2026 Forecast in California Workers’ Compensation
March 17, 2026
2026 Forecast in California Workers’ Compensation
With 2026 under way, California workers’ compensation stakeholders are entering a more restrained legislative and judicial climate as the state transitions into a midterm election cycle. The California Legislature and Governor Newsom have adjourned a session marked by heightened concern over insurer-borne costs, signaling that future Labor Code amendments may trend toward moderation rather than expansion. Nevertheless, legislative debate is expected to continue into 2026, particularly around industry-specific rebuttable presumptions and medical treatment standards.
Rising Scrutiny of Cumulative Trauma Claims
Cumulative trauma (“CT”) claims have become a focal point of concern. The California Insurance Commissioner recently issued an advisory highlighting the rising workers’ compensation costs and the impact on businesses statewide. This followed the adoption of a new Workers’ Compensation Insurance Claims Cost Benchmark and an Average Advisory Pure Premium Rate reflecting an 8.7% increase over the prior year.
Several factors are contributing to these rising costs, including increased medical treatment expenses, higher medical-legal fees, projected growth in CT claims, and escalating claims-adjustment costs. These pressures have led to deteriorating accident-year combined ratios, even as premium rates remain relatively low.
California’s heightened focus on CT claims is particularly significant because it is the only state that permits CT stress claims. According to the Duncan Financial Group, CT cases now account for approximately 37.5% of all workers’ compensation claims in California. This is more than double the share reported in 2022. Given their growing prevalence and cost impact, CT claims are likely to face increased legislative scrutiny. Any statutory changes, expanding the statute of limitations, or redefining what qualifies as a CT injury, could have wide-ranging consequences for employers, insurers, and injured workers.
Evolving Privacy and Discovery Standards
Recent Workers’ Compensation Appeals Board (“WCAB”) decisions have further refined discovery limits and privacy protections, emphasizing proportionality and curbing overly broad discovery practices.
In Tran v. UL, LLC (2025 Cal. Wrk. Comp. P.D. LEXIS 340), the WCAB upheld a workers’ compensation judge’s order allowing discovery of an applicant’s raw neuropsychological testing data while modifying the order to enhance privacy safeguards. The applicant alleged head and brain injury, but his treating neuropsychologist refused to release the underlying data, citing privacy concerns. The WCAB held that by placing his brain injury at issue, the applicant partially waived his constitutional right to privacy. However, it emphasized the need to balance discovery rights against privacy interests. The Board strengthened the protective order by limiting access to medical experts only, requiring defense counsel to ensure ongoing confidentiality, and prohibiting the raw data from being introduced into evidence in any proceeding.
Similarly, in Avalos v. Royal Plywood Co./Household Industries (2025 Cal. Wrk. Comp. P.D. LEXIS 302), the WCAB held that an applicant who claimed a specific physical injury did not waive her right to privacy regarding her psychological history. The applicant sustained a right ankle injury and reported headaches, but defense counsel questioned her extensively about prior psychological treatment. The WCAB found no waiver of privacy, concluding that headaches alone did not establish a sufficient nexus to a psychiatric condition. The Board noted, however, that if medical evidence later demonstrated a connection between the headaches and a psychological injury, and the applicant continued to seek benefits for that condition, limited inquiry could be permitted.
Utilization Review and Medical Treatment Disputes
A recent California Court of Appeal decision is expected to have lasting effects on medical treatment disputes well into 2026 and beyond. The ruling reinforces strict adherence to the statutory utilization review (“UR”) and independent medical review (“IMR”) process and narrows attempts to bypass that framework.
In Illinois Midwest Insurance Agency LLC v. WCAB (Rodriguez) (Nov. 10, 2025, B344044), the Court of Appeal annulled a WCAB decision that had allowed an applicant to seek relief directly from the Board rather than pursuing IMR. The applicant had received home health care over an extended period through a series of discrete authorizations. When a subsequent request was denied through UR, the WCAB asserted jurisdiction, relying on Patterson v. The Oaks Farm (2014) to conclude that “ongoing” treatment could not be discontinued absent a change in condition.
The Court of Appeal rejected that rationale, holding that no exception exists to the legislatively mandated UR and IMR process, even for disputes involving continuous or long-term treatment. The decision reaffirms that challenges to medical necessity must proceed through UR and IMR without deviation, underscoring the judiciary’s continued enforcement of the statutory scheme.
In summary, 2026 is potentially a year of more tempered policies as the current midterm election cycle is likely to drive a more business-friendly model for California Insurers and Employers while the Courts offer more protections to injured workers in terms of privacy protection as a tradeoff. Only time will tell, but the cost of California Workers’ Compensation has the full attention of State Commissioner Lara as claims and premiums both continue to increase.
Written By:
Briana Del Bono, Esq., of our LFLM-San Francisco Office
Laughlin, Falbo, Levy & Moresi, LLP.