New law on workers compensation changes definitions of excluded employees

(Sacramento, CA – Insurance News and Markets) – On Oct. 17, California Insurance Commissioner Dave Jones notified all insurance companies writing workers’ compensation policies in the state about changes to definitions of, and procedures related to, excluded employees, following the enactment of Assembly Bill 2883.

Starting on Jan. 1, 2017, all business workers’ compensation insurance policies (including in-force policies) will be required to cover 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.”

Before AB 2883 was signed, 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. The new law requires 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.

Source: California Department of Insurance.