Two Berkshire Hathaway-owned insurance units will have to stop selling certain workers compensation policies in California.
The California Department of Insurance said Tuesday that it had approved a cease and desist order for California Insurance Co. (CIC) and Applied Underwriters
Captive Risk Assurance Co. (AUCRA). The order came in the wake of a case brought against the companies by Shasta Linen, a small company that challenged the policies’ legality.
The companies agreed to stop selling certain types of policy that hadn’t been reviewed and approved by the department. According to the Department of Insurance, California Insurance Commissioner Dave Jones found that the companies had issued “EquityComp” policies and rates without approval, and that they had intended to dodge regulatory review.
“These filing requirements were put in place to protect businesses from insurers seeking to take advantage of their market power – for example, the unfiled insurance scheme sold to small business Shasta Linen shifted the risk back to Shasta Linen, had prohibitively expensive renewal and cancellation penalties, and required disputes to be arbitrated in the British Virgin Islands,” Jones said in a statement.
The new order bars the issuance of new EquityComp policies without the approval of the insurance commissioner. It also requires that CIC and AUCRA arbitrate disputes within California.