A workers compensation statute of limitations is a regulation in a common law legal system that sets the maximum time after an event that legal proceedings based on that event may be initiated. For example, such legal proceedings may involve claim subrogation or premium collection.
California’s statute of limitations for collecting unpaid insurance premiums begins once an insurer has sent its final audit bill to the policyholder, and continues for 3 years. In a unanimous opinion, the court said the California State Compensation Insurance Fund could collect on $1 million in workers compensation premiums owed by building contractor, even though the company said SCIF waited too long to seek payment.
SCIF issued two workers comp policies to building contractor that ran from January 2003 to January 2004, but cancelled the policies for nonpayment in December 2003, court records show. The fund performed an audit to determine the amount due by building contractor and issued a final bill for more than $1 million to the company in October 2005.
A collection agency filed a complaint against building contractor in October 2009 seeking payment for the SCIF debt. However, building contractor argued that, based on its 2003 policy cancellation, the complaint was filed after the statute of limitations.
The appellate court said insurers have three years after the end of a policy period to complete an audit, as well as “reasonable time” to submit a final bill to the policyholder. Further, it said that the statute of limitations would have begun when SCIF sent its final bill in late 2005, since the insurer would have needed time to defend claims filed before building contractor’s policy cancellation.