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California court revives insurer’s policy cancellation over payroll audit dispute - Business Insurance Skip to content Register for free Search Search Log In Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers Risk Management Cyber Risks Pricing Trends Mergers & Acquisitions Technology Sponsored Content WSIA RISKWORLD Workers Comp & Safety Workers Comp Cost Control Pain Management Workplace Safety International EMEA Asia-Pacific Latin America People Events BI Intelligence Top 100 Agents & Brokers Best Places to Work 2025 Lists Directories Insurance Pricing BI Stock Index Magazine Current Issue Past Issues Subscribe Women to Watch ALL INsurance Resources Risk Perspectives Sponsored Content Webinars White Papers California court revives insurer’s policy cancellation over payroll audit dispute by Louise Esola Workers Comp Coverage Aug 7, 2026 A California appeals court ruled that a workers compensation insurer properly canceled an employer’s policy after the employer repeatedly failed to provide payroll records needed for a premium audit, overturning a Workers’ Compensation Appeals Board decision that had found the cancellation invalid. According to Employers Preferred Ins. Co. v. Workers’ Compensation Appeals Board , certified for publication Thursday, the California Court of Appeal for the 3rd Appellate District held that Purchase Green Artificial Grass’ failure to respond to repeated requests for payroll records constituted a failure to permit the audit, giving Employers Preferred Insurance Co. the right to cancel the policy before an employee was injured. The dispute arose after the insurer sought payroll records following expiration of a 2020 workers compensation policy to calculate the employer’s final premium. The insurer sent multiple letters, emails and a certified letter over more than three months requesting the records before issuing a cancellation notice for the employer’s renewal policy, effective Sept. 14, 2021. An employee was injured Feb. 3, 2022, and filed a workers compensation claim. The insurer denied coverage, asserting the policy had been canceled months earlier. An arbitrator and the Workers’ Compensation Appeals Board concluded the cancellation was ineffective because neither the policy nor California’s Insurance Code specifically defined what constituted a “failure to permit” a payroll audit. The appellate court disagreed, finding the employer’s repeated failure to respond to requests for payroll records amounted to a failure to permit the audit under both the policy language and state law. The court said a reasonable reading of the insurance contract imposed an affirmative obligation on the employer to provide the requested records and that the insurer satisfied all notice requirements before canceling coverage. 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