Starting January 1^st of 2017 California’s workers’ comp policies will be required to cover people who were previously exempted from coverage, and the California Insurance Commissioner, Dave Jones, is hoping to notify all work comp insurers of the changes so that the transition goes as smoothly as possible. There are some who say the language in the bill is going to make it broader than was initially intended, since it will apply to in-force policies as well and not just apply to policies that are written after the implementation date.

The bill, AB 2883, will require officers and directors of private corporations, as well as working members of partnerships and LLCs to have workers’ compensation coverage. These people had not been required to have coverage before unless they opted to. Now, unless they meet very narrow requirements and sign a waiver, they will not be allowed to be excluded of work comp coverage. This will affect in-force policies as well, and the date will not be pushed back so insurers need to be ready. They will have to alert their employers who have employees that will no longer be excluded.

According to John Norwood who works for the lobbying firm Norwood & Associates, the bill’s language was altered to try and fix the abuse of the current exemption process. Some people would name everyone working in their organization as an officer so that they would not need to have a workers’ comp policy. Now a person must hold at least 15 percent of the company’s stock or meet another specific qualification to be named an exempt officer, director or partner. But that threshold may be set a little too high for certain businesses, especially small businesses that are owner run and operated.

Jones said, “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.”

The DIR stands for the Department of Industrial Relations, the AIA stands for the American Insurance Association and the ACIC is the Association of California Insurance Companies. Norwood said that he hopes that a “fix-it bill” can pass so that in-force policies are not affected, but people will have to start paying for policies starting January 1^st and the next legislative session will not even begin until shortly after the New Year, so a bill could take some time.