Code of Maine Rules
02 - DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION
031 - BUREAU OF INSURANCE
Chapter 450 - WORKERS' COMPENSATION INSURANCE - EXPERIENCE RATING
Section 031-450-7 - Changes in Ownership

A. Substantial change in operations. For the purposes of this Section, "substantial change in operations" shall mean a change in operation of the employer sufficient to cause a change in the governing risk classification assignment and a change in the process and hazard of the operations. If an entity is subject to multiple classifications as a result of its operation of separate and distinct businesses, the determination whether there has been a substantial change of operations shall be made separately for each business if the experience is separable, and shall otherwise depend on whether discontinued operations represent a majority of the incurred losses during the rating period applicable at the time of the change.

B. Bona fide change in majority ownership. For the purposes of this Section, "bona fide change in majority ownership" shall mean that either the former owners of the business or its predecessor entity now collectively own or control less than 50% of the business, or the new owners of the business previously collectively owned or controlled less than one-third of the business or its predecessor entity. Ownership or control shall be considered whether exercised directly or through related parties, security interests, options to repurchase, or any arrangement designed to retain de facto control or otherwise avoid the application of this Rule.

C. Acquisition of physical assets. If an entity acquires most or all of the physical assets of a business by sale or lease from another entity and the seller then

D. Partial sale. If an entity disposes of a part of its assets or operations but otherwise continues to operate its business, the experience rating plan established by the designated advisory organization may establish criteria for determining whether the corresponding experience shall be transferred to the acquiring entity, retained by the selling entity, or attributed concurrently to both entities.

E. Restructuring. If, as a result of a realignment of operations among affiliated entities, or in connection with an acquisition, sale, or other transaction involving multiple entities, there is a substantial change in operations at the legal entity level but substantial continuity of operations in the aggregate, the experience shall follow the physical operations rather than the legal entity.

F. Temporary Changes of Control. The experience incurred on all operations of a risk shall continue to be used in determining the experience modification of an entity subject to trusteeship, receivership, a bondholders' protective committee, or similar temporary change of control, whether voluntary or at the direction of the courts, unless there is also a substantial change of operations and the new controlling parties did not have a prior controlling interest in the business.

G. Mergers, consolidations, exchanges of stock. If two or more entities are merged or consolidated, their incurred experience shall be used for experience rating the surviving entity, unless the merger or consolidation is also accompanied by a substantial change of operations of one or more of the merged entities, in which event the experience of the discontinued operations shall be disregarded in future ratings. Exchanges of stock and other transactions that create a new group of affiliated employers which are combinable for experience rating purposes, or consolidate two or more groups which were previously rated separately, shall be treated in the same manner as mergers.

H. Disaggregation of combined entities. If two or more entities have been combined for experience rating purposes but are no longer combinable as the result of a bona fide change in majority ownership of one or more of them, the experience of each entity before the sale or disposition shall continue to be used in rating the appropriate successor entity to the extent that the experience of the predecessor entities can be separated. If the experience cannot be separated, the transaction shall be treated in the same manner as a partial sale of a single business.

I. Substance of transaction. If the designated advisory organization determines that there is substantial continuity of operations between a predecessor and successor business, and that literal application of the provisions of this Section to the form of the transaction would result in misallocating or inappropriately disregarding the experience of the predecessor business, the designated advisory organization may apply the experience of the predecessor entity in rating the successor entity upon written notice to the policyholder, the insurer, and the Superintendent.

J. Effective date. A change in experience rating pursuant to a transaction subject to this Section shall be effective as of the effective date of the transaction, unless the plan filed by the designated advisory organization specifies a later effective date.

K. Waiver. The Superintendent shall have the discretion to approve an experience rating plan that modifies the provisions of this Section if the Superintendent determines that the plan filed by the designated advisory organization is consistent with the purposes of this Section and appropriately reflects the likelihood of future losses.