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Calif. workers comp statute of limitations begins when final audit bill sent: Court

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SANTA ANA, Calif.—California's statute of limitations for collecting unpaid insurance premiums begins once an insurer has sent its final audit bill to the policyholder, a California appellate court ruled Thursday.

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 WallDesign Inc., even though the company said SCIF waited too long to seek payment.

The ruling reverses an Orange County court decision that said SCIF's collection efforts fell outside a four-year statute of limitations for breach of written contract.

"Neither the law nor the language of the policies supports WallDesign's arguments regarding the date on which the statute of limitations began to run on the Fund's breach of contract claim," the appellate ruling reads.

SCIF issued two workers comp policies to WallDesign 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 WallDesign and issued a final bill for more than $1 million to the company in October 2005.

A collection agency filed a complaint against WallDesign in October 2009 seeking payment for the SCIF debt. However, WallDesign 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 WallDesign's policy cancellation.