Losses that are excluded from experience rating calculations
According to the Experience Rating Plan Manual, Rule 1-C-3 ” No loss is excluded from the experience of a risk even if the employer was not responsible for the accident that caused such loss.”
The rule then mentions the catastrophe exceptions. The Statistical Plan Manual contains a list of exclusions (please see bulleted list below).
Losses excluded from experience rating calculations, ER Rule 1-C-3:
- Catastrophe Number 87, World Trade Center rescue, recovery, and clean-up work
- Catastrophe Number 48, claims directly attributable to the September 11, 2001 attacks
- Limited losses, ER Rule 2-C-13.
- medical-only loss (injury type 6), reduced 70%
- per claim accident limitation
- multiple claim accident limitation
- employers liability per claim accident limitation
- Subrogation recovery*, Stat Plan Rule 4-A-1-a
- Special funds reimbursement*, Stat Plan Rule 4-A-1-b
- Fraudulent claims amount*, Stat Plan Rule 4-A-1-c
- Noncompensable claim, Stat Plan Rule 4-A-1-d
- Allocated Loss Adjustment Expense (ALAE) Stat Plan Rule 4-D-1
- Unallocated Loss Adjustment Expense (ULAE)**, Stat Plan Rule 4-D-2
- Other expenses***, Stat Plan Rule 4-D-3
Notes:
* Where any of these conditions apply, the gross incurred indemnity amount and/or incurred medical amount is reduced pursuant to the rules defined in Items A-1-a—Subrogation Amount, A-1-b—Assessments and Special Funds, and A-1-c—Fraudulent Claims. The gross incurred loss reduced by any of these conditions is referred to as the net incurred loss.
**Unallocated Loss Adjustment Expense (ULAE) is also excluded from incurred losses, paid losses, and ALAE. ULAE includes, but is not limited to:
- Carrier employees’ salaries, overhead, and traveling expenses that are considered loss adjustment expenses and are not incurred while doing activities listed as allocated expenses.
- Fees paid to independent claims professionals or attorneys hired to perform the function of claim investigation normally performed by claim adjusters. Fees are paid for developing and investigating a claim so that a determination can be made of the cause or extent of responsibility for the injury or disease, including evaluation and settlement of covered claims.
***Other Expenses: Expenses- any general allowances for contingencies and any supplemental nonstatutory benefits not otherwise provided for in this Plan must be excluded from the amount of losses. Reserves in excess of the amount shown on the final settlement receipt must not be included in the amount of losses reported under this Plan. At the completion of all payments, losses may only include settlement amounts filed with the Industrial Commission or other body having jurisdiction over workers compensation claims.
