Under California law, almost all employers are required to maintain workers’ compensation insurance. This insurance will cover the costs of medical treatment for an employee who sustains injury while working on the job. California law provides harsh criminal and civil penalties for those employers who fail to abide by this requirement. In some cases, though, an employer may have difficulty obtaining insurance. Some companies provide services that are considered “high risk,” and so insurance companies are reluctant to provide insurance to those companies.
To address this problem, the California State Labor Department created the Workers’ Compensation Joint Underwriting Associations. The purpose of the WCJUA is to provide a resource for those high risk employers who have a hard time purchasing workers’ compensation insurance. The primary WCJUA in California is called the State Compensation Insurance Fund (SCIF). The SCIF may provide workers’ compensation insurance to those businesses that are otherwise unable to obtain coverage on the open market. SCIF is a non-profit organization and provides the same services as other workers’ compensation insurance providers. Although the SCIF was established by the California state legislature in 1914, it is not a branch of the California government. SCIF provides insurance to all types of employers, but is an especially crucial resource for those employers who are unable to purchase insurance elsewhere. The types of employers who are typically in need of insurance through SCIF are new business owners, business owners with poor premium payment history, or those in a high risk industry. Typically, in order to be considered hard to place or high risk, an employer must have been rejected by at least three other open-market insurance companies.
There are some drawbacks to the system. Employers should be aware that even though the state has made it possible for them to buy insurance despite being high risk, the premiums will still be higher than they otherwise would be if they were not engaged in a high risk industry. The underwriting guidelines for the SCIF are also exceptionally strict and subject to heavier state regulations. The application is long and meticulous, taking up to a month to obtain an insurance policy. Finally, out of state work is often excluded from coverage. If a business has branches in other states, the business may have to purchase insurance in that state as well. However, on the plus side, the SCIF makes it possible for high risk businesses to comply with the state law requirement to carry workers’ compensation insurance.
Workers’ compensation insurance is a complicated issue and can become further complicated if your business is difficult to place. Call me today at (714) 516-8188 and let me talk with you about your business and workers’ compensation.