Article 3 - Rating and Other Organizations

California Insurance Code — §§ 11750-11759.2

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Sections (44)

Amended by Stats. 2000, Ch. 884, Sec. 2. Effective September 29, 2000.

(a)The purpose of this article is to promote the public welfare by regulating concert of action between insurers in collecting and tabulating rating information and other data that may be helpful in the making of adequate pure premium rates for workers’ compensation insurance and for employers liability insurance incidental thereto and written in connection therewith for all admitted insurers and in submitting them to the commissioner for approval; to authorize and regulate the existence and cooperation of qualified rating organizations to one of which each workers’ compensation insurer shall belong; to authorize and regulate cooperation between insurers, rating organizations and advisory organizations in ratemaking and other related matters to the end that the purposes of this chapter may be complied with and carried into effect.

(b)Notwithstanding any other provision of law, within 60 days of receiving an advisory pure premium rate filing made pursuant to subdivision (b) of Section 11750.3, the Insurance Commissioner shall hold a public hearing, and within 30 days of the conclusion of the hearing, approve, disapprove, or modify the proposed rate.

§ 11750.1

Amended (as amended by Stats. 1993, Ch. 228) by Stats. 1993, Ch. 1242, Sec. 9. Effective January 1, 1994. Amendments (to currently operative law) by Stats. 1993, Chs. 228 and 1242, are operative January 1, 1995, by Sec. 7 of Ch. 228, as amended by Sec. 43 of Ch. 1242.

As used in this article, unless a different meaning is manifest, the term:

(a)“Insurer” means every insurer authorized to transact workers’ compensation insurance and employer’s liability insurance incidental thereto and written in connection therewith in this state, including the State Compensation Insurance Fund;

(b)“Rating organization” means any organization which has as its primary object or purpose the collecting of loss and expense statistics and other statistical information and data, the making of pure premium rates and those rating plans authorized by Section 11734 for workers’ compensation insurance and employer’s liability insurance incidental thereto and written in connection therewith and presenting them to the commissioner for approval;

(c)“Insurance” means workers’ compensation insurance and employer’s liability insurance incidental thereto and written in connection therewith;

(d)“Willful” or “willfully” in relation to an act or omission which constitutes a violation of this article means with actual knowledge or belief that such act or omission constitutes such violation and with specific intent to commit such violation.

(e)“Advisory organization” means every person, group or organization, other than an insurer, whether located within or without this state, which prepares policy forms or underwriting rules incidental to or in connection with workers’ compensation insurance and employer’s liability insurance incidental thereto and written in connection therewith or which collects and furnishes to admitted insurers or rating organizations loss statistics or other statistical information and data relating to workers’ compensation insurance and employer’s liability insurance incidental thereto and written in connection therewith and acts in an advisory capacity to such insurers or rating organizations as distinguished from a ratemaking capacity. No duly authorized attorney at law acting in the usual course of his profession shall be deemed to be an advisory organization.

(f)“Employer’s liability insurance incidental thereto and written in connection therewith” means insurance of any liability of employers for injuries to, or death of, employees arising out of, and in the course of, employment when this insurance is incidental to, and written in connection with, the workers’ compensation insurance issued to the same employer and covering the same employer interests.

§ 11750.2

Amended by Stats. 1981, Ch. 714, Sec. 300.

The provisions of this article shall apply to all workers’ compensation insurance and employer’s liability insurance incidental thereto and written in connection therewith in this state, except reinsurance.

§ 11750.3

Amended by Stats. 1994, Ch. 1131, Sec. 3. Effective January 1, 1995.

A rating organization may be organized pursuant to this article and maintained in this state for the following purposes:

(a)To provide reliable statistics and rating information with respect to workers’ compensation insurance and employer’s liability insurance incidental thereto and written in connection therewith.

(b)To collect and tabulate information and statistics for the purpose of developing pure premium rates to be submitted to the commissioner for issuance or approval.

(c)To formulate rules and regulations in connection with pure premium rates and the administration of classifications and rating systems.

(d)To inspect risks for classification or rate purposes and to furnish to the insurer and upon request of the employer and after notice to the insurer, to furnish to the employer full information concerning the rates applicable to the employer’s insurance.

(e)To examine policies, daily reports, endorsements or other evidences of insurance for the purpose of ascertaining whether they comply with the provisions of law and to make reasonable rules governing their submission. A rating organization may develop loss data on behalf of its members to assist members in developing plans pursuant to subdivision (e) of Section 11735 and other loss sensitive plans.

(f)Within one year after expiration of any workers’ compensation insurance policy, to initiate test audits of insured employer’s payrolls and insurer’s audits of those payrolls to check the accuracy and reliability thereof, and to examine all records relative thereto and premises of insured employers.

(g)To exchange information and experience data with rating organizations, advisory organizations, and insurers in this and other states, with respect to ratemaking.

(h)To become a member or subscriber of any lawfully authorized ratemaking or advisory organization whenever membership in the organization is necessary or helpful to the rating organization.

(i)To perform all acts necessary, incidental, or convenient to carry out the foregoing purposes or the provisions of this chapter relating to rating organizations.

§ 11751

Amended by Stats. 2017, Ch. 534, Sec. 71. (AB 1699) Effective January 1, 2018.

On and after January 1, 1952, a rating organization shall not conduct its operations in this state without first having filed with the commissioner a written application for and securing a license to act as a rating organization. Any rating organization may make application for and obtain a license as a rating organization if it meets the requirements for license set forth in this article. The fee for filing an application for a license as a rating organization is two hundred twenty-four dollars ($224) payable in advance to the commissioner. Every rating organization shall file with its application:

(a)A copy of its constitution, its articles of incorporation, agreement of association, and of its bylaws, rules and regulations governing the

conduct of its business, all certified by the custodian of the originals thereof.

(b)A list of its members who shall not number less than five insurers authorized to write and writing workers’ compensation insurance in this state and whose combined experience shall be determined by the commissioner to be reasonably adequate for ratemaking purposes.

(c)The name and address of a resident of this state upon whom notices of the commissioner or process affecting that rating organization may be served.

(d)A statement of its qualifications as a rating organization.

§ 11751.1

Amended by Stats. 1993, Ch. 228, Sec. 5. Effective January 1, 1994. Operative January 1, 1995, by Sec. 7 of Ch. 228.

To obtain and retain a license, a rating organization shall provide satisfactory evidence to the commissioner that it shall do all of the following:

(a)Permit any insurer to become a member at a reasonable cost and without discrimination, or to withdraw therefrom.

(b)Neither have nor adopt any rule or exact any agreement, the effect of which would be to require any member as a condition of membership to adhere to any rates.

(c)Neither adopt any rule nor exact any agreement, the effect of which would be to prohibit or regulate the payment of dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders or members.

(d)Neither practice nor sanction any plan or act of boycott, coercion, or intimidation.

(e)Neither enter into nor sanction any contract or act by which any person is restrained from lawfully engaging in the insurance business.

(f)Notify the commissioner promptly of every change in its constitution or articles of incorporation, agreement of association, or in its bylaws, rules and regulations governing the conduct of its business; its list of members; and the name and address of the resident of this state designated by it upon whom notices or orders of the commissioner or process affecting the organization may be served.

(g)Agree that the commissioner or his or her representative may attend all meetings of the organization or any of its committees.

(h)Agree to permit four members of the public, two representing organized labor and two representing insured employers, to serve on the managing or governing committee of the organization as specified in Section 11751.35.

(i)Maintain reasonable records of the experience of its members and of the data, statistics or information collected or used in connection with the pure premium rates, classifications, manual rules, and policy and endorsement forms used by its members so that these records will be available at all reasonable times to enable the commissioner to determine whether the rating organization and its members comply with the provisions of this chapter applicable to them. These records shall be maintained in an office within this state. The commissioner may prescribe a uniform system for the keeping of the records which shall be reasonably adapted to the rating organization and its members’ method of operation and which shall be applicable to all rating organizations licensed under this article and their members.

§ 11751.2

Added by Stats. 1951, Ch. 1123.

The commissioner shall examine each application for license to act as a rating organization and the documents filed therewith and may make any further investigation of the applicant, its affairs and its proposed plan of business, as he deems desirable.

The commissioner shall issue the license applied for within 60 days of its filing with him if from such examination and investigation he is satisfied that:

a. The business reputation of the applicant and its officers is good.

b. The facilities of the applicant are adequate to enable it to furnish the services it proposes to furnish.

c. The applicant and its proposed plan of operation conform to the requirements of this chapter.

Otherwise, but only after hearing upon notice, the commissioner shall in writing deny the application and notify the applicant of his decision and his reasons therefor.

Licenses issued pursuant to this section shall remain in effect until suspended or revoked.

§ 11751.25

Amended by Stats. 2017, Ch. 534, Sec. 72. (AB 1699) Effective January 1, 2018.

Notwithstanding Section 11751, each rating organization possessing a license of indefinite term pursuant to this article shall owe and pay to the commissioner an annual fee of one hundred fifty dollars ($150), in advance, on account of that license until its final termination. That fee shall be for annual periods commencing on July 1 of each year and ending on June 30 of each year and shall be due and payable on each March 1 and shall be delinquent on and after each April 1.

§ 11751.3

Amended by Stats. 1989, Ch. 892, Sec. 5.

(a)Subject to the approval of the commissioner, a rating organization licensed under this article may adopt any reasonable constitution, articles of incorporation, or agreement of association, and may make reasonable rules for the regulation of its members and the conduct of its business by bylaws or otherwise. In a rating organization of which the State Compensation Insurance Fund is a member, it shall be entitled without election to membership on the managing or governing committee and on the classification and rating committee thereof.

(b)In addition, after consultation with the California Labor Federation, AFL-CIO, other statewide organized labor organizations, and statewide associations representing business, the commissioner shall appoint two public members representing insured employers and two public members representing organized labor to serve on the managing or governing committee of a rating organization. The bylaws of a rating organization shall permit a public member from time to time to designate in his or her stead a representative from the same employer organization or an affiliated employee union, as the case may be, to attend and participate in any meeting of the governing committee of a rating organization.

§ 11751.35

Amended by Stats. 1995, Ch. 375, Sec. 2. Effective January 1, 1996.

(a)Four members of the public, two representing organized labor and two representing insured employers, appointed pursuant to subdivision (b) of Section 11751.3, shall be entitled to serve on the managing or governing committee of a rating organization licensed under this article. A public member shall be entitled to vote on all issues involving pure premium rates, classifications, rating plans, rating systems, manual rules and policy, and endorsement forms which are properly brought before the committee. A public member shall be removed by the commissioner only for cause.

(b)In the event a public member is unable or unwilling to complete his or her term, after consultation with the California Labor Federation, AFL-CIO, other statewide organized labor organizations, and statewide organizations representing business, as the case may be, the commissioner shall appoint a successor from organized labor or an insured employer to complete the unexpired term.

(c)The public members who serve on the governing committee of a rating organization licensed under this article together may, by a majority vote, retain experts who shall include a fellow of the Casualty Actuarial Society, to advise them on any matter specified in subdivision (a). The actuary hired may participate in all proceedings of the actuarial committee of the rating organization. The reasonable expense of retaining these experts shall not exceed one hundred thousand dollars ($100,000) per year and shall be paid from the budget of the department. The commissioner shall increase this amount annually to reflect any needed cost-of-living adjustments. The public members may submit information obtained from these experts, as well as any other information they deem appropriate, to the commissioner for his or her consideration in approving a change of any matter specified in subdivision (a).

(d)In addition to the expenses authorized pursuant to subdivision (c), the public members who serve on the governing committee of a rating organization licensed under this article may expend up to an additional one hundred thousand dollars ($100,000) per year, which shall be paid by insurer members of the rating organization. Those funds shall be used to retain staff, who shall be hired by a majority vote of the public members.

§ 11751.4

Added by Stats. 1951, Ch. 1123.

From and after the taking effect of this act, it shall be the duty of every insurer to be a member of a rating organization. No insurer may at the same time belong to more than one rating organization licensed under this article.

§ 11751.5

Amended by Stats. 1993, Ch. 1242, Sec. 11. Effective January 1, 1994.

The commissioner, after notice and hearing, may promulgate reasonable rules and statistical plans, which may be modified from time to time and which shall be used thereafter in the recording and reporting by insurers of their loss and expense experience in order that the experiences of all insurers may be made available in such form and detail as may be necessary to aid the commissioner in administering the provisions of Article 2 (commencing with Section 11730). The commissioner shall designate a rating organization licensed under this article as his or her statistical agent to gather and compile such experience statistics and all licensed rating organizations shall report the experience of their members to such designated rating organization. Subject to reasonable rules approved by the commissioner, such designated rating organization shall make such experience statistics, when compiled, available to all licensed rating organizations and may make a reasonable charge to other rating organizations for the expense incurred by it in combining, tabulating and compiling the experience of all workers’ compensation insurers.

§ 11751.55

Amended by Stats. 1985, Ch. 770, Sec. 24.

If an insurer, the State Compensation Insurance Fund, a rating organization, or an advisory organization requests an official action by the commissioner under Chapters 2 (commencing with Section 11630), 3 (commencing with Section 11690), or 4 (commencing with Section 11770) of this part which he can lawfully consummate only after a noticed public hearing required by law, the commissioner shall require the request to be in writing and require the payment of five hundred ninety dollars ($590), in advance, as a fee for filing such request. Such fee shall be earned even if the request is denied or is granted in an altered form.

§ 11751.7

Amended by Stats. 2005, Ch. 428, Sec. 1. Effective January 1, 2006.

(a)The rating organization designated the statistical agent pursuant to Section 11751.5 shall provide to the Director of Industrial Relations, upon request, any information in the possession of, or reasonably attainable by the rating organization, that would assist the Director of Industrial Relations to identify employers who fail to secure adequate insurance in violation of Section 3700 of the Labor Code. The information requested pursuant to this section shall be provided by the rating organization in a form and manner prescribed by the Director of Industrial Relations.

(b)The rating organization designated the statistical agent pursuant to Section 11751.5 shall provide to the Registrar of Contractors of the Contractor’s State License Board, upon request, any information in the possession of, or reasonably attainable by, the rating organization that would assist in identifying licensed contractors who fail to secure adequate insurance in violation of Section 3700 of the Labor Code. The information requested pursuant to this section shall be provided by the rating organization in a form and manner prescribed by the Registrar of Contractors.

§ 11751.8

Amended by Stats. 1997, Ch. 748, Sec. 3. Effective January 1, 1998.

An insurer shall report to its rating organization as corrections or revisions of losses, pursuant to the unit statistical plan and uniform experience rating plans approved by the commissioner, if any of the following is applicable:

(a)A loss record detail was incorrectly reported through mistake other than error of judgment.

(b)One or more claims are declared noncompensable. A claim is declared noncompensable if any of the following applies:

(1)There is an official ruling specifically holding that a claimant is not entitled to benefits under the workers’ compensation laws of the state, even though the claimant may have been awarded reimbursement for expenses incurred by the claimant in presenting the case.

(2)No claim was filed during the period of limitation provided by the workers’ compensation laws for the filing of the claim, and the carrier, therefore, closes the claim.

(3)Where the carrier contends, prior to the valuation date, that a claimant is not entitled to benefits under the workers’ compensation laws and the claim is officially closed because of the claimant’s failure to prosecute the claim.

(c)The carrier has recovered in an action against a third party.

(d)A death claim has been compromised over the sole issue of the applicability of the workers’ compensation laws of the state.

(e)The exposure has been reassigned to another classification through the revision of an audit, in which case the insurer shall file with the revision of exposure a revision of losses that will reassign all claims to the appropriate classification.

(f)A clerical error in either the classification assignment or the type of injury assignment of a given claim, or a group of claims, has been discovered by the insurer.

(g)A clerical error in either the classification assignment or the type of injury assignment of a given claim has been discovered by the rating organization. The insurer shall, when notified by the rating organization, file a revision of losses or make satisfactory explanation.

(h)A correction is made in a classification assignment of a given claim, or a group of claims, as a result of the organization test audit of an insured for which the experience has been submitted.

(i)The claim has been determined to be a joint coverage claim in accordance with the unit statistical plan approved by the commissioner.

§ 11751.82

Amended by Stats. 2010, Ch. 697, Sec. 41. (SB 189) Effective January 1, 2011. Operative July 1, 2012, by Sec. 105 of Ch. 697.

(a)An insurer under a wrap-up insurance policy shall report workers’ compensation losses and payroll information for each contractor and subcontractor to its rating organization on a timely basis and in accordance with the uniform statistical plan. Within 10 days, upon request, the insurer shall provide to each contractor and subcontractor copies of the report covering workers’ compensation losses and payroll information for that contractor or subcontractor.

(b)For the purposes of this section, a “wrap-up insurance policy” is an insurance policy, or series of policies, written to cover risks associated with a work of improvement, as defined in Section 8050 of the Civil Code, and

covering two or more of the contractors or subcontractors that work on that work of improvement.

§ 11751.9

Added by Stats. 1997, Ch. 748, Sec. 4. Effective January 1, 1998.

Whenever a claim or claims used in an experience rating are closed and reported pursuant to the unit statistical plan approved by the commissioner and are valued, in the aggregate, at an amount that is less than 60 percent of the highest reported aggregate value of all of these claims, then the experience rating shall be revised pursuant to the uniform experience rating plan approved by the commissioner based on the most current reported values for all claims used in the experience rating.

§ 11752

Added by Stats. 1951, Ch. 1123.

The commissioner may, as often as reasonable and necessary, make or cause to be made an examination of each rating or advisory organization to ascertain whether such organizations comply with the legal requirements applicable to it under this article.

In lieu of any such examination the commissioner may accept the report of an examination made by the insurance supervisory official of another state or the report of a representative designated by the National Association of Insurance Commissioners.

§ 11752.1

Added by Stats. 1951, Ch. 1123.

The officers, managers, agents and employees of any such organization may be examined by the commissioner at any time under oath and shall exhibit all books, records, accounts, documents or agreements governing its method of operation together with all data, statistics and information of every kind and character collected or considered by such organization in the conduct of the operations to which the examination relates.

§ 11752.2

Added by Stats. 1951, Ch. 1123.

The reasonable cost of any examination authorized by this article of any rating or advisory organization shall be paid by the organization examined.

§ 11752.5

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§ 11752.6

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§ 11752.7

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§ 11752.75

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§ 11752.8