Berkshire Hathaway insurers ordered to cease and desist sale of illegal workers’ compensation policies
News: 2016 Press Release
SACRAMENTO, Calif. — California Insurance Company (CIC) and Applied Underwriters Captive Risk Assurance Company, Inc. (AUCRA), two Berkshire Hathaway companies, were issued a cease and desist order from the California Department of Insurance following Commissioner Jones' decision in the Shasta Linen case that CIC used unapproved rates in a complex insurance scheme that circumvented regulatory review. The order requires CIC and AUCRA to cease and desist from issuing or renewing any workers' compensation policy that uses an unfiled and unapproved ancillary or collateral agreement consistent with the decision.
"My cease and desist order requires California Insurance Company and Applied Underwriters Captive Risk Assurance Company, Inc. to stop selling unfiled insurance policies, and stop renewing policies that have not been filed with the Department," said Insurance Commissioner Dave Jones. "The precedential Shasta Linen decision and order found that California Insurance Company was circumventing regulatory oversight by imposing unfiled rates and terms on a small family owned business, including terms requiring the small business to pay hundreds of thousands of dollars more and to resolve any disputes with the insurer in the British Virgin Islands."
Last week Commissioner Jones announced that under an elaborate scheme, CIC has been selling an insurance product called "EquityComp" that essentially left a California small family-owned business self-insured. Commissioner Jones ruled that this complex insurance scheme circumvented regulatory review and found it to be void as a matter of law.
"Insurance companies are required to file rates and terms so we can make sure they are complying with the law," said Jones. "These filing requirements were put in place to protect businesses from insurers seeking to take advantage of their market power – Shasta Linen is an example of why it's critically important to require insurers to file all their rate and terms."
Insurance brokers licensed by the California Department of Insurance could face license suspension or non-renewal if they are found to knowingly misrepresent the terms or effect of an insurance policy to their clients. Brokers that continue to sell or renew these policies and represent them as lawful workers' compensation policies are violating their responsibility to their clients and are not in compliance with the Insurance Code.
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- Cease and Desist Order: http://cdicms.insurance.ca.gov/0400-news/0100-press-releases/2016/upload/nr071C-DreCIC06-29-16.pdf
- Link to Shasta Linen decision: http://cdicms.insurance.ca.gov/0400-news/0100-press-releases/2016/upload/nr066ShastaLinen-Decision-Order.pdf
- Link to Shasta Linen declaration: http://cdicms.insurance.ca.gov/0400-news/0100-press-releases/2016/upload/nr066Shasta-Linen-DeclarationofService.pdf
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.