California Workers' Compensation Minimum Limits for Shareholder‑Employees

Statutory Minimums for Shareholder‑Employees in California

California law requires that any corporation employing shareholders who perform services for the company must provide workers' compensation coverage at the same minimum limits as regular employees. The state's statutory minimum is $1,000,000 per injury for bodily injury, $1,000,000 for death, and $1,000,000 for property damage. These limits apply regardless of the shareholder's ownership percentage, provided they are compensated for their work.

Key Differences from General Employee Coverage

While the dollar limits match those for non‑shareholder employees, California distinguishes shareholder‑employees in two ways: (1) the employer may elect to self‑insure only if it meets a $5 million net worth threshold and obtains a certificate of authority, and (2) the shareholder‑employee must be listed on the policy as an insured person, not merely covered under a blanket policy.

When Exceptions Apply

Exceptions to the minimum limits are limited. A shareholder‑employee who is also a corporate officer may be covered under a separate "officer's" policy that offers higher limits, but the base statutory limits still apply if the officer is injured while performing non‑executive duties. Additionally, a corporation can purchase a "limited‑coverage" policy that caps benefits at $5,000 per injury for minor claims, but this is only permissible for non‑shareholder employees; shareholder‑employees must retain the full statutory minimums.

Comparison with Other States

California's uniform $1 million minimum is higher than many states that allow lower limits for small businesses or for shareholder‑employees. For example, Texas permits a $500,000 limit for certain small employers, and New York allows a $250,000 limit for shareholders who are not actively engaged in day‑to‑day operations. California's approach reflects its broader worker‑protection philosophy.

Practical Steps for Employers

• Verify that every shareholder who receives compensation is listed on the workers' compensation policy.
• Confirm the policy meets the $1 million per‑injury statutory minimums.
• If self‑insuring, ensure the corporation's net worth exceeds $5 million and obtain the required certificate.
• Review officer‑specific policies to avoid inadvertent gaps in coverage.

Summary Table of Limits and Requirements