Advanced
Insurance Management LLC
is based in
the Chicago suburbs,
but we do a lot of work for employers in California.
California
Workers
Comp is
similar
in many
aspects to
Workers
Comp in most other states,
but it also
has a lot of
unique aspects to it--enough
so that
California
is often
viewed as being
its own specialized world when it comes to Workers
Comp insurance.
For one thing,
the biggest source of California Workers
Compensation
coverage is
the
State Compensation Insurance Fund,
or
SCIF.
This is a
quasi-governmental agency, not technically an
insurance company, although SCIF uses the same
manual rules in California and the same policy form
as insurance companies.
Who has to get Workers Compensation coverage?
In California, every
business that has employees, even if only one
employee,
has to get Workers Compensation insurance.
Is workers’ comp required for part-time
employees?
How many hours an employee works does not affect
his or her entitlement to workers’ compensation.
And starting in 2020, California has enacted
strict rules regarding whether or not a worker
is truly an independent contractor or an
employee. California Workers Comp excludes
genuine independent contractors but the criteria
to be deemed a true independent contractor are
stringent.
To meet the requirements of what is
known as AB 5, to be truly independent a worker
has to meet all
these criteria:
-
operate a separate business from the company
using their services;
-
Be doing a kind of work that is not integral
to the business of the company using their
services;
-
Perform the work without supervision or
control by the company using their services.
This also means that your
insurance company may seek to
charge you premiums for
any uninsured
independent
contractors you
use.
To avoid being charged, you must have on file certificates
of insurance that
document that these independent contractors have their
own Workers Compensation insurance in force.
Absent
these certificates of insurance or a other valid proof
that
they have their own coverage, insurance companies
can get
overzealous in seeking to make premium charges
for such
workers.
Sometimes insurers will
seek to make premium charges even
when certificates of
insurance are presented, if the insurer alleges
that
there was not truly coverage in place for that worker.
This is
an area that has been the subject of some
contentious disputes.
For Construction companies in
California, there is
a unique trap that can cause
audited premium to
be much higher than estimated:
the Dual Wage
Classification trap.
Find out more about Dual Wage Classification rules and
problems here.
How are the premiums calculated?
Workers Compensation premiums are
calculated by assigning
classifications to the business
operations (according to a system
devised by the WCIRB).
Each classification has a particular rate,
which is
applied to remuneration (the rate is per hundred dollars
of remuneration).
The policy starts out with estimated
remuneration (usually referred to as payroll, but it can
be more
than that) and then, when the policy ends,
actual remuneration is
determined, and the policy
premium is adjusted by an audit.
Premium is further adjusted, for companies paying $5,000
or more
a year in premium, by application of the
Experience Modification
Factor. This factor, calculated
annually by WCIRB, is based on
prior loss and payroll
data of the particular business.
Premium can be further adjusted, in the voluntary
market, with
Schedule Credits or Debits. Also in the
voluntary market, the
premium is reduced by applying a
Premium Discount factor.
For those covered by SCIF as part of the California
Assigned Risk program, there are additional proprietary
rating factors that SCIF typically applies that serve to
adjust and increase premium charges.
And always
remember, the premium shown when the policy starts is
just an estimate.
Final premium will be determined after
the policy ends, and sometimes this final premium can be
significantly higher than the original estimated
premium.
We regularly get calls from employers who
have just received a shockingly-high final premium bill
and are at a loss to understand how their Workers Comp
policy that originally had a premium of just $2,000.00
has now generated a final premium bill of $25,000--or
more.
We
can often help employers by finding and
correcting
errors made by the insurance
company in computing that
final premium.
All of the above is offered for information purposes
only. We here at Advanced Insurance Management LLC are
not attorneys, so if you have any question regarding
Workers' Compensation law you should contact appropriate
legal counsel.
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