in the rating have been received by the WCIRB. Notwithstanding any provision of this Plan, in no event shall an experience rating revised solely due to the application of this paragraph be published or applied if it increases the otherwise applicable experience rating. 13. Revision of Losses a. It shall not be permissible to revise values because of department or judicial decisions or because of developments in the nature of injury between two valuation dates. Provided, however, that (1) in cases where loss values are included or excluded through mistake other than error of judgment, (2) where the claim is determined to be non-compensable, (3) where the insurer has received a subrogation recovery or a portion of the claim cost is declared fraudulent, (4) where a closed death claim has been compromised over the sole issue of applicability of the workers compensation laws of California, or (5) where a claim has been determined to be a joint coverage claim; then a revised reporting shall be filed with the WCIRB and it shall be used to adjust the current and two immediately preceding experience ratings, subject to the provisions of Section V, Rule 6, Experience Modification Corrections Effective Dates. b. Notwithstanding paragraph a, or Section V, Rule 6, if an employer provides notification to its insurer pursuant to subdivision (b) of Section 3761 of the Labor Code that a claim is not compensable and such claim is determined by the Workers Compensation Appeals Board to be noncompensable, a loss correction shall be filed by the insurer with the WCIRB, and it shall be used to adjust each rating in which the claim was used. The loss correction shall be filed in accordance with Part 4, Unit Statistical Reporting Requirements, Section VII, Subsequent Reports, Correction Reports, and Reporting Methods, Rule 2c, Loss Corrections, subsection (1), of the Uniform Statistical Reporting Plan. 14. Moral Responsibility No loss shall be excluded from the experience of a risk on the grounds that the employer was not morally responsible for the accident that caused such loss. 18
c a l i f o r n i a WCIRBCalifornia California Workers Compensation Uniform Statistical Reporting Plan 1995 Effective January 1, 2006
Workers Compensation Insurance Rating Bureau of California c a l i f o r n i a California Workers Compensation Uniform Statistical Reporting Plan 1995 Effective January 1, 2006 WCIRBCalifornia Memorandum