California orders insurer to stop selling comp coverage

California Insurance Commissioner Dave Jones on Thursday ordered an insurer and its affiliates to stop selling workers compensation and liability policies because it is not properly licensed with the state insurance department, a requirement the parent company claimed it was exempt from. 

In October 2016, the department issued a cease-and-desist order against the Agricultural Contracting Services Association Inc. and its affiliates, the American Labor Alliance Workers’ Compensation Fund and Trust, CompOne USA, and its board chair and founder Marcus Asay. Agricultural Contracting Services Association is a nonprofit corporation domiciled in Nevada and registered in California, according to court documents.

The original order alleged the company and its affiliates were “soliciting, marketing, selling and issuing” workers compensation policies to employers statewide; the department’s investigation division found the entities were not properly registered and were transacting insurance without proper authority.

The company had previously challenged the department’s cease-and-desist order, claiming it only sold employee benefits and was exempt, according to court documents. Mr. Asay could not be reached for comment.

“My decision protects California employers who unknowingly purchase insurance from companies that are not licensed by the California Department of Insurance,” Mr. Jones said in a statement, adding that employers that buy policies from such companies “are likely at great financial risk.” 

“Companies not properly licensed to transact insurance in California place policyholders at risk because the companies have not met the scrutiny required under state law,” he said in the statement. “These unlicensed entities dangerously undermine consumer protections established by California law.”

As part of his order, Mr. Jones made the decision precedential, which allows future cases to rely on the ruling in this case and sending a “clear message” that such unlicensed transactions are not permissible in California, according to the statement.