Understanding California Workers’ Compensation Insurance: A Comprehensive Guide

Under California Labor Law, all employers must provide Workers’ Compensation benefits to their employees, even if they have just one full-time or part-time employee. Workers’ Compensation benefits both employees and employers, as employees cannot sue their employers in court, and there’s no need to prove fault for work-related injuries.

How to Purchase Workers’ Compensation Insurance

Employers can purchase Workers’ Compensation insurance in three ways:

  • Private insurance companies
  • State Fund
  • Self-insuring the business (businesses active for at least three years can request approval from OSIP – Office of Self Insurance Plans)

Factors Affecting Insurance Costs

The cost of purchasing Workers Compensation Insurance depends on the following factors:

  • Payroll
  • Location
  • Number of Employees
  • Claims History
  • Classification Codes
  • Industry and risk factors

To get the best price, it is advisable to get quotes from two or more companies and compare. Monthly premiums are calculated based on the payroll amount worked for each job classification. Work classifications are given a unique code, and each code has a percentage that can frequently change.

Penalties for Employers without Workers’ Compensation

If an employer doesn’t have Workers’ Compensation insurance, they are violating California Labor Law and will face penalties such as:

  • $10,000 fine
  • One-Year Prison
  • State penalty of up to $100,000

Workers’ compensation coverage

All employees can benefit from Workers’ Compensation insurance when the injury occurs while working. Some examples of covered incidents include:

  • Injuries due to slipping and falling, being struck by a falling object, getting caught in machinery, or experiencing back and neck injuries
  • Injuries sustained while driving to a job site or meeting (excluding commuting)
  • Injuries caused by repetitive motions, such as lifting and carrying, or resulting in nerve damage
  • Viruses and diseases contracted in the workplace, such as smoke inhalation or radiation exposure
  • Psychological and emotional conditions caused by anxiety or stress disorders due to workplace conditions
  • Death resulting from work conditions, such as heart attack or stroke

However, Workers’ Compensation does not cover situations where the injury was caused by:

  • Intoxication from alcohol or other substances
  • Self-inflicted injuries
  • Fights initiated by the injured party
  • Injuries sustained during the commission of an offense

Certain employees, such as sole proprietors, executive officers and directors, LLC members, and independent contractors, fall under the Workers’ Compensation exemption category in California. However, it is strongly recommended that sole proprietors and independent contractors consider purchasing Workers’ Compensation insurance, as this policy can help cover medical expenses and wages while recovering. In some cases, personal insurance providers may deny work-related injury claims, leaving the injured party responsible for paying bills on their own.

Types of Workers’ Compensation Benefits in California

Workers compensation insurance covers five types of benefits in California:

  • Medical Care
  • Temporary Disability
  • Permanent Disability
  • Supplemental Job Displacement
  • Death

Medical Care

This benefit provides medical treatment to help employees recover and return to work. It covers costs associated with medical evaluations, surgeries, treatments, prescribed drugs, medical devices, and transportation charges.

Temporary Disability

Temporary Disability payments are given to workers unable to perform their usual job while recovering.

Permanent Disability

Permanent Disability benefits are provided when a doctor diagnoses an injured worker as unable to recover fully from the injury. The payout amount depends on the permanent disability rating, the injury sustained, the worker’s age, and occupation. Some employees may be eligible for life pension payments based on their injury or illness.

Supplemental Job Displacement

Supplemental Job Displacement benefits cover retraining costs if the injured worker returns to work but cannot perform their original job.

Death Benefits

Death benefits are provided to the family of an employee who loses their life due to a work-related injury or illness.

The claims process

For Employees:

  1. Report the Injury/Illness to the Employer: Workers should report to their immediate supervisor and/or the management team as soon as possible. If the injury develops gradually, notify the team as soon as you believe it is job-related.
  2. Get emergency treatment if necessary.
  3. Complete the “employee” section of the claim form and submit it to the employer for them to complete the “employer” portion. The employer then submits the form to the claim administrator in the insurance company.
  4. Upon filing the claim, the insurance company has 90 days to accept or deny it. If the insurance company doesn’t provide an outcome, the injury is eventually accepted.

The insurance company will provide the injured worker with the following documents:

  • Claim acceptance or denial letter
  • Medical treatment appointment information
  • Medical evaluation appointment information
  • Payment summary for Permanent or Temporary disability with their rates

For Employers:

  • Within one working day of learning about the injury, provide the employee with a Workers’ Compensation Claim Form (DWC-1) and notice of potential eligibility.
  • Instruct the employee to complete the “employee” section of the form and return it to the employer.
  • After receiving the form from the employee, complete the “employer” section and send the duly completed form to the insurance company. Provide a copy to the employee.
  • Submit Form DLSR 5020 (Employer’s Report of Occupational Injury or Illness) to the insurance company or administrator within five working days after receiving the employee’s notification.
  • Within one working day of learning about the employee’s claim, approve medical treatment of up to $10,000.

Pre-Designating a Doctor

In general, injured workers must be treated by the Medical Provider Network (MPN) provided by their employer. MPN has physicians approved by the Workers’ Compensation insurance company for treating injured employees.

In some cases, injured employees can request to pre-designate their doctor when:

  1. The employer or insurance company fails to provide MPN information
  2. An appropriate doctor in the network is not available within a reasonable distance

Employees can pre-designate their personal doctor only if they satisfy the following conditions:

  • Provide a written request including the physician’s name and business address before the date of injury for which treatment is sought
  • Have non-occupational healthcare coverage on the date of injury, either through a policy or a fund
  • Have their personal doctor agree to be pre-designated before the date of injury

Duration for Reporting the Injury

Injured employees should inform their employer within 30 days of the workplace accident. Failure to do so may result in being barred from claiming Workers’ Compensation benefits.

In some circumstances, when an injury occurs and is not immediately discovered, the injured employee can file a Workers’ Compensation claim within one year of the injury. In certain cases, California regulators can extend the time frame as follows:

  • If the injured person is under 18 years of age at the time of injury, they have one year to file the claim upon becoming a legal adult.
  • If the injured employee has a repetitive stress injury, they can file the claim within one year of becoming aware of the injury.
  • If the initial injury causes further injury, the injured employee has five years to file a Workers’ Compensation claim.
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