(a) If a change in a classification assignment on a workers’ compensation insurance policy is due to an erroneous classification and results in a decreased premium, the classification change shall become effective as of the inception date of a policy in effect on the date the revised classification assignment is published by an insurer or, if the classification is assigned by the designated rating organization, when the insurer and insured are notified in writing by the designated rating organization that the erroneous classification assignment is under review. The revised classification assignment shall be applied as of the inception date of a policy that expired no more than 12 months prior to the date the revised classification assignment was published or the insurer and insured were notified in writing by the designated rating organization that assigned the classification that the erroneous classification assignment was under review, provided that the erroneous classification assignment was applicable to that policy.

(b) If a change in a classification assignment on a workers’ compensation insurance policy is due to an erroneous classification and results in an increased premium, the classification change shall become effective on the effective date of the erroneous classification assignment provided any of the following conditions occur:

(1) The revised classification assignment is published within three months of the effective date or publication date of the erroneous assignment.

(2) The insurer or, where applicable, the designated rating organization, was notified in writing within three months of the effective date or publication date of the erroneous classification assignment of a possible error.

(3) The designated rating organization notified the insurer in writing within three months of the effective date or publication date of the erroneous classification assignment that the erroneous classification assignment was under review.

If one or more of the conditions set forth in paragraphs (1), (2), and (3) do not occur, the revised classification assignment shall become effective as of the date it is published unless the publication date is less than three months prior to the expiration date of the outstanding policy, in which case the revised classification assignment shall become effective as of the inception date of the policy that replaced the outstanding policy.

(c) If a change in a classification assignment on a workers’ compensation policy is due to an insured’s change of operations, any resulting increase or decrease in premium shall become effective on the date of the change of operations.

(d) Any insurer that violates this section shall be subject to civil penalties in an amount of up to five thousand dollars ($5,000) per violation.

(Amended by Stats. 1995, Ch. 375, Sec. 3. Effective January 1, 1996.)