California companies have won a legal victory as the state regulators forced a national workers’ compensation insurer to stop forcing employers to resolve insurance disputes out of state.

California Insurance Commissioner Dave Jones announced Thursday a settlement with Zurich American Insurance Co. and Zurich American Insurance Co. of Illinois over workers compensation insurance agreements. Zurich’s agreements forced California employers to arbitrate disputes in Chicago where Zurich is headquartered.

Several Los Angeles County employers had challenged this arbitration procedure, claiming it made pursuing workers compensation insurance disputes with Zurich and other insurers prohibitively expensive and stacked the deck in favor of the insurers. As a result, the employers claim they had to pay higher premiums.

Under the settlement with Zurich, California employers can choose to arbitrate disputes in California under California law.

“Zurich’s practices required California employers to resolve disputes in Zurich’s back yard, under unfavorable law and circumstances and at added expense to employers,” Jones said in a statement. “This settlement gives California employers the opportunity to level the playing field by arbitrating disputes in California, under California law.”

A Woodland Hills attorney representing three L.A. area companies in disputes with their workers compensation carriers welcomed the settlement.

“This agreement appears to bring back some equity for California employers,” said Nicholas Roxborough, partner at Roxborough, Pomerance Nye & Adreani. “We hope that other national workers’ compensation carriers…would follow a less obstructionist path in attempting to seek unenforceable arbitration clauses against California employers.”