| Revision History | |||
|
Type |
Effective Date |
Circular |
Notes |
| Revision | 04/01/2024 | C-23-13 | Revisions to Manual Rules Related to Occupational Disease Provisions |
|
Revision |
11/18/2021 |
Revisions to North Carolina Basic Manual Rule 3.A.12.a.4. Final Earned Premium – Determination |
|
|
Revision |
07/01/2021 |
Revisions to North Carolina Basic Manual for Workers Compensation and Employers Liability |
|
|
Revision |
04/01/2018 |
Update of Circular C-17-8 NCCI Item B-1435 |
|
|
Revision |
04/01/2018 |
NCCI Item B-1435 Part II Classifications, Including Trucking and Towing |
|
|
Revision |
05/01/2017 |
NCCI Item B-1430 - Elimination of Anniversary Rating Date (ARD) |
|
|
Revision |
04/01/2017 |
Revisions to North Carolina Basic Manual Rule 3-D-Professional Employers Organization State Specific Endorsements: WC 32 03 05, WC 32 03 06, WC32 03 07 and WC 32 03 08 |
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|
Revision |
01/01/2017 |
North Carolina Basic Manual Update NCCI Item B-1429 - Establishment of Audit Noncompliance Charge |
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|
Original |
04/01/2016 |
North Carolina Basic Manual for Workers Compensation and Employer Liability - Digital Edition |
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1. Advisory Loss Cost & Assigned Risk Rates
The advisory loss cost is the portion of the rate that represents projected losses and loss adjustment expenses. Each carrier adds an increment for expenses and any modification to the advisory loss cost to develop the rate, subject to the approval of the North Carolina Commissioner of Insurance.
For assigned risk rates, the Bureau adds an increment for expenses and a modification to the advisory loss cost to develop the rate, subject to the approval of the North Carolina Commissioner of Insurance.
Manual premium is calculated based on manual rates per $100 of payroll.
The advisory loss cost and assigned risk rates for each classification are shown in the Miscellaneous Values section.
Large Risk Alternative Rating Option (LRARO) premium eligibility, and rules specific to North Carolina, can be found in the NCCI Retrospective Rating Plan Manual.
2. (RESERVE FOR FUTURE USE)
The standard North Carolina policy cancellation condition permits cancellation by the insured or by the insurance carrier.
b. Reasons for Cancellation and Premium Determination
The reason for the cancellation determines the way in which the premium is calculated.
Cancellation Provisions Table 1
|
If... |
Then... |
|
The policy is cancelled by the insurance carrier… |
|
Cancellation Provisions Table 2
|
If... |
Then... |
|
The policy is cancelled by the insured when retiring from business such that:
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 is not considered retiring from the business insured by the policy. |
|
Cancellation Provisions Table 3
|
If... |
Then... |
|
An assigned risk policy is being cancelled because the insured replaced coverage through the voluntary market… |
|
Cancellation Provisions Table 4
|
If... |
Then... |
||||
|
The policy is cancelled by the insured or Premium Finance Company, except when the insured is retiring from the business… |
Unless a policy is endorsed with Pro-Rata Cancellation Endorsement (WC 32 06 02) and meets the criteria listed in the Schedule of that endorsement, 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:
Short-rate percentage: 1. Determine the payroll developed during the period the policy was in effect. 2. Determine the full policy payroll by using the following formula:
3. Apply rates to such payroll. 4. 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:
5. Based on the extended number of days, apply the short-rate percentage shown in the Short Rate Cancellation Table located in Appendix B to the full policy premium calculated in step 3. This result is the short-rate portion of the premium. 6. If applicable:
7. The total earned premium for the short-rate cancelled policy must not be less than the annual minimum premium applicable to the policy.
Short-rate factor:
If the policy is endorsed with the Pro-Rata Cancellation Endorsement (WC 32 06 02) and the policy meets the criteria listed in the Schedule of that endorsement, the policy will be cancelled pro rata according to the following procedures:
|
Refer to Appendix B for cancellation examples.
4. Admiralty Law, Federal Employers Liability Act (FELA), and US Longshore and Harbor Worker’s Compensation Act (USL&HW)
a. F-Classification Codes and Admiralty/FELA Classifications (that include USL&HW Act benefits)
The rates for classification codes followed by the letter “F”, as well as 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 (not including USL&HW Act benefits)
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:
Use the non F-classification that describes the duties performed.
Increase the rate and minimum premium for the non F-classification by the USL&HW Coverage Percentage found in the Miscellaneous Values section.
NOTE: This factor is not applied to the expense constant.
Apply the increased rate to that portion of an employee’s payroll that is subject to the USL&HW Act.
c. Waters not subject to Admiralty Jurisdictions
Insurance for operations on waters not subject to admiralty jurisdiction are to be provided by the standard policy and endorsement forms and are subject to the rules that apply to statutory workers compensation insurance.
Admiralty classifications and rates for Program II apply to these operations.
d. Extensions of the USL&HW Act
Premium for extensions of the USL&HW Act is determined in the same manner as the premium for the USL&HW Act.
5. Combination of Legal Entities, Locations and Operations
a. Legal Entities
If the same person(s), or group of persons, own the majority interest in separate legal entities, they may be insured on one policy. Where combination of separate entities is permissible, a single policy may be issued to insure more than one legal entity.
Classifications are applied separately to each legal entity.
See the Experience Rating Plan Manual for additional information.
b. Locations and Operations
All operations of any one employer at a single location must be insured on one policy. If the same person(s), or group of persons, own the majority interest in separate legal entities at the same locations, they may be insured on one policy.
See the Experience Rating Plan Manual for additional information.
Deposit premium is the initial payment required by an insurance carrier to provide coverage. This is established by the carrier and is subject to periodic premium adjustment.
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 North Carolina Commissioner of Insurance.
a. Estimated annual premium and the payment schedule are subject to adjustments at interim or final audit, and a risk may select a higher deposit premium at inception.
b. The deposit premium is credited to the final earned premium or renewal policy. It cannot be credited to any interim premium adjustment.
For information regarding deposit premium on Three-Year Fixed-Rate policies, refer to Rule 3-B-2.
Rule 3-A-6 is not applicable in the residual market. Refer to Rule 4-A and 4-H for residual market deposit premium rules.
7. (RESERVE FOR FUTURE USE)
8. Effective Date
Effective date of a policy is the starting date (month, day, and year) of the policy, the time at which insurance coverage begins.
Estimated annual premium is based on the estimated payroll for each classification anticipated by the insured during the policy period. These estimates are subject to evaluation by the carrier through review of records or inspections.
The expense constant is the premium charge 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 if a state is added or deleted during the term of the policy.
For voluntary policies, the expense constant is filed by or on behalf of the carrier with the North Carolina Department of Insurance. For Assigned Risk policies, the expense constant is shown in the Miscellaneous Values section.
The following rules apply where an expense constant is applicable:
a. The expense constant is:
Not subject to premium discount, experience rating modification, retrospective rating adjustment, or additional charges for the catastrophe provisions determined in Rule 3-A-23
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
Shown on the Information Page of the policy
Expense constant examples:
In the example below, the manual premium plus the expense constant of $250 does not exceed the minimum premium. The total estimated annual premium for this policy is the minimum premium:
|
Estimated Annual Payroll |
$10,000 |
|
Divided by 100 |
100 (units of payroll) |
|
Rate |
$5.35 |
|
Manual Premium (Payroll/100) x Rate |
$535 |
|
Expense Constant |
$250 |
|
Total Estimated Annual Premium |
$785 |
|
Minimum Premium |
$1,250 |
In the example below, the manual premium plus the expense constant of $250 exceeds the minimum premium. The total estimated annual premium for this policy is $1,320:
|
Estimated Annual Payroll |
$20,000 |
|
Divided by 100 |
200 (units of payroll) |
|
Rate |
$5.35 |
|
Manual Premium (Payroll/100) x Rate |
$1,070 |
|
Expense Constant |
$250 |
|
Total Estimated Annual Premium |
$1,320 |
|
Minimum Premium |
$1,250 |
b. 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 share the same highest expense constant, the expense constant is determined by the state with the largest amount of standard premium.
Example of expense constant determination when two or more states have the same highest standard premiums:
|
State |
Standard Premium |
Expense Constant |
|
State X |
$10,000 |
$250 |
|
State Y |
$17,000 |
$250 |
|
State Z |
$1,400 |
$180 |
This is a multiple state policy with three states. When more than one state is listed on the policy, the appropriate expense constant to charge is the highest expense constant on the policy, which is $250. In this example, two states (state X and state Y) have the same highest expense constant. State Y has the largest amount of standard premium and would determine the governing state for policy issuance and reporting purposes.
c. The expense constant must be excluded from the determination of standard premium.
d. The full expense constant must be charged for short-term policies.
Expense constants are pro-rated when short-term policies are issued:
To replace a binder
Solely to establish consistent effective dates with other insurance policies
e. If the policy is cancelled, refer to cancellation provision tables in Rule 3-A-3-b for treatment of the expense constant.
f. The pro-rated portions of the expense constant as outlined above must not be less than $15.
For expense constant determination of Three-Year Fixed-Rate policies, refer to Rule 3-B.
11. Coal Mine Disease Charge (Federal Mine Safety and Health Act)
a. Disease coverage provided for risks subject to the Federal Mine Safety and Health Act is not subject to:
Experience rating
Premium discounts
Retrospective rating
Refer to the North Carolina Workers Compensation Statistical Plan Manual for the applicable codes to report disease experience where there is liability under the Federal Mine Safety and Health Act.
b. Advisory loss costs or assigned risk rates for this coverage and any underlying North Carolina coverage for disease are shown separately in the Miscellaneous Values section.
c. For advisory loss costs or assigned risk rates for employers not described by a coal mine classification, contact the North Carolina Rate Bureau if exposure develops.
a. Determination
1. Final earned premium is the total premium earned during the policy period. 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 employer.
2. Determination of final earned premium is governed by the approved rules, classifications and rates, subject to modification by applicable rating plans.
3. The carrier has the right to calculate final earned premium based on an examination and audit of all records related to the policy.
4. The rules, classifications, and rates in this manual govern the audit of payrolls and adjustments of premiums. 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, at least once a year.
5. 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.
Example of acceptable deviation to rule that audited information must coincide with the effective and expiration dates of the policy:
The policy period is 1/1/2014 – 1/1/2015. The insured’s payroll records begin on 1/7/2014 and are produced every two weeks. The auditor may use the payroll records to audit the premium from 1/7/2014 – 1/7/2015.
b. Audit Noncompliance Charge
1. If the employer does not comply with Part Five – Premium, Section G. (Audit) of the policy, the employer will be considered noncompliant with the policy terms and conditions. When this occurs, the carrier may apply an Audit Noncompliance Charge (ANC) subject to the conditions in this rule. The charge is determined by applying the ANC multiplier to the ANC basis shown below:
|
ANC Basis |
ANC Multiplier |
Endorsement |
Other |
|
Estimated Annual Premium |
Up to three times |
Audit Noncompliance Charge Endorsement |
For assigned risk policies, the ANC Endorsement must be attached to the policy when NC is shown in 3.A of the Information Page. For voluntary policies, the ANC endorsement is optional. |
2. On a multistate policy, the ANC applies only to the exposure in the states where an employer is noncompliant with an audit and where this ANC rule is approved for use.
3. The ANC is a premium charge and is applied in accordance with the applicable state premium algorithm. The ANC is not part of the standard premium.
4. The application of the ANC is subject to the following conditions:
a. Carriers must comply with all applicable state laws and/or regulations related to audits of workers compensation policies.
b. The Audit Noncompliance Charge Endorsement and/or applicable state-specific endorsement must be attached to the policy at inception of policy term being audited.
c. The carrier must make two attempts to obtain the audit information and/or complete the audit. At each attempt, the carrier must notify the employer regarding the specific, required records and the amount of the ANC to be applied if the employer continues to refuse to comply with the audit.
d. The carrier must adequately document the audit file regarding the above attempts to obtain the required audit information.
e. When a carrier applies an ANC to the policy, and cancellation for audit noncompliance is permissible under state law, the carrier may cancel the policy and must issue a cancellation notice in accordance with applicable state laws and/or regulations and NC Basic Manual rules and Assigned Carrier Performance Standards (ACPS).
5. This ANC rule applies to mail/email, telephone, computer (remote access), and physical audits, unless otherwise prohibited by state law.
6. The ANC may be applied to guaranteed cost policies as well as retrospectively rated policies.
7. The scenarios listed below may occur and are treated as follows:
|
If an ANC is applied and the employer… |
Then the carrier… |
|
Pays the ANC and later allows the audit |
|
|
Does not pay the ANC but later allows the audit |
Performs the final audit and determines the final policy premium based on the results of the audit |
|
Pays the ANC but does not later allow the audit |
Does not change the previously reported:
|
|
Does not pay the ANC and does not later allow the audit |
Does not change the previously reported:
|
8. Reinstatements of cancelled policies must be in accordance with all applicable state laws and/or regulations and NC Basic Manual rules or ACPS.
9. The ANC must be reported, including applicable corrections, in accordance with the NC Statistical Plan. Assigned carriers must also comply with NCCI’s ACPS noncompliance and compliance reporting for assigned risk policies.
10. For assigned risk policies, if an assigned carrier has applied an ANC, the employer will be considered noncompliant with the audit and will remain ineligible for assigned risk coverage until the employer allows the audit to be performed and/or provides the required records. This applies even if the employer has paid the ANC.
a. Standard Limits of Liability
Standard limits of liability apply to employers liability insurance:
With or without workers compensation insurance
For employees subject to voluntary compensation insurance
For operations subject to USL&HW Act
For damages under admiralty law or FELA
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 assigned risk market. Refer to Rule 4-F regarding available coverages for assigned risk policies.
1. Bodily Injury by Accident (each accident limit) applies to all bodily injury resulting from a single accident.
2. Bodily Injury by Disease is represented by two limits:
Each Employee Limit is the maximum amount of damages that the carrier 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.
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 a carrier will pay during the policy year.
|
Employers Liability, Voluntary Compensation, USL&HW Act and Extensions |
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 |
$100,000 |
b. Increased Limits of Liability
Except for FELA and/or admiralty coverage for assigned risk policies as described in Rule 3-A-13-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:
Expense constant
Experience rating modification
Schedule rating modification
Premium Discount
Retrospective rating adjustment
Deductible credits
ARAP surcharge factor (Refer to Rule 4-D)
The Employers Liability (E/L) Increased Limits Factor is applied to the manual premium if the employer chooses to increase its standard limits under Part Two – Employers Liability of the policy.
If the limits of liability under Part Two are increased:
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 the increased limits must be determined by multiplying the total manual premium by the percentage in the Table for Increased Limits.
c) For Voluntary policies, 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) For assigned risk policies, the additional premium must not be less than the minimum premium shown in the Table for Increased Limits.
e) 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. For additional information regarding minimum premiums, refer to Rule 3-A-15-b.
Example of a calculation of estimated annual premium when both the policy minimum premium and increased limits minimum premium apply:
|
Policy Minimum Premium: |
$1,250 |
|
Increased Limits Minimum Premium: |
$ 120 |
|
Estimated Annual Premium: |
$1,370 |
f) 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
When the increased limits premium calculated for all states equals or exceeds the increased limits minimum premium for the state with the highest increased limits minimum premium, no increased limits minimum premium applies. The combined increased limits premium for all states would apply.
Example where multiple states are on the same policy and the increased limits premiums for all states on the policy are less than the single highest increased limits minimum premium applicable to the policy:
|
|
Total Manual Premium |
Percentage |
Increased Limits Premium |
Increased Limits Minimum Premium |
|
State A |
$1,500 |
3% |
$45 |
$150 |
|
State B |
$1,000 |
2% |
$20 |
$100 |
|
State C |
$3,000 |
3% |
$90 |
$175 |
|
Total |
|
|
$155 |
|
The increased limits premium calculated of $155 of all states is lower than the single highest increased limits minimum premium for state C; therefore, the increased limits minimum premium amount of $175 would apply to the policy.
Example where multiple states are on the same policy and the increased limits premium for one state is higher than the single highest increased limits minimum premium applicable to the policy.
|
|
Total Manual Premium |
Percentage |
Increased Limits Premium |
Increased Limits Minimum Premium |
|
State A |
$70,000 |
3% |
$2,100 |
$150 |
|
State B |
$4,500 |
2% |
$90 |
$100 |
|
State C |
$1,000 |
3% |
$30 |
$175 |
|
Total |
|
|
$2,200 |
|
The increased limits premium calculated of $2,220 would apply to the policy because the premium for all states exceeds the single highest minimum premium for State C.
Refer to Appendix C for additional limits values.
2) Employers Liability Insurance – Without Workers Compensation Insurance
a) The standard limits of employers liability insurance may be increased. If higher limits of liability are applied, the premium is determined on the basis of the rates multiplied by the factors filed by or on behalf of the carrier and approved for their use by the North Carolina Commissioner of Insurance.
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 in North Carolina.
3) Voluntary Compensation Insurance
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 the Table for Increased Limits provided in Rule 3-A-13-b (1) above.
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 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. For additional information regarding minimum premiums, refer to Rule 3-A-15-b.
c) For assigned risk policies:
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.
Employers Liability insurance is not available for FELA coverage; therefore, increased limits of liability are also not available for FELA coverage.
Rule 3-A-13-b (4) – Table for Increased Limits does not apply.
Table for Increased Limits
|
Limits per Accident |
Factor Program I |
Factor Program II |
Minimum Premium Program I |
Minimum Premium 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.
5) USL&HW Act and Extensions of the USL&HW Act
Rule 3-A-13-b (1) above also 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 non-fiduciary capacity
Refer to the Experience Rating Plan Manual for additional information.
The minimum premium is the lowest policy premium that is required in order to provide insurance under the standard policy. The minimum premium must be shown on the Information Page of the policy and is not subject to an experience rating modification.
Voluntary minimum premiums are filed by the carrier. Assigned risk minimum premiums are shown in the Miscellaneous Values section.
1) The minimum premium at policy issuance is determined as follows:
If a policy only has one classification, apply the minimum premium for that classification.
If a policy has two or more classifications, apply the highest minimum premium for any classification on the policy.
If a policy is for multiple states, the applicable minimum premium 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.
Example of minimum premium determination when two or more states have the same highest minimum premium:
|
|
Standard Premium |
Minimum Premium |
|
State X |
$500 |
$1,250 |
|
State Y |
$700 |
$1,250 |
|
State Z |
$400 |
$1,000 |
This is a multiple state policy with three states. If the estimated annual premium for each state is less than the highest minimum premium on the policy, the appropriate policy minimum premium to charge is the highest minimum premium on the policy, which is $1,250. In this example, two states (State X and State Y) have the same highest minimum premium. State Y has the largest amount of standard premium and would determine the governing state for policy issuance and reporting purposes.
2) The minimum premium is subject to final adjustment at final audit. Determination of the minimum premium is based on classifications developing premium as follows:
If the final earned premium is less than the minimum premium determined at audit, then the minimum premium must be charged.
If no classification develops premium during the policy term, 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 an equal 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 Rule 3-A-15-b (4) referenced below.
4) The minimum premium is pro-rated 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 carrier per Rule 3-A-3-b Cancellation Provisions Table 1.
A policy is cancelled when the insured is retiring from business per Rule 3-A-3-b Cancellation Provisions Table 2.
An assigned risk policy is cancelled because coverage was placed in the voluntary market per Rule 3-A-3-b Cancellation Provisions Table 3.
5) If a policy is cancelled midterm, the minimum premium for increased limits for employers liability and federal coverages is 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 cannot 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 cannot be less than the applicable annual minimum premium.
6) For policies that only provide 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 assigned risk policies in North Carolina.
c. Admiralty Law/FELA
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. For assigned risk policies, it must not be less than the minimum premium shown in the Table for Increased Limits in Rule 3-A-13-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.
Example of a minimum premium policy that includes classifications subject to admiralty law and classifications not subject to admiralty law:
Class Code Subject to Admiralty Law: $750 Minimum Premium
Class Code Not subject to Admiralty Law: $500 Minimum Premium
The minimum premium for this policy would be $1,250 ($750 + $500)
d. USL&HW Act
Rules 3-A-15-a and b apply to policies that include ULS&HW Act coverage. For minimum premium determination on Three-Year Fixed policies, refer to Rule 3-B-2.
a. A non-ratable element is a supplementary loading or percentage included in the development of the manual rate for a specific classification. It adjusts for the classification’s potential for catastrophic losses.
b. Class codes designated with an “N” in the advisory loss cost or rate pages are part of the 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. When determining premium, the statistical non-ratable code and corresponding advisory loss cost or rate are applied in addition to the basic classification.
e. Premium for a non-ratable element is not subject to experience rating or retrospective rating.
a. Premium developed for operations covered under Part Three – Other States Insurance is based on the workers compensation rules and rates applicable in such other states.
b. For additional information on assigned risk policies, refer to Rule 4-A (WCIP).
Premium discount is a percentage discount that is based on the size of the total standard premium. See Appendix A. For more information regarding standard premium, refer to Rule 3-A-19.
Premium discount is not applicable in the North Carolina assigned risk market.
Premium discount does not apply to the portion of the standard premium under a Retrospective Rating Plan.
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 North Carolina Commissioner of Insurance.
a. Determination of Premium Discount
A policy qualifies for premium discount when the standard premium exceeds the eligibility amount approved by the North Carolina Commissioner of Insurance.
Premium discount plans may vary based on individual carrier filing.
Total standard premium is subject to premium discount as follows:
1) Without Retrospective Rating
Single State Policy
Premium discount is determined by applying the discount percentages to the total standard premium that is in excess of the approved threshold amount.
Multiple State Policy
Premium discount applies on an interstate basis and is determined by applying the discount percentages to each state’s portion of the total standard premium that is in excess of the approved 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.
The portion of the standard premium subject to the 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 that is 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.
3) Other Methods
Any other method used to determine premium discount is permissible 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.
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 combined policies 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 with 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
The following conditions must be met for the purposes of determining premium discount for wrap-up policies that are issued to two or more legal entities:
1) All policies must be issued by one or more 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 coverage on large construction projects. To limit the insurance to a specific project, the standard Designated Workplaces Exclusion Endorsement (WC 00 03 02) must be attached.
4) Combinable entities are limited to the following:
a) General contractor, including any owner or principal acting as a general contractor.
b) Subcontractor 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-18-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. For additional information on wrap-up construction policies, refer to Rule 3-A-22.
Premium Discount Example:
No part of Standard Premium subject to Retrospective Rating:
|
(a) |
(b) |
(c) |
(d) = (b)*(c) |
(e) = (b) - (c) |
|
Carrier Approved |
Amount of |
Final |
||
|
Discount Ratio |
Discount |
Premium |
||
|
Total Premium |
$390,000 |
|
$61,611 |
$328,389 |
|
|
|
|
|
|
|
First $1,000 |
$1,000 |
0.0% |
$0 |
|
|
Next $4,000 |
$4,000 |
9.4% |
$376 |
|
|
Next $95,000 |
$95,000 |
14.7% |
$13,965 |
|
|
Next $400,000 |
$290,000 |
16.3% |
$47,270 |
|
|
Over $500,000 |
$0 |
16.3% |
$0 |
|
(d) total = $1,000*0.0% + 4,000*9.4% + 95,000*14.7% + $290,000*16.3%
Standard premium is the premium before application of any premium discount. It is determined on the basis of:
Rates
Non-ratable elements
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-23 and any disease charge subject to the Federal Mine Health and Safety Act before the application of the premium discount.
NOTE: NCCI’s Annual Financial Calls for experience, which are used for ratemaking, contain a different definition of standard premium.
20. States Added After Policy Effective Date
a. Additional states may be added to the policy after the effective date of the policy. For the additional state operations, apply:
1) Manual rates in effect on the effective 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 for application of experience rating.
b. For assigned risk policies, additional states may be added to the policy only in accordance with Rule 4-A (WCIP).
21. Waiver of Right to Recover from Others (Subrogation)
It is permissible in North Carolina to issue the standard policy with a provision that the carrier not enforce its right of recovery against anyone liable for any injury covered by the policy. If this waiver is requested, a Waiver of Our Right to Recover from Others Endorsement (WC 00 03 13) must be attached to the policy.
a. A premium charge may be applicable for the use of this endorsement (WC 00 03 13) and is calculated in the same manner in both the voluntary and assigned risk markets. There are two options available when using this endorsement:
1) Blanket Waivers: Used when the waiver applies to all jobs during the policy year. The premium charge is 2% of the total manual premium with a $100 minimum premium per policy, or otherwise approved by the North Carolina Commissioner of Insurance.
2) Specific Waivers: Used when the waiver applies to a specific job. The premium charge is 5% of the manual premium that applies to the specific job being covered. The minimum premium for a specific waiver is $100 per waiver, or otherwise approved by the North Carolina Commissioner of Insurance.
b. 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.
22. Wrap-Up Construction Projects
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 a 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. For more information regarding majority interest, refer to Rule 3-A-14.
The Designated Workplaces Exclusion Endorsement (WC 00 03 02) must 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.
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.
An insured’s total payroll in each state is divided by units of $100 and multiplied by the appropriate value found in the Miscellaneous Values section. 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 payroll 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.
Premium for terrorism is calculated on the basis of total payroll according to Rule 2.
An insured’s total payroll in each state is divided by units of $100 and multiplied by the appropriate value found in the Miscellaneous Values section. 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 payroll 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.
1. Explanation
a. If the estimated premium is less than the premium eligibility amount for experience rating, a policy may be issued for a period of three years at a fixed rate, as long as the risk is not otherwise eligible for the experience rating plan on the effective date of the policy.
b. If a policy is issued as a Three-Year Fixed-Rate policy, it must be specifically identified on the Information page of the policy.
c. The rates in force on the effective date of the Three-Year Fixed-Rate policy will apply to the policy for the full term.
Exception to Rule 3-B-1-c:
If a single rate revision results in an increase of 10% or more on outstanding policies, the rate increase must be applied to the remaining portion of the policy.
a. The minimum premium is calculated as follows:
1) Determine the minimum premium for a one-year policy.
Apply the minimum premium for a specific classification if the policy has only one classification.
Apply the highest minimum premium for any classifications if the policy has two or more classifications.
2) Multiply the one-year policy minimum by three (3). Finally, subtract:
Two expense constants if the deposit premium is paid in advance, or
One expense constant if the deposit premium is paid in installments.
b. An expense constant must be charged regardless of the amount of earned premium.
c. The deposit premium may be paid in advance or in three annual installments. It must not be less than the minimum premium.
d. Earned premium determination may be deferred until termination of the policy.
e. Three-Year Fixed-Rate policies are not subject to experience rating modification.
None of the operations insured by a Three-Year Fixed-Rate policy are eligible for experience rating during the period that this type of policy is in force.
None of the experience under a Three-Year Fixed-Rate policy can be used in experience rating.
A Three-Year Fixed-Rate policy cannot be combined with other policies under the experience rating plan.
3. Cancellation
a. Cancellation by the carrier or the insured when the insured is retiring from the business is calculated per Rule 3-A-3. This rule is also applicable when an assigned risk policy is being cancelled because the insured has replaced overage through the voluntary market.
b. If the policy is cancelled by the insured, except when retiring from a business, add $15 to the premium.
1. Explanation
Domestic workers are hired to perform duties inside or outside a private residence. The domestic worker must be employed directly by the resident owner, the estate of the owner, or family of the resident.
Code 0913 – Domestic Workers – Residences – Full Time are domestic workers, inside or outside, who are employed full-time. “Full-time” applies to any domestic worker who is employed more than 20 hours per workweek. Au pairs or domestic workers who are compensated by room and board are considered to be full-time.
Code 0908 – Domestic Workers – Residences – Part-Time are domestic workers, inside or outside, who are employed 20 hours or less per workweek.
These codes include cooks, housekeepers, laundry workers, maids, butlers, companions, nannies, private chauffeurs, and gardeners.
Exception:
If commercial farm operations are conducted, Code 0908 and Code 0913 do not apply to any operations at the farm location. Outside domestic workers at commercial farm locations are assigned to the appropriate farm classification.
2. Other Classifications – Maintenance, Repair or Construction Operations
Code 0908 and Code 0913 include ordinary repair or maintenance of the insured’s premises or equipment by domestic workers.
Building maintenance or repair by employees hired specifically for that purpose must be assigned to Code 9015 – Buildings – Operation by Owner or Lessee.
Extraordinary repairs, alterations, new construction, erection, or demolition of structures must be assigned to the appropriate construction or erection classifications.
3. Coverages
a. Workers Compensation and Employers Liability Insurance
An employer’s statutory workers compensation obligations with regard to domestic workers may be insured as follows:
By the standard policy, or
By attaching the Workers Compensation and Employers Liability Coverage for Residence Employees Endorsement (WC 00 03 14A) to a homeowner policy, a comprehensive personal liability policy, or to any policy that provides similar coverage.
Statutory coverage is the minimum extent of insurance protection required in an insurance contract in accordance with applicable state laws or statutes.
b. In states where domestic workers are not included and cannot be covered under the workers compensation law, Voluntary Compensation Insurance may be provided by attaching a Voluntary Compensation and Employers Liability Coverage for Residence Employees Endorsement (WC 00 03 12A) to a homeowner’s policy, comprehensive personal liability policy, or any policy that provides similar coverage.
4. Name of Insured
One or more members of the same residence may be named as the insured, but only in connection with the employment of domestic workers in that residence.
5. Advisory Loss Costs, Rates and Premium
Advisory loss costs and rates for Code 0908 and Code 0913 are per capita premium charges.
Per capita classifications use the number of workers rather than payroll to measure exposure.
a. Requirements for Maintenance of Records
The insured must maintain a record of the names, duties, and period of service of each domestic worker.
b. Premium Determination
Full-Time Domestic Workers – Code 0913
Estimated premium is calculated based on the estimated number of such domestic workers during the policy period.
If additional domestic workers under Code 0913 are employed during the policy period or if some domestic workers are no longer employed and are not replaced, then the per capita premium charges must be prorated.
Each pro rata charge is based on the period of employment, but cannot be less than 25% of the per capita charge.
Part-Time Domestic Workers – Code 0908
Estimated premium is calculated based on the estimated aggregate (total) time of all occasional domestic workers who are to be employed during the policy period.
Regardless of concurrent employment, a single per capita charge applies for each aggregate of employed time 20 hours or less per workweek. An additional per capita charge applies to any remainder less than 20 hours or less per workweek.
c. Minimum Premium
For a policy with two or more classifications, whether per capita rated or payroll rated, the highest minimum premium for any classification on the policy must be applied.
d. Catastrophe Provisions
Premium for catastrophe provisions as detailed in Rule 3-A-23 does not apply to per capita classifications.
1. Definitions
a. Client or Client Company
A person or entity that contracts with a licensee (licensed professional employer organization group) and is assigned employees by the licensee (licensed professional employer organization group) under that contract.
b. Direct Worker
An employee of a client or PEO that is not a leased worker obtained through a PEO. For purposes of this rule, the employer of the direct worker(s) is responsible for securing workers compensation insurance for the direct worker(s), unless otherwise determined by North Carolina statutes and/or regulations. An executive officer, director, shareholder, manager, LLC member, partner or owner of a client or PEO who is an employee of a client or PEO and is not a leased worker obtained through a PEO is a direct worker.
If an employee was employed by the client prior to the client entering into the PEO agreement, it must be presumed that the employee is a leased worker and not a temporary employee.
c. Licensee
A person licensed under North Carolina General Statutes Chapter 58, Article 89A to provide professional employer services. The term includes a professional employer organization group licensed under North Carolina General Statute 58-89A-35(b) and includes persons who are licensed pursuant to alternative licensing procedures as set forth in North Carolina General Statute 58-89A-76.
d. Leased Worker (defined as “Assigned Employee” in North Carolina General Statute 58-89A-5)
An employee who is performing services for a client under a contract between a licensee PEO and a client company in which employment responsibilities are shared or allocated.
Leased worker does not include a temporary employee.
Individuals who are directors, shareholders, partners and managers of a client company are leased workers to the extent the licensee PEO and the client have agreed that those individuals are leased workers and provided that those individuals meet the criteria of this definition and act as operational managers or perform reviews for the client company.
e. Master Policy
A form of policy issuance used to provide workers compensation and employers liability insurance for the leased workers of a PEO under which a single standard workers compensation and employers liability policy is issued to a PEO covering all of its leased workers in North Carolina (there are typically multiple client companies). The policy may also cover direct workers of the PEO.
f. Multiple Coordinated Policy (MCP)
A form of policy issuance used to provide workers compensation and employers liability insurance for the leased workers of a PEO under which the PEO secures a separate policy for each of its client companies. This type of policy is also referred to as a MCP. Policy issuance is as follows:
1. The PEO has its own standard policy covering only its direct workers.
2. The PEO has a separate standard policy for each client company which names the PEO as the insured and which identifies the client company and covers its leased workers.
3. Endorsements are used to coordinate coverage between the client company and the PEO.
g. Professional Employer Organization (PEO)
A person that offers professional employer services. The term PEO includes “staff leasing service companies,” “employee leasing companies,” “staff leasing companies” and “administrative employers” who offer or propose to offer professional employer services in North Carolina.
h. Professional Employer Organization (PEO) Agreement
A written contract by and between a client company and a professional employer organization that provides:
1. For the allocation and sharing between the client company and the licensee PEO of the responsibilities of employers with respect to the leased workers, including hiring, firing, and disciplining of employees; and
2. That the licensee PEO and the client company assume the responsibilities required by North Carolina General Statutes Chapter 58, Article 89A.
i. Professional Employer Services (Professional Employer Organization Arrangement)
An arrangement by which employees of a licensee PEO are assigned to work at a client company and in which employment responsibilities are in fact shared by the licensee PEO and the client company in accordance with North Carolina General Statute 58-89A-100, and the employee’s assignment is intended to be of a long-term or continuing nature, rather than temporary or seasonal in nature. Professional Employer Services does not include services that provide temporary employees or independent contractors, a personnel placement service, managed services, payroll services that do not involve employee staffing or leasing, the sharing of employees by commonly owned companies within the meaning of section 414(b) and (c) of the Internal Revenue Code of 1986, as amended, or similar groups that do not meet the requirements of this definition.
j. Temporary Employees
Persons employed under an arrangement by which an organization hires its own employees and assigns them to a client company to support or supplement the client’s workforce in a special work situation, including:
• An employee absence
• A temporary skill shortage
• A seasonal workload
• A special assignment or project
Such an arrangement can be a long-term arrangement and the persons employed under the arrangement continue to be temporary employees.
2. Coverage
a. Statutory workers compensation and employers liability insurance coverage secured and maintained by a licensee PEO for leased workers in the voluntary market may be provided by the carrier on a master policy basis or a MCP basis.
b. Statutory workers compensation and employers liability insurance coverage secured and maintained by a licensee PEO for leased workers in the assigned risk market must be provided by the carrier on a MCP basis.
c. If a PEO has a separate temporary employment service operation, then separate workers compensation insurance policies are required and must be maintained for each type of business in the state of North Carolina.
d. A client company shall not enter into a PEO agreement or be eligible for workers compensation coverage in the voluntary market if (1) the client company owes its current or prior carrier any premium for workers compensation insurance or (2) the client company owes its current or prior PEO amounts due under the PEO agreement, except for premiums or amounts due that are subject to dispute. For the purposes of Rule 3.D and compliance with other North Carolina statutes and/or regulations, a licensee PEO may rely on a statement by the client company that the client company has met any and all prior premium or fee obligations, unless the licensee PEO has actual knowledge to the contrary.
3. Premium For Leased Workers
a. Premium for leased workers will be determined based on the applicable classification, rates, payroll and rating programs for each client for whom coverage is being requested and/or payroll exists, with payment made by the PEO unless otherwise specified by written contract.
b. The carrier and the PEO may agree to a retrospective rating program or any other permitted pricing program regardless of policy issuance method (MCP or master policy).
c. The PEO must provide its workers compensation carrier with the proper and necessary documentation to allow the carrier to determine and charge a premium that is commensurate with the exposure and anticipated claim experience for all employees covered under policies issued by the carrier in the name of the PEO. This documentation must include (1) a listing of all covered employees provided to each client company, by classification code and (2) the total eligible wages, by classification code, and the premiums due to the carrier for the employees provided to each client company.
Failure to maintain and provide the carrier with the required documentation may result in the PEO being considered noncompliant with the applicable North Carolina statutes and the policy terms and conditions.
4. Administration-Master Policy
a. Policy Issuance
1. A policy issued to a PEO to cover the leased workers of a PEO arrangement on a master policy basis must be issued in the name and FEIN of the PEO in accordance with this rule and all other rules governing the issuance of a policy.
2. Direct workers of a client shall not be included on the PEO’s policy for the leased workers. Executive officers, sole proprietors, partners, and LLC members of a client who are employees of the client but who are not leased from a PEO under a PEO arrangement will be considered direct workers. A separate policy is required by the client for its direct workers, subject to the North Carolina Workers’ Compensation Act.
3. Each client shall be issued a certificate of insurance on the PEO’s single policy. The certificate of insurance shall require that the insurer provide notice of cancellation to the licensee PEO and each client company of the licensee PEO.
4. Master policy issuance is only available in the voluntary market.
b. Endorsements
1. The following endorsements are applied under the master policy basis:
|
Type of Policy |
Endorsement |
Purpose |
|
Client Policy (direct workers) |
North Carolina Professional Employer Organization (PEO) Client Exclusion Endorsement (WC 32 03 07) |
Attach the WC 32 03 07 to the client policy issued to cover only the direct workers of the client. This endorsement is attached to the client’s policy that is not part of the master policy arrangement.
|
|
PEO Policy (direct workers) |
North Carolina Professional Employer Organization (PEO) Exclusion Endorsement (WC 32 03 05) |
If a separate policy is issued to the PEO to cover its direct workers, attach the WC 32 03 05 to that policy. WC 32 03 05 excludes coverage for workers leased to specified clients.
|
|
PEO Policy (leased workers) |
North Carolina Professional Employer Organization (PEO) Extension Endorsement (WC 32 03 06) |
Attach the WC 32 03 06 to the Master Policy issued to the PEO to cover workers it leases to its clients. The endorsement makes the policy applicable to the employees leased from the PEO to the client. Coverage for direct workers of the PEO can be provided if properly indicated on the endorsement.
|
2. The Alternate Employer Endorsement (WC 00 03 01A) should not be used for specifying clients written under the master policy basis.
c. Cancellations/Nonrenewals:
1. When a policy written in accordance with the Master Policy method to cover clients’ leased workers is canceled, the insurance company writing the policy shall provide an individual notice of cancellation to the licensee PEO and to each client of the licensee PEO as required by North Carolina statutes/and or regulations.
2. If the insurer fails to provide individual notices of cancellation to the licensee PEO and the client companies, the insurer shall remain liable on the risk for losses incurred by the client companies that would have been covered by the workers' compensation policy prior to the attempted cancellation.
d. Experience Rating
1. Refer to Rule 5-A, Employee Leasing/Professional Employer Organizations, in the Experience Rating Plan Manual for the rules regarding treatment of experience rating modifications.
2. Refer to the Rule 3-F, Evasion of Experience Rating Modification, in the Experience Rating Plan Manual for the rules regarding evasion of an experience rating modification.
3. The PEO’s experience rating modification, if any, applies to the policy covering the PEO’s direct workers and to the policy covering the clients of the PEO arrangement written under a master policy basis.
5. Administration-Multiple Coordinated Policy (MCP)
a. Policy Issuance
1. If a licensee PEO provides workers’ compensation coverage pursuant to the MCP method, the PEO will obtain a separate policy for each client company of the PEO.
a. Each policy issued to cover a client company’s leased workers shall identify the PEO and the name of the client company. The insurer shall specify the name of the PEO for the client company by using the designation “L/C/F” (Labor Contractor For) on the policy in the following manner: Company PEO L/C/F Client XYZ.
b. Direct workers of a client shall not be included on the policy covering the leased workers. Executive officers, sole proprietors, partners, and LLC members of a client who are employees of the client and who are not leased workers from a PEO under a PEO arrangement will be considered direct workers of the client. A separate policy is required by the client for its direct workers, subject to the North Carolina Workers’ Compensation Act.
c. Each policy will have the same expiration date, including any new client added midterm.
d. Each policy will have the same renewal date.
e. If a client leases workers from more than one PEO, there must be a separate policy for the leased workers of each PEO.
f. The client company of a PEO shall have a continuing obligation to provide coverage as required by Chapter 97 of the NC General Statutes, the Workers Compensation Act, for any employees of the client company who are not leased workers and not otherwise covered under a MCP.
g. Multiple coordinated policies can be issued in the assigned risk and voluntary market.
The multiple coordinated policy method is the only method available in the assigned risk market.
2. The PEO must have a separate standard policy covering the direct workers of the PEO.
a. A policy issued to cover the direct workers of the PEO under a MCP basis will be issued in the name and FEIN of the PEO in accordance with this rule and all other rules governing the issuance of a standard policy.
b. If the PEO has no direct workers in North Carolina, a policy will be issued to cover the PEO which reflects classification code 8810-Clerical Office Employee NOC on an “if any” basis and the minimum premium for classification code 8810 will be charged as the minimum premium for the policy.
b. Endorsements
1. The following endorsements are applied to the various policies under the MCP arrangement.
|
Type of Policy |
Endorsement |
Purpose |
|
PEO Policy (direct workers) |
North Carolina Professional Employer Organization (PEO) Exclusion Endorsement (WC 32 03 05) |
Attach the WC 32 03 05 to the policy issued as part of a MCP arrangement to the PEO to cover its direct workers. WC 32 03 05 excludes coverage for workers leased to specified clients.
|
|
PEO Policy (leased workers) |
North Carolina Professional Employer Organization (PEO) Extension Endorsement (WC 32 03 06) |
Attach the WC 32 03 06 to the policy issued to the PEO as part of the MCP arrangement to cover leased workers. This policy is written as Company PEO L/C/F Client XYZ. The endorsement makes the policy applicable to the employees leased from the PEO to the client. Note that coverage for direct workers of the PEO cannot be selected on the endorsement when the policy is part of the MCP arrangement.
|
|
Client Policy (direct workers) |
North Carolina Professional Employer Organization (PEO) Client Exclusion Endorsement (WC 32 03 07) |
Attach the WC 32 03 07 to the policy issued to the client to cover only the direct workers of the client. This endorsement is attached to the client’s policy that is not part of the MCP arrangement.
|
2. The Alternate Employer Endorsement (WC 00 03 01A) should not be used for specifying clients written under the MCP arrangement.
c. Cancellations/Nonrenewals
1. When a policy written in accordance with the MCP method to cover a client’s leased workers is cancelled, the insurance company writing the policy shall provide individual notices of cancellation to the PEO and to the client of the PEO as required by North Carolina statutes/and or regulations.
2. If a PEO ceases to exist, the policy issued to the PEO to cover its client’s leased workers will remain in force to policy expiration and will be non-renewed in accordance with the MCP method. The carrier must provide notice to the client regarding the status of the policy covering the client’s leased workers.
d. Experience Rating
1. Refer to Rule 5-A, Employee Leasing/Professional Employer Organizations, in the Experience Rating Plan Manual for the rules regarding treatment of experience rating modifications.
2. Refer to the Rule 3-F, Evasion of Experience Rating Modification, in the Experience Rating Plan Manual for the rules regarding evasion of an experience rating modification.
3. The PEO’s experience rating modification, if any, applies to the policy covering the PEO’s direct workers.
4. A client’s experience rating modification, if any, applies to:
• The policy issued to the PEO covering the client’s leased workers under the MCP and
• Any other policy(ies) covering the client’s direct workers
Note: The client’s experience rating modification will include the client’s experience, if any, for the time period applicable under the Experience Rating Plan Manual, even if that time period extends to the period prior to the PEO arrangement.
e. Premium Discount
In the voluntary market, all policies written under the MCP basis, written by the same insurance carrier and referencing the same PEO as labor contractor may be combined for premium discount purposes. Assigned risk policies are not eligible for premium discount.
6. When Client Insures Its Leased Workers
If a client company provides workers compensation coverage to its leased workers pursuant to the terms of their PEO agreement and as permitted in North Carolina General Statue 58-89A-110(j), apply the following endorsement to the policy issued to the client company.
|
Type of Policy |
Endorsement |
Purpose |
|
Client Policy (leased workers) |
North Carolina Professional Employer Organization (PEO) Client Extension Endorsement (WC 32 03 08) |
Attach the WC 32 03 08 to the policy issued to the client to cover leased workers. The endorsement makes the policy applicable to the employees leased from the PEO to the client. Coverage for direct workers of the client can be provided if properly indicated on the endorsement.
|
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