Berkshire companies ordered to “cease and desist” workers’ comp sales

Two subsidiaries of the company were ordered not to sell or renew certain workers’ compensation policies in California, following a ruling that they had circumvented state law

Workers Comp

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Two subsidiaries of Berkshire Hathaway have been ordered to “cease and desist” the selling and renewing of certain workers’ compensation policies in California.

The order from the California Department of Insurance follows a ruling last week by Commissioner Dave Jones, who said Applied Underwriters and California Insurance Co. were circumventing a state law designed to shield small businesses from unpredictable workers’ comp costs.

California Insurance, a Berkshire workers’ comp carrier, was allegedly filing one set of rates and policies with the state department while selling businesses different policies through Applied Underwriters. Under this “profit-sharing arrangement,” the premium paid by the insured is adjusted for the actual costs of claims incurred while the policy is in place, rather than expected claims.

The Sacramento linen-rental firm that filed the complaint said it had been unexpectedly charged with hundreds of thousands of dollars in workers’ comp coverage for its 60 workers.

Jones’ Wednesday order extends the department’s ruling to all similar policies the companies have issued in California, defined as workers’ comp policies that offer “guaranteed” limits on clients’ costs but are tied to “reinsurance participation agreements.”

Similar orders related to Applied Underwriters have been issued by insurance regulators in Wisconsin and Vermont, the department noted.

Applied Underwriters disputes Jones’ finding and plans to appeal in the 30-day period before the order goes into effect.

“The company strongly disagrees with the commissioner’s decision and intends to vigorously pursue all legal avenues,” a company spokesperson told the Wall Street Journal.

The order affects one of the largest companies in the United States, as well as the state of California. It is one of the state’s 10 biggest workers’ compensation carriers, according to NAIC data, and accounts for 3.1% of the market.


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