RULE X - CANCELLATION

1. The Cancellation Condition of the Standard Policy permits cancellation by the insured or by the insurance carrier.
2. Pennsylvania enacted legislation that prohibits an insurance carrier from cancelling workers’ compensation policies during their term, except for nonpayment of premium and/or failure to reimburse the deductible amount.

Reinstatement

When a notice of cancellation for non-payment has been issued, if the insurer thereafter receives payment and voluntarily determines to reinstate the policy, such reinstatement of coverage must be retroactive to the cancellation date.

Alternatively, if the insurer does not want to reinstate the policy as of the cancellation date but voluntarily determines to resume coverage after a lapse in coverage, the insurer must issue a new policy. Such new policy must carry the carrier rating values effective on the policy effective date of the new policy.

IMPORTANT NOTICE: CANCELLATION NOTICES MUST BE SUBMITTED ELECTRONICALLY TO THEPCRB WITHIN 10 DAYS OF ISSUANCE; PROVIDED, HOWEVER, THAT FAILURE TO SUBMIT SUCHNOTICE WITHIN THE REQUIRED TIME SHALL NOT INVALIDATE ANY CANCELLATION WHICH HASBEEN MADE IN ACCORDANCE WITH THE PROVISIONS OF THE POLICY.

Premium for the canceled policy shall be computed as follows:

1. Carrier Rating Values and Payroll
   Apply carrier rating values to the payroll developed during the period the policy was in effect.
2. Experience Rating
   Apply any experience rating modification in accordance with the rules of the Experience Rating Plan Section. Refer to Rule VI-E

Compute the premium as provided in B above if a policy is cancelled by the insured when:

1. All the work covered by the policy has been completed, or
2. All interest in any business covered by the policy has been sold, or
3. The insured has retired from all business covered by the policy.

The premium for the canceled policy shall be based on the Short Rate Cancellation Table in this rule and computed as follows:

1. Actual Payroll – Determine the payroll developed during the period the policy was in effect.
2. Extended Payroll and Number of Days
   a. Extended Payroll Extend such payroll pro-rata based on the number of days for which the policy was written divided by the number of days the policy remained in force to produce the full policy payroll.

   Example
   A policy written for 250 days that remained in effect for 185 days produced a payroll of $55,500.Payroll extended for the original policy term — $55,500 x 250/185 = $75,000.

   b. Extended Number of Days
   The extended number of days shall be determined by dividing the number of days the policy was inforce by the number of days for which the policy was written and multiplying the quotient by 365days. When the policy was written for a one year period, the extended number of days will equal the number of days the policy remained in force.

3.  Carrier Rate – Apply carrier rate to the payroll in 2a. above.
4. Experience Rating – Apply any experience rating modification in accordance with the rules of the Experience Rating Plan Section. Refer to Rule VI-H.
5. Short Rate Percentage – Based on the extended number of days calculated in 2.b., apply the short rate percentage shown in the Short Rate Cancellation Table in this rule to the premium computed on the basis of the extended payroll in order to determine the short rate portion of the premium.
6. Example of a Short Rate Cancellation –
   A policy originally written for 250 days in effect for 185 days develops actual payroll of $55,500, carrier rate of $.50.

   a. Payroll extended to full policy term = $55,500 x 250/185 = $75,000

   b. Full policy term premium = $75,000 x $.50 = $375

   c. Extended number of days = 185/250 x 365 = 270

   d. Short rate percentage for 270 days = 80%e. Short rate premium = $375 x .80 = $300

   f. Total premium for canceled policy = $300

Short Rate Cancellation Table

Short Rate Cancellation Table (continued)

Short Rate Cancellation Table (continued)

Short Rate Cancellation Table (continued)