How does workers' comp work in California?

California is currently the most expensive state in the country for employers workers compensation coverage. California rates have continued to rise over the past 10 years. Much of the increased costs are caused by the rising costs of medical coverage and state laws.

State law requires that all employers provide workers compensation coverage to any employee of the company. It is illegal for any employer to pay a medical bill directly to the provider. A claim form (DWC Form 1) must be filed with the insurance company for any injury requiring more than first aid care.

Failure to purchase workers comp coverage is a criminal offense in California. Employers may receive a fine of $10,000 or more and up to a year in a county jail.

Workers' Comp Rules & Information for California

State Insurance Directives Regarding Covid-19

All insurance companies provide their insureds with at least a 60-day grace period to pay insurance premiums so that insurance policies are not cancelled for nonpayment of premium due to circumstances beyond their control (Summary: Insurance Commissioner is “requesting” that all insurance companies provide their insureds with at least a 60-day grace period to pay insurance premiums so that insurance policies are not cancelled for nonpayment of premium during this challenging time due to circumstances beyond the control of the insured.)

Discretionary order in effect from 03/18/2020 - further notice. Applies to all insurance companies.

Additional Orders Regarding Insurance Related to Coronavirus

Insurers are ordered to make an initial premium refund for the months of March and April to all adversely impacted CA policyholders as quickly as practicable, but by no later than August 11, 2020. This applies to lines of business that are deemed to have measured risks that are overstated as a result of the pandemic, e.g., commercial auto, workers’ compensation, commercial multi peril, and commercial liability. Insurers are permitted to determine the best method premium – premium credit, reduction, return, etc. If consistent with current rating plan, Insurers may reclassify exposures to comport with current exposures or reduce exposure base (e.g., miles drive, payroll, receipts, etc.) to reflect actual or anticipated exposure without obtaining prior approval. Insurers may refund premium without prior approval if they apply a uniform premium reduction for all policyholders in an individual LOB for recent, current, and upcoming policy periods. The amount of across-the-board premium refund may be an average percentage based on estimated change in risk and/or reduction of exposure bases. Alternatively, Insurers may refund premium without prior approval by reassessing the classification and exposure bases of affected risks on a case-by-case basis for recent, current, and upcoming policy periods. Where there are risk misclassifications resulting in overcharges, insurers should immediately reclassify risks and refund premium. By August 11, 2020, insurers must provide affected policyholders a notice that includes: 1) the amount of the refund; 2) an explanation of the basis for the adjustment, including a description of the policy period that was the basis of the refund and any changes to the classification or exposure basis; and 3) an invitation for the policyholder to provide their individual actual or estimated experience (for auto policies, this would include an invitation to provide updated mileage estimates). Within 60 days, insurers must report actions taken or contemplated in connection to this bulletin (for more info about this request, see the “Regulatory Requests” tab).

Effective 04/13/2020 - 08/11/2020 unless extended.

California Regulatory Authority

Workers Compensation Rating Bureau of California
525 Market Street, Ste. 800
San Francisco, CA 94105-2716

California State Fund and Assigned Risk Policies

Employers can choose to buy coverage from a private insurance carrier or they can choose to get coverage from SCIF (State Compensation Insurance Fund). The state does not require that coverage was declined by a private insurance company in order to submit for underwriting. While the California State Fund can be competitive with the private markets, businesses are advised to seek quotes from three or more insurance carriers in order to ensure fair market pricing.

State Fund Announces 2016 Decrease in Fund Rates (June 2016)

The California Department of insurance has approved the new rate filing proposed by the California State Fund. Effective September 1st, 2016, California policyholders will see an overall reduction in rates of 9.5%. This is good news for most policyholders since rates had been on the incline for several years prior.

Early 2016 Rates Continue to Escalate for California Employers

The most recent premium comparison indicate that California state moved from the third highest rates in the U.S. to the number one spot. Rates are estimated to be approximately 188% higher than the study median rates.

California Short Rate Cancellations (Effective January 2012)

Recent changes to California insurance codes now require that all insurance companies provide written disclosure of their short rate fee calculation to all CA employers. Many carriers are working to add these disclosure statements to their current quote systems. The disclosure should be provided in writing for workers compensation quotes involving:

• New Policies- prior to the acceptance of the quote.

• Renewal Policies- as part of the renewal quote and prior to the renewal effective date.

California Classification Codes

California administers its own workers compensation program aside from the NCCI (National Council on Compensation Insurance). While California utilizes many of the same 4-digit classification codes as NCCI, they have multiple state special and state exception codes to the standard NCCI Scopes Manual. Employers should be cautious when trying to attempt self-classification without an experienced agency such as Workers Compensation

State Fund Information in CA

California is a No Fault workers' comp system. The State Fund was created by the legislature in 1914 in order to guarantee insurance access for California employers. The State Fund is designed to be a non-profit public enterprise under state statute. The organization is self-supporting and generate revenue from insurance premiums and investment income. The Fund insures approximately 130,000 state businesses.

More Programs and Options

We're always working with our insurance carriers to develop specialized programs for a broad range of industry class codes. Our Target Programs are designed to streamline the underwriting process and help ensure we offer the lowest rates available anywhere.

  • Contractors
  • Home Health Care
  • Janitorial Services
  • Transportation
  • Hospitality
  • And More
California Workers Comp Help?

CA Posting Requirements

California employers are required to post the Notice to Employees poster in an obvious place at the worksite. This poster provides information to employees about your insurance company and where to go to seek medical treatment.

Failure to post the notice may result in a fine up to $7,000 per violation.

California Notice to Employees

Let Workers Compensation help your business navigate workers comp insurance in California.

What Does Workers' Compensation Insurance Cover?

Workers' comp coverage protects employees when injured. It makes good financial sense for both parties.
Injuries and accidents happen. A workers' comp policy is a no-fault system that pays for these accidents and claims. It's required by law in most states.
  • Loss of income for employees unable to perform job duties
  • Medical expenses for employees injured on the job
  • Retraining expenses for employees unable to return
  • Permanent injury or disability for lasting injuries
  • Survivor benefits if employees are killed on the job
Coverage does not protect employers from everything. Sometimes employees and employers can be negligent.
In some instances, workers' compensation coverage will not protect employers or employees from the legal liability resulting from a workplace injury.
  • Injuries resulting from a violation of the law
  • Incidents resulting from employees' use fo drugs or alcohol
  • Injuries that did not occur in connection with the job
  • Clear company policy violations
  • Injuries that did not occur in connection with the job

Workers' Comp Includes Employers Liability Insurance?

Employers liability insurance is an additional layer of coverage included as part of a workers' compensation insurance policy. Employers Liability is know as Part 2 of the policy. It adds two additional coverages for employers:

Employers Legal Liability and Legal Defense Costs

In todays world, there are a variety of reasons employees and third-parties sue employers for damages. Here a some common types covered by employers liability insurance:

Third Party Lawsuits

Your employee sues another party that may have contributed to the injury, In turn, the third party sues your business.

Consequential Bodily Injury

Another party or individual is injured while providing care for the injured employee.

Dual Capacity Legal Action

An employee files a claim but also attempts to sue the employer for being responsible in other ways outside of the employment relationship.

Loss of Consortium

A spouse sues for damages caused by the loss of companionship or relations.

Employers Liability coverage is not included with coverage in the four monopolistic states. Employers in these states can endorse this coverage onto their General Liability policy. That coverage is commonly know as Stop Gap Coverage.

Visit NCCI for more resources and information about workers' compensation class codes. Visit United States Department of Labor for more information about government agencies managing workers compensation insurance rates.

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