Hi, this is Alyssa Burley with Rancho Mesa's Media Communications and Client Services Department. Thank you for listening to today's Top Rancho Mesa News, brought to you by our Safety and Risk Management Network, Studio One. Welcome back, everyone. My guest today is Sam Clayton, Vice President of the Construction Group with Rancho Mesa.
He specializes in providing commercial insurance to construction contractors. And today we're going to discuss the COVID-19 workers' compensation surcharge that is likely coming to California. Sam, thanks for joining us. Thanks for having me, Alyssa.
This surcharge doesn't sound like it's good news for California's struggling employers. Fortunately, the construction industry has been deemed essential, and projects have continued to make progress over the last eight months while we've technically been in lockdown. I've heard the Workers' Compensation Insurance Rating Bureau, or the WCIRB, has recommended a COVID-19 surcharge for 2021 workers' compensation policies. Can you explain what it is and what it means for California's employers?
Sure, Alyssa. If the COVID-19 surcharge is approved, the amount paid by employers will vary by industry. They can stand away from a $0.01 to a $0.24 per $100 of payroll charge. The industries with less of a COVID-19 exposure can expect a lower surcharge, while industries with a higher exposure can expect a greater surcharge.
The additional surcharge may not seem like a lot, but multiplied by a company's payroll, it could be a significant impact to the company's bottom line. Additionally, this surcharge will apply to all California employers, regardless if they've had any COVID-19-related illnesses. So, by now, California employers should be familiar with Governor Newsom's executive order in 6220, followed by Senate Bill 1159, and we'll put links to our articles on both of those in the episode notes. The executive order in SB 1159 both place the burden of COVID-19 cases largely on the employer, with rare exception.
So, employers are submitting workers' compensation claims against their policies, and the carriers are now passing on or distributing that added cost to all California employers if the surcharge is approved by the insurance commissioner. Is that correct? Yes. The WCIRB recommends adding a surcharge after growing concerns that the number of COVID-19-related workers' compensation claims will continue to increase.
It's been estimated this year that 11% of all workers' comp claims in California have been COVID-19-related. The surcharge will help the insurance carriers mitigate the growing cost of the claims that could not have been anticipated when rates were calculated for the 2020 policies. Even though COVID-19 claims will not be included in employers' experience modification rates, carriers will look to a number of variables in order to adequately price for an individual company's premium, like the company's overall claims experience, COVID-19 claims experience, and the COVID-19 protocols and practices that are in place by the employer. So, even though COVID-19 claims will not affect the employer's excellence, the underwriter still reviews the company's claims history and their safety practices, which can affect credits or debits on the premium.
So, companies may see debits on the premium, plus have to pay the COVID-19 surcharge. Is that right? That's correct. Rancho Mesa and California Union employers, as well as several carriers, including the State Compensation Insurance Fund, or State Fund, oppose the surcharge idea.
Our feeling, as well as many of the others, is that most carriers are now underwriting specifically for COVID-19 by evaluating the business's COVID-19 claims history and safeguards they put in place. Thus, there's no additional need for this additional surcharge. In the next few weeks, we will release a follow-up article that will highlight the best practices employers can implement now to minimize the COVID-19 impact to their organization and their 2021 workers' compensation renewal pricing. Sam, if someone has questions about the surcharge or what to expect on their 2021 workers' compensation renewal, what's the best way to get a hold of you?
I can be reached at 619-937-0167 or my email address is sclayton at ranchomesa.com. Thank you, Sam. We'll be anxiously awaiting more news about the surcharge. Thanks, Alyssa.
Have a good day. This is Alyssa Burley with Rancho Mesa. Thanks for tuning in to our latest episode produced by Studio One. For more information, visit us at ranchomesa.com and subscribe to our weekly newsletter.