Berkshire agrees to pull controversial workers' comp products

The two units were halted from selling workers’ comp policies that could be too costly for small businesses

Workers Comp

By Lyle Adriano

California insurance commissioner Dave Jones announced Tuesday that two Berkshire Hathaway Inc. insurance units have agreed to stop selling workers’ compensation policies without his approval. Purportedly, the policies could prove costly to the region’s small businesses.

The two insurance units, Applied Underwriters Inc. and California Insurance Co., agreed to a cease and desist order that prevents them from selling or renewing unapproved "EquityComp" policies. Although they signed the order, both units denied any wrongdoing, reported Reuters.

In June, Jones discovered that the units issued the nontraditional EquityComp policies without first seeking his approval. In doing so, the units evaded state law meant to protect employers from unexpected workers’ comp costs.

It was the sale of an EquityComp policy to Sacramento-based Shasta Linen Supply Inc. that brought the case to Jones’ attention. Investigations revealed that the workers’ comp policy would have subjected the family-owned company of 63 to hundreds of thousands of dollars of excessive costs.

The agreement on Tuesday also led to what Jones called "substantial relief" that could reduce costs for existing policyholders.

According to Jones, the filing requirements "protect businesses from insurers seeking to take advantage of their market power."

Berkshire has said that the EquityComp policies carried a profit-sharing component. Jones, however, argued that the company also created a higher risk of claims that could skyrocket employers’ costs.


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