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Berkshire Hathaway insurers ordered to cease and desist sale of illegal workers’ compensation policies

News: 2016 Press Release

For Release: June 29, 2016
Media Calls Only: 916-492-3566
Email Inquiries: cdipress@insurance.ca.gov

Berkshire Hathaway insurers ordered to cease and desist sale of illegal workers’ compensation policies

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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Media Notes:

 


Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at www.insurance.ca.gov via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.

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