Workers' Compensation Glossary
Plain-English definitions of the California workers' compensation terms employers encounter most. Each term has its own anchor for easy reference.
Workers' Compensation
A no-fault insurance system that provides medical care, disability benefits, and wage replacement to employees injured on the job, and protects employers from most injury-related lawsuits. In California, most employers with one or more employees are required to carry it.
Employers' Liability
Coverage that protects an employer against lawsuits from employees for workplace injuries that fall outside the exclusive remedy of workers' compensation, such as certain third-party-over actions or consequential injury claims. Part Two of a workers' compensation policy.
Class Code
A standardized three- or four-digit number assigned by the WCIRB in California that categorizes a business by the type of work performed. Each class code carries a base rate per $100 of payroll used to help calculate premium.
Payroll
Total remuneration paid to employees, including wages, salaries, bonuses, and certain non-cash compensation. Payroll is the primary basis for calculating workers' compensation premium.
Remuneration
The total compensation used for premium calculation, generally including gross wages, bonuses, commissions, and certain allowances. Some payments, like tips and overtime premium, are partially excluded under California rules.
Experience Modification
A factor calculated by the WCIRB that adjusts a business's workers' comp premium based on its claims history relative to other businesses in the same class codes. A mod of 1.00 is average; below 1.00 reflects better-than-average experience; above 1.00 reflects worse-than-average experience.
Loss Runs
A report from an insurance carrier listing the claims history for a policy period, including dates, types, paid and reserved amounts. Loss runs are typically required to quote workers' comp coverage.
Certificate of Insurance
A standardized document (commonly ACORD 25) evidencing that a workers' compensation policy is in force. Often required by general contractors, clients, and regulators before work begins.
Waiver of Subrogation
A policy endorsement preventing the carrier from recovering claim payments from a third party who caused the loss. Often required on construction contracts.
Additional Insured
A person or entity, such as a general contractor, added to a policy so they receive coverage under that policy for certain claims arising from the named insured's work.
Claim
A formal request by an injured employee for workers' compensation benefits, including medical treatment, temporary or permanent disability, and supplemental job displacement benefits where applicable.
Indemnity
The portion of a workers' comp claim that compensates an injured worker for lost wages—temporary disability, permanent disability, or death benefits—distinct from medical-only costs.
Medical-Only Claim
A claim where the injured worker receives medical treatment but no wage-loss (indemnity) benefits. Medical-only claims generally have a smaller impact on the experience modification than indemnity claims.
Assigned Risk
A market of last resort for businesses unable to secure coverage in the voluntary market. In California, the assigned risk plan assigns policies to participating carriers under standardized terms.
State Fund
The State Compensation Insurance Fund (State Fund), a quasi-public carrier in California that offers workers' compensation coverage and competes with private carriers.
Broker
A licensed insurance professional who represents the insured (not the carrier), shops the market, and places coverage. A California broker can access multiple carriers to find suitable terms.
Carrier
The insurance company that issues the workers' compensation policy and pays covered claims. California carriers must be admitted or eligible surplus lines insurers.
Underwriter
The carrier employee who evaluates the risk—class codes, payroll, claims history, experience mod, and operations—and determines whether to offer coverage and at what price.
Risk Management
The practices a business uses to reduce workplace injuries and control claim costs—safety programs, return-to-work plans, training, and claims oversight—which can help lower long-term workers' comp costs.