The news that Berkshire Hathaway Inc. sold workers compensation insurer Applied Underwriters Inc. to the insurer’s founder and president Steve Menzies and a private equity investment firm in a $920 million deal was big news this fall.  

Meanwhile, the fallout over whether the sale had been approved in California, and a subsequent order blocking the merger, continues.  

Mr. Menzies, who founded the Omaha, Nebraska-based insurer in 1994, announced on Oct. 16 that he and the Quasha Group, led by New York-based Quadrant Management Inc., would acquire Applied and its subsidiary North American Casualty Co.  

A few days later, the California Department of Insurance said in a statement that it had declined to approve the sale of an Applied Underwriters’ subsidiary, California Insurance Co. Applied Underwriters, however, argued that it had ceased writing business in the Golden State and had moved the domicile of that subsidiary to New Mexico, where it received sale approval on Oct. 9 by the New Mexico Superintendent of Insurance. 

Applied Underwriters said it sought the domicile change after CDI failed to approve or deny the sale at the time of the deadline despite months of notice.  

CDI has since been appointed conservator of California Insurance Co. by a San Mateo County Superior Court judge in an order issued Nov. 4. The order grants CDI the right to take possession of the insurer and ensure that exiting policyholders are covered.  

The company has had a contentious relationship with California and, in June 2017, subsidiaries California Insurance Co. and Applied Underwriters Captive Risk Assurance Co. settled with the CDI over alleged “bait and switch” marketing tactics for workers compensation coverage, with the insurers agreeing to lower rates for certain coverages and make other changes to coverage terms. 

Applied Underwriters faced other controversies in 2019. In March, the New Jersey Department of Banking and Insurance issued an enforcement action against Applied Underwriters accusing the company and its affiliates of marketing and selling unfiled and unapproved workers compensation programs in violation of New Jersey law. 

In July, New York regulators imposed a $3 million fine on the company for selling workers compensation products bundled with side reinsurance participation agreements that were not approved by state regulators.