In California, the ownership, operations, and employees of a business are all factors in the calculation of its experience modification (more commonly referred to as its ExMod). It is important that the Workers Compensation Insurance Rating Bureau (WCIRB) be notified when ownership changes occur for experience rated policyholders.
When Should I Notify the WCIRB of a Change in Ownership?
Usually, a change in ownership is denoted by the transfer of an entity’s operations or assets to another entity. More specific guidelines, found in Section II, Rule 3 of the California Workers’ Compensation Experience Rating Plan – 1995 (ERP) define a change in ownership for experience rating purposes:
- All or a portion of the ownership in an entity is sold, transferred, or conveyed from one person to another.
- An entity is dissolved or non-operative and a new entity is formed.
- Two or more corporations undergo a statutory merger or consolidation.
- All or most of the tangible or intangible assets of an entity are sold, transferred, or conveyed to another entity.
- A trusteeship or receivership is set up, either voluntarily or at the direction of the courts, to operate a business.
The proper method of reporting these changes, as directed by the WCIRB, is for insurers to complete the Notification of Change In Ownership and/or Combinability of Entities Form (Form 601).
On occasion, the WCIRB receives NCCI’s ERM-14 Confidential Request for Ownership Information form. However the ERM-14 does not contain the necessary details for the WCIRB to process ownership changes and cannot be used in lieu of WCIRB Form 601.
When is it okay not to notify the WCIRB of a Change in Ownership?
- Name Changes: Form 601 is not necessary to report a name change for the insured when there has been no change in ownership pursuant to Section II, Rule 3 of the ERP. Name changes should be reported to the WCIRB using the appropriate policy endorsements.
- Change in Entity Type: Form 601 should not be used for changes in entity types – such as a sole proprietor becoming a corporation (while the same individual retains 100% ownership of the corporation).
If you have any questions, please don’t hesitate to contact our office.