The California Department of Insurance said it is looking into whether workers compensation insurers are selling unfiled policies and rates after a Berkshire Hathaway Inc.-owned company circumvented regulatory review to take advantage of a family-owned business.

California Insurance Commissioner Dave Jones on Monday ordered California Insurance Co., a workers comp insurer owned by Berkshire Hathaway, to provide a refund to Shasta Linen Supply Inc. after it sold the Sacramento-based business an unfiled and unapproved insurance program, records show.

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, according to a statement by the department. However, Applied Underwriters Captive Risk Assurance Co., another Berkshire company, then sold Shasta Linen a retroactive nonlinear insurance policy called EquityComp, which hadn't been submitted for review.

Under the EquityComp policy, “the risk of claims was essentially shifted back to the small business, which would end up paying additional premiums and fees in the policy term if it suffered from increasing claims,” the statement says.

Facing higher payments, Shasta Linen brought the case before Mr. Jones, according to the statement. He found that, contrary to California law, the Berkshire Hathaway companies failed to file the EquityComp insurance policy and rates with the Department of Insurance.

Mr. Jones deemed the EquityComp scheme illegal and void as a matter of law, records show. Shasta Linen will not have to make additional payments under the EquityComp policy and California Insurance Co. must repay any amounts in excess of the premium under the guaranteed cost policy.

And Mr. Jones has directed the Department of Insurance to determine whether other unfiled insurance policies and rates are being sold by Berkshire Hathaway companies or other workers comp insurers, according to the statement.

Depending on the outcome, next steps could include “market conduct examinations, financial examination and enforcement actions with potential penalties,” the statement says.

“California employers should be able to trust that their insurance companies are doing business by the book and not exploiting them in the name of profit," Mr. Jones said in the statement.