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California Company A starts a worker's compensation policy with six
employees. Their classification at the time the policy is issued is some
general office classification, and the rate is relatively low, something
around 1% of the payroll.
One year later, the company has two of the original six employees doing some
retail oriented resale business. During the yearly worker's compensation
audit, the two employees are reclassified by the insurance company as
"retail category", and the worker's compensation rate is changed to more
than 10% of the payroll *retroactively*. The insurance company now demands
nearly 400% of the original policy amount in order to cover the added "risk"
of retail workers retroactively.
Is this legal? Is this enforceable in the state of California? I
understand completely why an insurance company wants to understand the risk
pool, and why they would assign different rates for different risks. It's
also clear that the insurance company would be able to say that *going
forward* the rate must change, giving the insured time to examine and verify
the rate. What strikes me as fundamentally unfair is for the insurer to
adjust the rate of coverage to a rate that was never presented, or
discussed, at the time the policy was agreed to, and applying that rate for
services already delivered.
The insurance company in this case wants to claim that there is no issue of
contract law involved here. The insurance company is claiming that this is
the law in the State of California, and the law allows them to adjust the
rates retroactively as described.
It seems fundamentally unfair that someone can complete a sale and then
recharacterize what is being sold after the sale, and then arbitrarily
adjust the price to a price the buyer never even knew about when he agreed
to make the purchase. That kind of transaction can't be supported by
contract law in absence of a clear contract provision can it? Is this
kind of unfair behavior in fact written into California state law?
--
Will
westes AT earthbroadcast.com
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