Question from an IIABNY member: One of my accounts is a new owner of a business since November 2014. The name changed but they kept part of the old company name under a "doing business as" name. The experience modification factor for the old owner was 1.13, but there was a claim and when the new owner took over his mod was now 1.31. Would the new owner have to keep this mod for his business if he took over? Wouldn’t he start with 1.00 mod? He kept a few of the employees, put a safety practice in place and hired a safety consultant.
Answer: Under the New York Experience Rating Plan Manual rules, “The experience for any entity undergoing a change in ownership will be retained or transferred to the experience ratings of the acquiring, surviving or new entity unless specifically excluded by this Plan.” The rules go on to say,
“The experience will be excluded only if the Rating Board confirms all of the following:
- The change must be a material change such that:
- The entire ownership interest after the change had no ownership interest before the change, or
- The collective ownership of all those having interest in an entity results in either less than:
- 1/3 ownership before the change, or
- 1/2 ownership after the change; and
- The material change in ownership is accompanied by a change in operations sufficient to result in reclassification of the governing classification; and
- The material change in ownership is accompanied by a change in the process and hazard of the operations. Change in process and hazard is determined by the Rating Board.”
So, not only does the ownership have to change, but so do the operations, process and hazards. If the new owner is performing the same operations as the old one, then he’s stuck with the old owner’s experience mod.