Who Pays For Workers’ Compensation Benefits?

Quick Answer

In California, the employer is responsible for paying workers compensation benefits, either through a private workers compensation insurance policy or through self-insurance (for larger employers). California Labor Code Section 3700 requires virtually all employers who employ workers in California to maintain workers compensation coverage. When an employer has workers comp insurance, the insurance carrier administers the claim and pays benefits. When an employer fails to maintain required insurance, the Uninsured Employers Benefits Trust Fund (UEBTF) may cover claims. Attorney Damoun Yazdi at Accident Network Law Group handles workers compensation claims throughout Southern California.

Key Takeaways

• California Labor Code Section 3700 requires employers to carry workers compensation insurance or be legally self-insured
• Workers comp insurance carriers pay benefits on behalf of the insured employer
• Large employers can self-insure with California Department of Industrial Relations approval
• The Uninsured Employers Benefits Trust Fund (UEBTF) covers claims against uninsured employers
• State Compensation Insurance Fund (State Fund) is California’s public workers comp insurer and is a last-resort option

Private Workers Compensation Insurance

Most California employers maintain workers compensation insurance through private insurance carriers. These carriers issue workers compensation policies to employers, collect premiums, investigate and administer claims, pay authorized medical treatment, and provide disability benefits when employees are injured.

Insurance carriers have strong financial incentives to control costs by denying claims, limiting medical treatment authorizations, challenging disability ratings, and settling claims quickly and cheaply. This is why injured workers who receive inadequate benefits often benefit from attorney representation.

Self-Insurance

California’s Department of Industrial Relations allows qualified larger employers to self-insure for workers compensation rather than purchasing a policy. Self-insured employers must meet minimum net worth and financial stability requirements and obtain the DIR’s approval. They administer claims through their own claims departments or through third-party administrators.

Self-insured employers have even stronger direct financial incentives to minimize claims because each claim dollar comes directly from the employer’s budget rather than from an insurance pool.

State Compensation Insurance Fund

California’s State Compensation Insurance Fund (State Fund) is a not-for-profit public enterprise fund that competes with private insurers in the workers compensation market. State Fund is the insurer of last resort, meaning employers who cannot obtain coverage elsewhere can purchase coverage from State Fund. Many small businesses and employers in high-risk industries are insured through State Fund.

Uninsured Employers Benefits Trust Fund (UEBTF)

Despite California’s mandatory insurance requirement, some employers operate without workers compensation insurance. When an injured worker’s employer is uninsured, the Uninsured Employers Benefits Trust Fund (UEBTF) may cover the worker’s medical and disability benefits under California Labor Code Section 3716.

The UEBTF then pursues reimbursement from the uninsured employer. Employees who believe their employer may be uninsured should verify insurance status through the California Workers’ Compensation Insurance Rating Bureau’s website or contact the Labor Commissioner’s Office.

Operating as an uninsured employer in California is a crime (misdemeanor for a first offense, felony for subsequent offenses) under California Labor Code Section 3700.5. Uninsured employers are also personally liable to the injured employee.

What Happens When the Employer Disputes Coverage

Even when the employer has insurance, the carrier may dispute whether the injury qualifies for workers compensation coverage by arguing the injury did not arise out of employment, the employee was not acting within the scope of employment, the injury was pre-existing, or the injury was caused by the employee’s willful misconduct.

When coverage is disputed, the employee can file an Application for Adjudication of Claim with the Division of Workers’ Compensation to have the dispute resolved by a Workers’ Compensation Judge.

California Workers Compensation Laws

California Labor Code Section 3700 (mandatory insurance requirement), Section 3700.5 (criminal penalties for non-compliance), Section 3716 (UEBTF for uninsured employers), Section 4600 (medical treatment), Sections 4653-4658 (disability benefit calculations).

Contact a California Workers Compensation Attorney

Attorney Damoun Yazdi at Accident Network Law Group, with 12+ years of personal injury and workers compensation experience, handles all workers compensation disputes including claims against uninsured employers. Free consultations, contingency basis. Our team serves Riverside, Costa Mesa, Rancho Cucamonga, Apple Valley, Victorville, and throughout Southern California. Se habla espanol.