New law impacts existing work comp policies effective January 1, 2017 changes definitions of excluded employees
News: 2016 Press Release
SACRAMENTO, Calif. — Today, Insurance Commissioner Dave Jones notified all workers' compensation insurers writing policies in California of the changes to definitions of and procedures related to excluded employees due to the Legislature's enactment of Assembly Bill 2883 (Assembly Insurance Committee). Beginning January 1, 2017 all business workers' compensation insurance policies, including in-force policies, will be required to cover, among others, certain officers and directors of private corporations and working members of partnerships and limited liability companies that may have been previously excluded from coverage.
The Commissioner met with the American Insurance Association (AIA) and Association of California Insurance Companies (ACIC), who supported AB 2883, and the Department of Industrial Relations (DIR) to discuss its implementation.
"AB 2883 is going to cause significant disruption for workers' compensation insurers and employers. We have issued a notice today to workers' compensation insurers so that they know what the new law requires of them and we directed insurers to provide notice to employers so they are made aware of the new law," said Commissioner Dave Jones. "Unfortunately, AB 2883 did not include any language exempting in-force policies or delaying its effective date so as not to impact in-force policies. The DIR, AIA and ACIC agree that this change in law applies to in-force policies."
Prior to AB 2883 being signed into law, officers, directors and working partners were generally not required to be covered under the business's workers' compensation policy unless they opted to be covered and were not listed on a limiting and restricting endorsement. AB 2883 changes this presumption so that officers, directors and partners are generally required to be covered under the employer's workers' compensation policy unless they meet a narrower definition of excluded employee, and even this narrower set of officers, directors, and partners, as defined, can only opt out of coverage by signing a waiver under penalty of perjury and filing the waiver with their employer's insurer.
Insurance companies are required to identify and provide notice to each employer that may have employees that were previously excluded from coverage and are affected by the new law. Insurers are also required to determine and report the premium and loss experience associated of those who have not chosen to opt of the coverage. Employers who believe they may be affected by this change in law are encouraged to contact their workers' compensation insurer or their workers' compensation agent or broker.
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.