Tuesday, October 25, 2016

AB 2883 - Notice of Change in Law Effective January 1, 2017

This is a significant change in workers' compensation which will impact those that currently have coverage excluded for owners, partners or managing members.  If you currently have corporate  owners with less than 15%  ownership, you will not be able to excluded them.  If you are an LLC you can only exclude managing members.  Many LLCs have members who are not managing members so this will need to be changed.  Note, all excluded people on a workers' compensation policy will need to sign a new waiver of coverage prior to January 1 2017.  You should talk to your accountant or attorney right away to discuss how this may impact your business.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA  94116

October 10, 2016

Re: AB 2883 - Notice of Change in Law Effective January 1, 2017
Officer, Director, Partner and Member Exclusions

Dear Valued Agent:

As you may be aware, there is a change in California's workers' compensation law that takes effect on January 1, 2017 for all new, renewal and inforce polices related to the exclusion of officers, directors, partners and members. We want to alert you and your customers of these changes and actions Zenith is taking to help through the transition.

The new law, AB 2883, makes the following changes:
  1. Any eligible individual (officer, director, general partner, managing member) electing exclusion from workers' compensation benefits must provide a signed waiver to the insurance carrier prior to January 1, 2017 
  2. For corporations, officers and directors (i.e., members of the Board of Directors) must now also meet a 15% ownership threshold in order to be eligible for exclusion
  3. For partnerships, only general partners are eligible for exclusion
  4. For LLCs, only managing members are eligible for exclusion
We are aware that various parties have been interpreting the law as applying to policyholders only as they renew.  Both the Division of Industrial Relations and the California Department of Insurance have been considering the new law and we expect them to issue guidance shortly that the law applies to inforce policies as of January 1, 2017.

As soon as these governmental agencies issue their statements, our intent will be to send to each of our agents a complete list of their affected policyholders and samples of the letter and waivers we will be sending to these policyholders shortly thereafter. To be excluded (if still eligible under the new law), each eligible individual must sign the written waiver of workers' compensation benefits certifying that he or she qualifies for exclusion. Employers or employer representatives may not sign on behalf of the individual electing exclusion.

In order to maintain existing exclusions under these policies without interruption, it will be imperative that we receive completed and signed waiver forms for each eligible individual electing exclusion as soon as possible, but no later than December 31, 2016. Failure to return the forms by this date will render the exclusions invalid by operation of law. 

We understand that this new law is taking effect under very challenging circumstances, including the short notice period and disruption of having this take place at year-end. We are committed to minimizing the impact to you and your customers as best we can.


Paul Ramont
Executive Vice President, Chief Underwriting Officer
Zenith Insurance Company
ZNAT Insurance Company

1 comment:

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Thanks for the information, will be sharing it among my circle, may be they will get benefit out of it and talk to their attorney.