A law book with a gavel - Insurance law
Well at least it’s the holiday season……..you were going to see EVERY one of your clients anyway right?!

Starting January 1st of 2017, Assembly Bill 2883 becomes effective in California and significantly changes Labor Code Section 3351 and 3352. A few important tips about the changes:

1.  The change is effective January 1st, 2017, regardless of policy effective date…not common for these types of changes. Nearly all workers compensation policies need to be reviewed to determine the impact…and we all have plenty of time on our hands during the holiday season!

2.  Insurance carriers should be notifying potentially impacted policyholders…you probably want to contact your clients to ensure they know how to respond.

3.  Waivers need to be sent to the insurance carrier…not CA DOI or WCIRB. You didn’t have anything else to do anyway right?!

4.  Waivers should be completed and submitted to insurance carriers as soon as possible…carriers will inevitably get inundated due to this change and you probably should try to be ahead of the pack. We all, and carriers in particular, handle huge volumes of last minute paperwork very well so there’s not likely to be any confusion or errors…

5.  New waivers need to be re-completed and submitted to insurance carriers when coverage is replaced by a new carrier…don’t overlook this point! Who doesn’t enjoy MORE paperwork?!

AB 2883 looks to clarify the exception process for workers’ compensation as:

  • Previously eligible directors, general partners, managing members and officers choosing exclusion from the workers’ compensation system now must provide a signed waiver to their workers’ compensation carrier before January 1, 2017
  • Officers and directors of a corporation must meet a minimum 15% ownership criteria to be eligible for exclusion
  • Only general partners of a partnership are eligible for exclusion
  • Only managing members of a limited liability company are eligible for exclusion

What’s possibly the largest concern with this legislation is how it’s being implemented…effective January 1st, 2017. Dave Jones, California Insurance Commissioner, commented “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.” This means the bill does not exempt in-force policies and mid-term changes to current in-force policies may be required. The implementation of this change is inconsistent with how most regulation changes in the insurance industry are handled as they are generally enforced at the clients next renewal on or after the effective date of the change.

It is now necessary to review, with your clients, their policies to determine who is now eligible for coverage exception under the new Bill and submit the mandatory waiver(s) prior to January 1st, 2017. Without submitting the required waiver(s) to the policyholder’s carrier, additional premium may become due to cover those who did not submit the waiver. It is important to also remember that the waivers are carrier specific meaning the waiver completed for the current carrier is not applicable for the next carrier if the policyholder moves their coverage to another carrier. In the event coverage is moved to another carrier, a subsequent waiver will need to be completed and submitted to the new carrier.

One helpful requirement from the Department of Insurance is that carriers are required to notify potentially impacted policyholders. “AB 2883 is going to cause significant disruption for workers’ compensation insurers and employers. We have issued a notice 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.

Happy Holidays! 😉

By: Mike Mendonca
(Workers’ Compensation Manager, Risk Innovations, LLC)