On June 22, 2022, Senate Bill (SB) 1127 was approved by the California State Assembly Insurance Committee and referred to the California State Assembly Appropriations Committee for review. Among other provisions, SB 1127 seeks to amend existing workers’ compensation law by reducing the decision timeframe an employer has to accept or deny a claim from 90 days to 75 days. While the bill has not yet been passed, the California Joint Powers Insurance Authority (California JPIA) has outlined the changes it would impart to the workers’ compensation claim system in California and the implications caused by these changes.
Current law establishes a workers’ compensation claim system as follows: After an injured employee files a claim with their employer for injuries sustained while on the job, if liability is not rejected within 90 days, the claim is accepted, and the injury is presumed compensable. SB 1127 proposes reducing the current 90-day window to a 75-day window. Other notable provisions the proposed bill would enact if passed include:
- Increasing the number of compensable weeks from 104 to 240 without limitation for firefighters and peace officers claiming an injury related to cancer.
- Increasing the penalty placed on an employer for unreasonably rejecting specific claims of injury sustained by a member of law enforcement or a first responder. Current law requires that when a claim is wrongly denied, an employer must pay up to 25% more than the amount an individual was unreasonably denied or $10,000, whichever is less. SB 1127 would require employers to pay five times the amount of the benefits unreasonably denied, amounting to a penalty not to exceed $50,000.
While it is uncertain how these changes will affect presumptive workers’ compensation cases in California, a similar, unsuccessful bill, SB 335 (Cortese), may provide insight.
In July 2021, SB 335 failed to pass in the Assembly Insurance Committee. Similar to SB 1127, this bill proposed cutting the decision time frame from 90 days to 45 days for most claims and 30 days for specific claims. The bill received minimal “yes” votes, and even those legislators who voted yes asked to remove language referencing the reduced decision timeframe.
Both of these bills’ reduced timeframes raise the concern that an employer’s ability to adequately and appropriately investigate a claim may be impeded.
The California JPIA’s Workers’ Compensation Program Manager, Jeff Rush, notes it is often already difficult to complete a thorough investigation within a 90-day timeframe.
Investigating a workers’ compensation claim requires time, energy, and resources. A proper investigation often includes multiple interviews with the injured employee, co-workers, and relatives or friends who can speak to the injury. A thorough review of the workplace where the injury occurred, as well as a review of online surveillance and video surveillance of the area, helps paint a clearer picture of the events surrounding a workplace injury.
“If SB 1127 passes, it will fundamentally change the landscape of how presumptive workers’ compensation cases are handled in California,” said Rush, who, along with California JPIA Senior Risk Manager Tim Karcz, serves on the California Association of Joint Powers Authorities’ Legislative Committee. “The ability to thoroughly investigate a claim may be greatly diminished if employers are forced to do so in only 75 days.”
There is also concern that the increased penalty, combined with the lack of time to complete a thorough investigation, may cause employers to accept claims in lieu of doing their due diligence—simply to avoid the potentially sizable penalties outlined in the bill.
The California JPIA continues its leadership role in tracking legislation that will affect agencies if signed into law. The Authority urges agencies to continue tracking SB 1127 and reach out to their local legislators if they find issues with the proposed bill.
Providing innovative risk management solutions for its public agency partners for more than 40 years, the California Joint Powers Insurance Authority (California JPIA) is one of the largest municipal self-insurance pools in the state, with more than 120 member cities and other governmental agencies. Members actively participate in shaping the organization to provide important coverage for their operations. The California JPIA provides innovative risk management solutions through a comprehensive portfolio of programs and services, including liability, workers’ compensation, pollution, property, and earthquake coverage, as well as extensive training and loss control services. For more information, please visit the California JPIA’s website at cjpia.org.