How do high-risk businesses get workers’ comp in California?

Where coverage comes from when carriers decline

An October 2025 American Academy of Actuaries issue brief counts 31 states with assigned-risk reinsurance pools. California isn’t one: the brief lists its mechanism as a competitive state fund, one of 12 states whose funds compete with private insurers and cannot decline coverage based on risk criteria.

That fund is State Compensation Insurance Fund, founded in 1914. Under Insurance Code 11770 onward, it is a public enterprise fund that may write workers’ comp to the same extent as any other insurer and must be fairly competitive. The state isn’t liable beyond the fund’s assets, and its advertising must say it is not a branch of the State of California.

Section 11784(c) sets the duty to write: State Fund may decline a risk that fails the safety authorities’ minimum requirements or is beyond its safe carrying, and otherwise may not refuse a workers’ comp risk tendered with the premium. A 2016 Assembly Insurance Committee analysis calls it both a competitor of private insurers and the insurer of last resort for employers they won’t cover.

So a high-risk business has two paths: private carriers that write its class, and State Fund. I shop both.

What the WCIRB does: classifications and the mod

Insurance Code 11734 has the Insurance Commissioner designate a rating organization to gather statistics and develop a classification system. Every comp insurer must report its claims experience to it and follow the uniform experience rating plan it files. In California that is the Workers’ Compensation Insurance Rating Bureau (WCIRB), a nonprofit and the state’s designated statistical agent. Under section 11750.3, a rating organization may also inspect risks for classification and test-audit payrolls.

Two parts of that system shape how hard you are to place. Your classification describes the work your employees do, and premium is figured per $100 of payroll in each class. Your experience mod compares your claims history with others in your industry, using a formula the WCIRB develops, and it is mandatory for businesses that qualify. More on how the experience mod works.

What makes a business high risk

The actuaries’ brief names the traits that make private insurers see an employer as too risky: small size, loss history, new business and hazardous operations.

• The work itself. Hazardous operations are on that list, and your classification is set by the work your employees actually do.
• Loss history. Past claims show up on your loss runs and feed your experience mod.
• New or small. A new business has no claims history to review.
• Payroll mix. Premium is figured on payroll in each class, so carriers need it broken out by type of work.
• Contractor rules. C-39 roofing contractors were already required to carry comp, and since January 1, 2023, C-8, C-20, C-22 and D-49 licensees must carry it whether or not they have employees. A lapse triggers automatic license suspension, or removal of that classification from a license that carries others. See roofing contractor insurance and contractor insurance.

What widens your options

• Get the classification right. Describe your operations accurately. Insurance Code 11760 makes it a crime to knowingly misstate a fact material to premium in order to reduce it.
• Run a real safety program. Title 8, section 3203 requires every employer to establish, implement and maintain an effective Injury and Illness Prevention Program, including inspections, injury investigation and training. State Fund’s employer handout lists a free online IIPP Builder.
• Report injuries fast. State Fund tells employers to give an injured worker the DWC 1 claim form within one working day of learning of the injury; a delay in reporting can raise claim costs.
• Bring a complete submission. State Fund’s quote checklist asks for the legal name and FEIN, locations, ownership, a description of operations, class codes, license, employee count, total payroll and loss runs.

Payroll, audits and paying for it

Premium starts from estimated payroll in each class. At the end of the policy period, a premium audit checks the records so you are charged the correct premium. State Fund’s auditors ask for payroll journals, tax returns, original time cards and cash disbursements, and it counts overtime, commissions, bonuses, sick, vacation and holiday pay as payroll.

Under Insurance Code 11760.1, the insurer gets access to those records during the policy and for three years after it ends. If an employer doesn’t provide access after three requests over at least 90 days and a 30-day certified notice, the insurer can charge three times its estimate of the annual premium. If you then allow the audit, the premium is revised. More on what a premium audit looks at.

What going without coverage risks

• A stop order. Labor Code 3710.1 has the state order an uninsured employer to stop using employee labor until it complies, and section 3722 adds a $1,500 penalty per employee when the order issues.
• A larger penalty. If you were uninsured for more than a week in the prior calendar year, the penalty is instead the greater of twice what comp would have cost for that period or $1,500 per employee.
• Criminal charges. Under Labor Code 3700.5, failing to insure when you knew or should have known of the duty is a misdemeanor: up to a year in county jail, a fine of at least $10,000, or both.
• Lawsuits. Labor Code 3706 lets an injured employee or dependents sue an uninsured employer for damages in court.

Outside the contractor classes above, a business with no employees may not need a policy. See who is exempt from workers’ comp in California and the workers’ comp coverage page.

Common questions

Sources

• California Insurance Code 11784: State Fund’s powers and duty not to refuse risks
• California Insurance Code, Article 1 (11770–11805): State Compensation Insurance Fund organization and powers
• Assembly Committee on Insurance analysis of AB 2887 (hearing April 20, 2016): State Fund’s role
• American Academy of Actuaries issue brief (October 2025): residual markets and rating bureaus by state
• California Insurance Code 11734: uniform experience rating plan and classification system
• California Insurance Code 11750.3: purposes of a workers’ comp rating organization
• Senate Banking, Finance and Insurance Committee analysis of AB 483 (June 2009): the WCIRB as California’s rating organization and statistical agent
• State Compensation Insurance Fund: Workers’ Compensation Basics employer seminar handout (May 4, 2023)
• Cal/OSHA, Title 8 section 3203: Injury and Illness Prevention Program
• California Insurance Code 11760: false statements to reduce premium
• California Insurance Code 11760.1: employer records and premium audits
• California Labor Code 3700: securing payment of compensation
• California Labor Code 3700.5: criminal penalty for failing to insure
• California Labor Code 3706: injured employee’s civil action against an uninsured employer
• California Labor Code 3710.1: stop orders
• California Labor Code 3722: penalties for uninsured employers
• California Business and Professions Code 7125: contractor classifications that must carry workers’ comp without employees (C-8, C-20, C-22, C-39, D-49)
• California Business and Professions Code 7125.2: license suspension for lapsed workers’ comp
• CSLB Industry Bulletin 22-12 (October 11, 2022): workers’ comp required for four more classifications

General information about how high-risk California employers secure workers’ compensation as of October 2026, not legal or tax advice; the California Labor and Insurance Codes, the approved experience rating plan and manual rules, and each insurer’s underwriting control. Coverage depends on underwriting and the terms, conditions and exclusions of the policy actually issued.