State cracks down on Berkshire units over unregulated comp policiesPosted On: Jun. 29, 2016 12:00 AM CST
The California Department of Insurance has issued cease-and-desist orders to two Berkshire Hathaway Inc.-owned companies in the wake of last week's decision regarding Shasta Linen Supply Inc.
California Insurance Co. and Applied Underwriters Captive Risk Assurance Co. must “cease and desist from issuing or renewing any workers compensation policy that uses an unfiled and unapproved ancillary or collateral agreement consistent with” Insurance Commissioner Dave Jones' June 21 decision, the state's Department of Insurance said in a Wednesday statement.
Mr. Jones ordered California Insurance Co. to provide a refund to Shasta Linen Supply after it sold the Sacramento, California-based business an unfiled and unapproved insurance program, records show.
“Insurance companies are required to file rates and terms so we can make sure they are complying with the law,” Mr. Jones said in the statement. “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.”
While California Insurance Co. sold Shasta Linen a guaranteed-cost workers comp policy submitted to the California Department of Insurance for review as the law requires, Applied Underwriters Captive Risk Assurance Co. sold the business a retroactive nonlinear insurance policy called EquityComp, which hadn't been submitted for review, records show.
The EquityComp policy “essentially left a California small family-owned business self-insured,” according to the statement.
“Insurance brokers licensed by the California Department of Insurance could face license suspension or nonrenewal if they are found to knowingly misrepresent the terms or effect of an insurance policy to their clients,” the statement says. “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.”