SACRAMENTO (CBS13) -- A new California law for tree trimming companies doubles their workers' compensation insurance rates for those using the state fund. It will impact thousands of companies in the industry across the Golden State and their options.
Max Echols is on the hunt for a new insurance policy for his tree care business after workers' compensation rates went up 100%.
"It's just going to be ridiculous," he said. "It could put businesses under."
Echols used to pay the state fund $25 for every $100 he pays his employees. As of 2022, that rate jumps to more than $50.
"As a small business, I can't afford something like that," Echols said. "I'm not going to name any names, but I know a number of companies that have people off the books because they have to."
The state workers' compensation fund is the insurer of last resort. Echols has been in business long enough that other companies will provide coverage.
"This is a huge decision from them because they write so much business for tree care companies," Rory Anderson said.
Anderson is an insurance broker specializing in companies that service the tree care industry. He says the state fund services 65% of the industry.
"I think they probably took a look at how much claim dollars they were spending versus how much premium they were intaking, and there was a mismatch," he said.
Anderson says doubling premiums for tree care companies was a cut the other ten industries the state fund covers.
"I think it was an interesting move because they could have just sent non-renewal notices to all tree companies," he said.
Anderson is reaching out to tree care businesses to let them know other insurance providers have not raised rates. Several have already made the swap.
"I've already got some competitive quotes," Echols said.
While experts say the state fund's policy is complete with no coverage gaps, business owners worry they would have to cut too much elsewhere to stay competitive.
Insurance experts say there are things tree cutting businesses can do to trim premium costs: get employees certified, adhere to safety protocols and implement other programs.
Jonathan Tudor, senior Vice President with the State Compensation Insurance Fund, said in a statement, "Since 2017, we've had 16 separate claims in this area that sac amounted to more than $1 million in costs. Because State Fund is a not-for-profit organization, we've had to increase our rates in this class to allow us to continue to provide coverage for all of our policyholders."
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