Can an insurance agent or an insurance company promise or guarantee the payment of a future dividend?
A. No. It is a misdemeanor for an insurance company, agent or a broker to promise the payment of future workers’ compensation dividends. Under California law, the insurance company’s board of directors or other governing body must review the overall loss experience of the workers’ compensation business since its last dividend declaration. This governing body then determines whether the insurer has a surplus from which dividends may lawfully be paid. Such dividends must be declared by resolution adopted after expiration of the policy term. This declaration should specify the dividend plans, formulas or schedules to be applied. Any person who makes or causes to be made any knowingly false or fraudulent material statement or material representation for the purpose of obtaining or denying workers’ compensation benefits or payments is guilty of a felony.
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