A new law that enables corporate directors and officers owning at least 10 percent of a business to opt out of workers’ compensation coverage goes into effect on July 1.

The law is intended to reduce the threshold of ownership, and is part of an effort to help eliminate workers’ comp fraud. Under the new law, directors and officers who want to opt out of worker’s comp must sign a waiver stating that they are covered by a health insurance plan.

Senate Bill 189, authored state Sen. Steven Bradford, D-Gardena, changes the 10 percent threshold from the 15 percent threshold previously established by Assembly Bill 2883.

AB 2883 raised a stir when it passed in 2016, but not so much because of the 15 percent threshold, although some brokers did believe that mark would hurt some middle-market business.

When it passed it prompted California Insurance Commissioner Dave Jones to issue a special notification to insurers, because it had the unintended consequence of exempting in-force policies.

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