California Workers’ Compensation Insurance: Top Providers & Rules

State law requires every California business with one or more employees to carry workers’ compensation insurance. Just like most other states’ requirements, California workers’ compensation insurance covers employee expenses due to work-related illness or injury and pays their lost wages. Employers in the state can expect to pay $1.70 per $100 of payroll expense for coverage.

What Are California Workers’ Compensation Requirements?

According to California Labor Code, Section 3700.5, it is a criminal offense to not have workers’ compensation insurance from the minute an employee starts. Failing to follow California workers’ compensation laws can lead to stiff penalties and fines starting at $10,000.

Business owners can choose to self-insure workers’ comp in California, but this option is limited to companies that demonstrate they are financially capable of paying claims. To do this, the business must:

• Have a net worth of a minimum of $5 million
• Maintain an annual net income of minimum of $500,000
• Post a security deposit

These requirements make it difficult for small businesses to self-insure, but some join group self-insurance plans that make administering coverage feasible. Either way, business owners must also get approved by the Office of Self-insurance Plans.

California Workers’ Compensation Insurance Exemptions

California business owners who have even one employee are required to maintain workers’ compensation insurance, but there are some exemptions to this rule. For example, business owners without employees are exempt from covering themselves unless they are roofers. Additionally, a corporation owned fully by its directors and officers is exempt from providing workers’ comp for its directors and officers.

Company owners and officers who don’t want to maintain workers’ compensation coverage are required to complete forms with their insurance carrier that state their ownership and involvement in the company.

Recent Changes to California Independent Contractor Classification

The laws have changed how independent contractors are classified, which may impact a business’ workers’ comp requirements in California. The new law, Assembly Bill 2257, establishes that workers should be treated as employees unless the employer can meet the standard of an “ABC” test, namely that the:

1. Workers are free from the control and direction of the hiring entity.
2. Work performed is outside the hiring entity’s usual course of business.
3. Workers are customarily engaged independently in an established trade, occupation, or business of the same nature.

A worker who meets these conditions is an independent contractor, and the business owner isn’t required to provide workers’ compensation insurance. If the worker fails any part of the ABC test, the employer must provide valid workers’ compensation insurance.

How Much Does California Workers’ Compensation Insurance Cost?

The average cost of workers’ comp in California is $1.70 per $100 of payroll, according to the National Academy of Social Insurance. However, premiums vary widely based on a business’ payroll, work classifications, and claims history. The basic formula for determining workers’ compensation insurance rates is:

Premium = (payroll / $100) x classification code rate x experience modification

Payroll is an estimate of what a business expects to pay during the policy term. It’s divided by $100 and then multiplied by the business’ classification code rate. This rate is based on the type of work the business performs, with risky operations receiving a higher rate. Next, the amount is multiplied by an experience modification rating (EMR) to represent the business’ claims history.

The Workers’ Compensation Insurance Ratings Bureau (WCIRB) determines a business’ classification code and experience rating. Below are a few examples of classification code rates to give an idea of how risk influences costs. These base rates, also called pure premium, do not include an insurer’s overhead or administrative costs. Business owners can find their class codes online. However, experience ratings are specific to each business.

Sample California Workers’ Compensation Rates by Class Code

California Workers’ Comp Cost Example

Consider a small plumbing company in Anaheim that has 10 employees, not including the company owner, who is exempt from workers’ compensation coverage requirements. The breakdown of employees is one office clerk (class code: 8810) making $35,000 per year, one outside sales representative (class code: 8742) making $50,000 annually, and a crew of plumbers (class code: 5183) with a total payroll of $300,000.

The base workers’ compensation insurance premium for this business is first calculated for each group of employees:

• Clerk: ($35,000 / $100) x 21 cents = $73.50
• Sales rep: ($50,000 / $100) x 33 cents = $165
• Plumbers: ($300,000 / $100) x $5.26 = $15,780

By adding these, we get the premium estimate: $73.50 + $165 + $15,780 = $16,018.50

The workers’ compensation insurance carrier then applies any relevant fees, discounts, or experience modifications based on the employer’s loss history and the insurer’s specific underwriting guidelines. Actual rates can also vary among insurance carriers contingent on the type of business risk they are most comfortable underwriting.

California Workers’ Comp Audit Requirements

Workers’ compensation premiums are based on payroll estimates, so insurers conduct audits conducted to make sure employers pay the right amount. These audits aren’t required by law but must providers to renew a policy. Depending on the results of an audit, an employer may get a refund for excess premiums paid or get an invoice to cover any shortfalls.

To complete a premium audit, insurers review an employer’s payroll records for the previous year, starting approximately two months prior to renewal. Small business owners can save themselves a lot of extra work by choosing a carrier like The Hartford that integrates with payroll processors. With integration, The Hartford can charge monthly premiums based on the business’ current payroll values.

Where Can I Get Workers’ Comp Insurance in California

California is a competitive state when it comes to workers’ compensation insurance, so employers have the option of shopping around to get the best coverage for the best price. If you don’t have the time to shop for policies, you can also use a workers’ compensation insurance broker to compare quotes from multiple carriers. Business owners who cannot get covered from either of these two options can apply with the state’s competitive fund.

Top California Workers’ Compensation Insurance Companies

The Hartford

The Hartford is the fourth-largest provider of workers’ compensation insurance policies based on premium in California. The company offers six added coverages in its standard broad form workers’ compensation insurance policy, giving it an edge over competitors that charge for them. These extras include extended reporting deadlines, voluntary compensation, and coverage for expenses while assisting with the defense of a suit.

State Compensation Insurance Fund

State Compensation Insurance Fund is the largest provider of workers’ compensation insurance in the state and among the top 10 in the country. It guarantees workers’ compensation insurance for companies that are seeking breaks on high premiums or unable to obtain coverage from a private insurer. As California’s competitive state fund, State Compensation Insurance Fund is ideal for businesses in high-risk industries or that need to get workers’ compensation insurance quickly to cover casual or seasonal laborers.

The Zenith

The Zenith is a Canadian-owned insurer and one of the largest commercial insurance companies in the nation. The carrier has a special program for agribusiness, which makes it highly attractive to the ranch and farm communities along the California coast. Plus, The Zenith understands that the needs of business owners change, so policies need to be adjusted during seasonal cycles.

Travelers

Travelers is the largest provider of workers’ compensation insurance in the nation and one of the top five in California. It strives to partner with companies to get employees back to work quickly through its unique ConciergeCLAIM. Injured workers are assigned a care provider to shepherd them through the claims-filing process, arrange proper care, and help them get back to work. This helps reduce the size of each claim and, ultimately, keeps costs down.

Employers

Employers is a national workers’ compensation carrier and top provider in California. The company specializes in workers’ compensation and focuses on understanding the unique needs of various class codes—particularly in the food industry. By partnering with the California Restaurant Association and other state restaurant associations, Employers has developed deep experience in the food industry. This means it can offer attractive prices on workers’ comp for fast food franchises, making it ideal for franchisers and their parent companies.

What California Workers’ Compensation Insurance Covers

While states have different laws, almost all require most employers to get workers’ compensation to cover costs if an employee suffers a workplace injury. This is true in California as well. Plus, California workers’ comp covers psychiatric conditions if they’re caused by an event at work. Some major items that workers’ compensation insurance covers include:

• Medical expenses: Pays $10,000 within 24 hours of a claim to cover emergency medical bills; also covers other health care expenses, including prescription medications, equipment, and travel associated with injuries or illnesses at work
• Temporary disability benefits: Pays up to two-thirds of injured workers’ pretax wages based on their previous 12 months of employment with a minimum and maximum set and adjusted annually by law
• Permanent disability benefits: Makes payments to workers whose injuries keep them from returning to their full earning capacity; the amount is based on the degree a disability impacts a worker’s ability to earn money as well as the worker’s age and occupation
• Death benefits: Pays up to $320,000 based on the number of dependents for a worker who dies from a compensable injury plus up to $10,000 in reasonable burial expenses for injuries after January 1, 2013
• Rehabilitation expenses: Covers costs of physical therapy and rehabilitation to help the injured employee recuperate
• Supplemental job displacement benefits: Provides a $6,000 nontransferable voucher for job retraining to employees with permanent partial disabilities

In addition to employee benefits, workers’ comp in California also covers the employer’s liability if an injured worker decides to sue.

What California Workers’ Compensation Insurance Doesn’t Cover

California workers’ compensation generally covers most work-related illnesses or injuries. However, claims may be denied if an employee was injured while off-duty, volunteering, or participating in an illegal activity. For example, if a small business has a bowling team and an employee injures their thumb while bowling, their injury probably wouldn’t be covered by workers’ compensation.

COVID-19 Coverage in California

On September 17, 2020, Governor Gavin Newsom signed SB 1159 into law, making COVID-19 claims for essential workers a covered condition. Employees who get sick with COVID-19 traced back to work can receive full workers’ compensation benefits.

California Workers’ Compensation Coverage Example

Beth works at a Universal Studios bar, where part of her job duties is to unload boxes of liquor when they’re delivered. One day while handling new stock, Beth hurts her back and is unable to continue her shift. She goes home and sees a doctor the next morning. An MRI shows a herniated disc in her lower back, and her doctor prescribes six weeks of rest.

After six weeks, Beth’s condition has not improved to the point where she can return to work. The doctor recommends surgery to fix the problem. Beth is scheduled for the procedure in four weeks, has it, and then spends another 12 weeks recovering. The entire procedure and rehabilitation, along with the lost wages, is paid for by the workers’ compensation policy.

What Are the Penalties for Not Having Workers’ Compensation Insurance in California?

Failing to follow California workers’ compensation laws can lead to penalties of twice the amount the business would have paid in workers’ compensation premium or $1,500 per employee, whichever is higher. Other potential consequences of failing to follow California workers’ comp laws include:

• Fines not less than $10,000 up to $100,000
• Misdemeanor charges with a penalty of up to one year in jail
• Officers and directors personally becoming liable for employees’ workers’ comp claims

The penalties for violating California workers’ compensation insurance laws are some of the costliest in the nation. This makes it all the more important for California employers to understand and follow workers’ comp requirements.

How to File a California Workers’ Compensation Claim

To receive workers’ compensation benefits in California, it’s important for employees and employers to follow the correct process for filing a claim. Failure to follow these steps can lead to an employee sacrificing coverage for a work-related illness or injury. Employers who fail to follow these steps can be held liable for workplace injuries or even face penalties and potential prosecution.

The steps for filing a workers’ compensation claim in California include:

1. The worker immediately notifies the employer of the incident and seeks medical attention.
2. After learning of the injury, the employer has one day to approve the initial $10,000 in benefits and to give the injured worker a Workers’ Compensation Claim Form (DWC 1).
3. The worker completes the employee section of DWC 1 and returns it to the employer.
4. The employer completes the employer section of DWC 1 and files it with the insurance carrier.
5. The employer also completes an Employer’s Report of Occupational Injury or Illness (DLSR 5020) and sends it to the carrier within five days of notification of an injury.
6. The carrier has 14 days to mail a letter to the worker explaining the claim’s status.
7. The employer has 90 days to approve or deny the claim. After 90 days, the claim is presumed to be covered.

Employers cannot unduly fire an employee who has filed a workers’ compensation claim. Moreover, they need to provide regular, modified, or alternative work once the employee’s doctor approves the employee’s return. The employee has 30 days to accept the employer’s return-to-work offer; otherwise, the employer can withdraw it.

California Workers’ Compensation Insurance Deadlines

California employers and their employees are subject to strict deadlines to remain in compliance with workers’ comp requirements. These deadlines exist to protect the employee from delayed care and the employer from having to address claims made years after the event.

Perhaps the most important deadline to note is the statute of limitations. Employees have one year from the date of the incident to file a workers’ comp claim. Other key workers’ comp deadlines in California include:

• Reporting an injury: Employees should notify their supervisors immediately, but they must provide notice within 30 days or risk losing their benefits.
• Responding to an injury notification: Employers have one day upon notification to provide a workers’ comp claim form (DWC 1) to the employee and to authorize medical treatment up to $10,000 while the claim is pending.
• Filing with the insurance carrier: Employers have five days to submit a report of occupational injury or illness (DLSR 5020) to their carriers.
• Rejecting an employee’s claim: Employers and their insurance carriers have 90 days to deny the claim in writing; otherwise, the claim is presumed to be covered.

California Workers’ Compensation Settlements

It is possible to get a workers’ compensation settlement if your injury is severe enough. Studies have found that most workers receive a settlement of between $2,000 and $20,000 to pay for the long-term effects of a temporary or permanent disability. When workers get a settlement, they get one lump-sum payment rather than payments over time. When workers agree to a settlement, they sign a release saying that they will not pursue any further workers’ compensation benefits on the claim.

California Workers’ Comp Resources

• Contact Information
  • State of California Department of Industrial Relations
    Division of Workers’ Compensation
    Office Locations
    800-736-7401
    dwc@dir.ca.gov
• Key Forms
  • Workers’ Compensation Claim Form (DWC 1)
  • Employers Report of Occupational Injury or Illness (DLSR 5020)
  • Notice to Employees—Injuries Caused by Work
• Useful Links
  • A Guidebook for Injured Workers
  • DIR Fact Sheet

Bottom Line

Workers’ compensation insurance covers employees who get sick or injured as a result of their work. Although minimum workers’ compensation insurance coverage is required in California, employers are often served well by including additional coverage to help employees recover and get back to work faster.

If you’re looking for a small business insurance company to help meet your workers’ compensation insurance needs, be sure to visit The Hartford. You can get a quote in minutes for all your insurance needs and can rest easy knowing that you and your employees are covered for any work-related incidents that might arise.

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