California workers’ compensation insurance

Here are several examples of how workers' compensation insurance coverage helps pay expenses for injured workers:

• A general contractor injures their hand while building a home addition. Workers' comp covers their doctor's appointment and pain medication, and provides disability benefits to replace part of the wages they miss while they are recovering.
• A personal care aide develops a back injury from helping transfer and lift patients, and can no longer perform their duties. In this instance, workers' compensation would also provide retraining benefits so they could learn the skills to take on a new job.
• A software developer trips on the staircase at their office and breaks their leg. Workers' comp covers the cost of the ambulance ride, emergency room visit, surgery, medications, and then two months of physical therapy to help them recover.
• A janitor suffers from respiratory problems after years of using harsh cleaning chemicals. After filing a workers' comp claim, they receive permanent disability payments for their ongoing lung issues.

There are three ways to buy a workers' comp policy in California:

• You can buy it from a private insurance company. You could contact each insurer independently to compare their products and rates, but that's where agents and brokers like Insureon come in. As the nation's leading digital insurance agency, Insureon partners with 30+ top-rated insurance carriers to deliver the right coverage for your business. Fill out an easy online application to get started.
• You can buy it from the state fund. California has a competitive state fund for workers' compensation, the State Compensation Insurance Fund. It offers coverage for businesses of all sizes and types.
• You can self-insure your business. Employers who meet certain requirements, including at least three years in business, can apply to the Office of Self-Insurance Plans (OSIP) for approval. This is mostly an option for large corporations and others with the financial resources to handle claims themselves.

Here's a breakdown of this equation:

• The classification rate reflects your employees' risk. Each worker has a classification code for the type of work they do. Insurers look up those codes in a database to find the associated rate, which is lower for office workers and higher for carpenters, tree trimmers, and others with a higher rate of injuries. California uses the Workers’ Compensation Insurance Rating Bureau of California (WCIRB) database, unlike other states that rely on the National Council on Compensation Insurance (NCCI).
• The experience modification rate (EMR) reflects your business's risk. The average experience modification rate is 1.0, which means a business is similar in risk to others in its profession. Higher EMRs reflect higher risks, such as a history of claims. The EMR only comes into play for annual workers' comp premiums of at least $5,000, so it's not a factor for many small business owners.
• The insurer multiplies these numbers with your payroll divided by 100 to come up with your workers' comp premium. Workers' compensation audits are typically done each year to ensure your business pays the right premium for this coverage.

Failure to carry a workers’ compensation insurance policy in California is a criminal offense. The penalties include:

• A stop order is typically issued to the business. Violations of the stop order can result in a fine of up to $10,000, imprisonment in county jail for up to one year, or both.
• The Uninsured Employer’s Benefit Trust Fund could file a lien against an employer’s property if it needs to pay benefits to the injured worker of an illegally uninsured employer.
• A penalty assessed by the Division of Labor Standards Enforcement could be twice the amount the employer would have paid in premiums while they were uninsured, or $1,500 per employee while the employer was uninsured, whichever is the greater amount.

If a worker is injured and the employer did not have workers’ comp, the employer could be liable for a penalty of $10,000 per employee at the time of injury if the case is compensable, or $2,000 per employee at the time of injury if that particular case was found to be non-compensable. The maximum penalty is $100,000.

There are two types of workers’ comp settlements in California:

• Stipulated findings and award. This is when the injured worker and the insurance company agree on the extent of disability and benefits, resulting in biweekly payments unless there’s a financial need for benefits to be paid upfront. The insurance company would continue to pay for future medical treatment. The injured worker might be able to reopen a case if the medical condition becomes worse within five years.
• Compromise and release. An injured worker is paid a lump sum that closes the case. Any future medical care would not be covered, even if it is related to the injury.

Any settlement would need to be approved by a California workers’ comp judge. There’s often an informal hearing before the judge. Although the insurance company would handle this, it’s good for the employer to remain informed about the ongoing progress of settlement negotiations in case it becomes the subject of later litigation.

An injured employee has one year to file a workers’ compensation claim. California regulators can extend that time under certain circumstances:

• If the worker is under 18 at the time of injury, the one-year statute of limitations would begin when the person becomes a legal adult.
• If there is a repetitive stress injury, the worker may file a claim up to one year from the date that they became aware of the injury.
• A worker has up to five years from the date of the job injury to submit a claim form if the original injury caused additional or further injury.