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Commercial Insurance and California AB5

How your Commercial Insurance could be impacted by AB5

California Assembly Bill 5 (AB5) is a law that went into effect in January 2020 and redefined the classification of independent contractors in the state. The law aimed to reduce misclassification of workers by companies seeking to avoid paying taxes and providing benefits to their employees. While the law has implications for various industries, it has particularly significant impacts on commercial insurance for truck drivers.

Under AB5, truck drivers who previously worked as independent contractors may now be classified as employees. This classification means that they are entitled to receive employee benefits, such as healthcare, retirement plans, and paid time off. Additionally, employers of these drivers are now required to pay unemployment insurance, Social Security, and Medicare taxes, among others. As a result, many companies that had previously relied on independent contractors are now reclassifying their drivers as employees.

The reclassification of truck drivers as employees has major implications for commercial insurance. Previously, independent contractors were responsible for securing their own commercial insurance policies, which typically included coverage for liability, cargo, and physical damage. As employees, truck drivers may now be covered by their employer's insurance policy, which could result in significant cost savings for both the employer and the employee.

However, there are some potential drawbacks to this new arrangement. For one, some commercial insurance policies may not provide adequate coverage for employee drivers, which could leave drivers exposed to liability in the event of an accident. Additionally, some insurance policies may have restrictions on the type of cargo that can be transported, which could limit the opportunities available to employee drivers.

Overall, the impact of AB5 on commercial insurance for truck drivers is complex and multifaceted. While reclassifying drivers as employees may provide benefits such as more comprehensive insurance coverage, it could also have unintended consequences, such as limiting the type of cargo that can be transported. As the law continues to be implemented, it will be important for employers and employees in the trucking industry to carefully consider their insurance options and seek out policies that best meet their needs.

Our Insurance Experts can help

Crossroads has licensed insurance experts ready to help you make sense of these new laws, and how they may impact your business. Get in touch with our team today, we can help you explore all your options, and get you the protection you need at an affordable rate. For more information, visit: