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A workplace injury can require months or even years of medical treatment, disability payments, and other workers’ compensation benefits. During that time, businesses may close, file for bankruptcy, change ownership, or disappear altogether.
For an injured employee, the news that an employer has gone out of business can raise an immediate concern: What happens to my workers’ compensation claim now?
Fortunately, a California workers’ compensation claim does not necessarily disappear simply because the company that employed you is no longer operating. What happens next depends largely on whether the employer had valid workers’ compensation insurance when the injury occurred.
At Hanning & Sacchetto, LLP, our Whittier workers’ compensation attorneys help injured employees understand who may remain responsible for their benefits when circumstances surrounding their employer change.
Workers’ Compensation Insurance Can Outlast the Business
Most California employers must carry workers’ compensation insurance. When an insured employee suffers a covered workplace injury, the insurance carrier generally handles the claim and pays applicable benefits.
That distinction matters most if the employer later closes.
If valid insurance covered the employer on the date of the injury, shutting down the business generally does not erase the insurer’s obligations under that policy. An employee may still have an active claim involving medical treatment, temporary or permanent disability benefits, or other benefits available under California workers’ compensation law.
In other words, the employer’s doors closing and the workers’ compensation claim closing are not necessarily the same event.
What if the Workers’ Compensation Insurance Company Fails?
A different complication can arise if the insurance carrier, rather than the employer, becomes insolvent.
California has a system for certain claims involving insolvent insurers. The California Insurance Guarantee Association (CIGA) handles qualifying workers’ compensation claims after a member insurer is found insolvent and ordered into liquidation.
For an eligible claim that was already open and active, CIGA generally receives the claim through the court-appointed liquidator rather than requiring the injured worker to start over.
The transition can still create uncertainty or delays as claim files are transferred, so injured workers should keep their own copies of medical reports, benefit notices, correspondence, and other claim documents.
An Uninsured Employer Creates a Different Problem
Closing a business does not necessarily mean the employer was uninsured. But if an injured worker discovers that the employer lacked required workers’ compensation coverage when the injury occurred, the process becomes more complicated.
California’s Uninsured Employers Benefits Trust Fund (UEBTF) may pay benefits when an illegally uninsured employer fails to pay workers’ compensation benefits awarded to an injured employee. However, obtaining those benefits requires specific procedural steps and does not happen automatically.
This makes it especially important to determine whether coverage existed on the date of injury rather than assuming a closed business has no source of benefits.
Keep Your Workers’ Compensation Records
If an employer announces a closure while a claim is pending, injured workers should preserve information related to both their employment and claim.
That may include, but is not limited to:
- Claim numbers and insurance carrier information.
- Medical reports and work restrictions.
- Benefit notices and payment records.
- Communications with the employer or claims administrator.
- Documents showing wages and employment.
These records can become particularly valuable if contacts change or questions later arise about the claim.
Your Employer Closed. Your Claim May Still Be Open.
Losing contact with an employer can make an already complicated workers’ compensation claim feel even less certain. However, it does not automatically mean an injured worker loses access to benefits.
If your California employer has closed, declared bankruptcy, or stopped operating. At the same time, you have an active workers’ compensation claim, Hanning & Sacchetto, LLP can help determine who is responsible for administering your claim and protecting your benefits.
Call (562) 698-6446 or contact our Los Angeles County workers’ compensation attorneys online to schedule a free consultation.