Under a change to an NCCI rule that was effective January 1, 2019, policyholders must now report any changes in the ownership of their business to their insurance carrier within 90 days.
When the ownership of a business changes, such as through a sale, transfer, merger, consolidation, or formation of a new entity, the change can affect the workers’ compensation experience modification factor (“mod”) that is assigned to the business by NCCI. In the past, application of experience mods revised due to ownership changes was based on when the policyholder reported the ownership change. If the ownership change was reported to NCCI within 90 days of the change, the revised mod was applied as of the date of the change. If the ownership change was reported more than 90 days after the change, the revised mod was only applied as of the next rating effective date.
NCCI was concerned that policyholders were delaying their reporting of ownership changes/combinability status in order to delay a change in their current experience mod, so they proposed a change to the rule. NCCI determined that ownership and/or combinability status changes should be reflected in the purchaser’s and the seller’s mods as quickly as possible to ensure that the correct premium for the exposure is charged.
As of January 1, 2019, businesses have 90 days to report changes in their ownership in writing to their insurance carrier. Reporting may be done via a Confidential Request for Information Form (ERM-14), or in a narrative on the policyholder’s letterhead signed by an officer. If the change in ownership results in NCCI recalculating the policyholder’s experience mod, the insurance carrier will apply the new mod retroactively to the date of the change in ownership, regardless of whether the revised mod is an increase or a decrease.
The rule change also now requires all policyholders to report ownership changes to their workers’ compensation provider, even if the policyholder is not experience rated.