Last week, the California Department of Insurance issued a press release announcing an order issued by Commissioner Ricardo Lara mandating that premiums for worker’s compensation coverage reflect the reduction in risk attributable to the state’s COVID-19-related stay-at-home mandates. By way of this alert, Michelman & Robinson addresses questions carriers may have about the order.
Q. What is the net effect of Commissioner Lara’s order?
A. In summary, the order amends Commissioner Lara’s regulations pertaining to the California Workers’ Compensation Uniform Statistical Reporting Plan—1995 and the California Worker’s Compensation Experience Rating Plan—1995. Here is how:
First, the regulations, as amended, will permit employers to reclassify employees whose duties have changed to a clerical classification, assuming that classification has a reduced risk as compared to previous ones.
Further, the amended regulations will compel insurance companies to recompute the premiums they charge policyholders—this so that premiums are in line with the reduction in risk of loss as a consequence of stay-at-home orders imposed in response to COVID-19. As a result, many policyholders and businesses that continue to struggle during the COVID-19 pandemic will get the benefit of premium savings.
Next, the regulation update will serve to exclude from premium calculations any payments made to employees (including sick or family leave) while they are not performing any duties for the employer, effectively lowering the employer’s workers’ compensation premium rate by reducing the amount of payroll assessed and allowing employers to avoid paying premiums for paid workers who are furloughed.
Finally, in the wake of Commissioner Lara’s order, claims related to a COVID-19 diagnosis will not be included in future rate calculations (so that employers will not be penalized in the future with higher rates due to the coronavirus). Likewise, the regulations will now require insurers to report injuries related to a COVID-19 diagnosis, which will allow the Workers’ Compensation Insurance Rating Bureau to track COVID-19 incidents.
Q. When will the amended regulations take effect?
A. The regulations, as amended by Commissioner Lara’s order, will become effective on July 1, 2020.
Q. Are the updated regulations retroactive?
A. Some of them are. The regulation permitting employers to reclassify employees will be retroactive to March 19, 2020, and will conclude 60 days after Governor Gavin Newsom’s statewide stay-at-home order is lifted.
This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.