Berkshire Hathaway is in hot water with regulators in California after one of its insurers was recently sold by the company without regulatory approval, according to reports from Reuters.
On November 05, the California Department of Insurance stated that it won a court order appointing it conservator of California Insurance Co, which is a subsidiary of Applied Underwriters Inc. Just last month, Berkshire Hathaway sold its 81% stake in Applied to buyers that included the latter’s co-founder Steve Menzies as well as private equity firm Quadrant Management. The bill for the transaction came out to $920 million.
Applied, meanwhile, merged California Insurance with an insurer in New Mexico after the transaction was completed, and got approval for the deal in that state. The workers’ compensation specialist commented that it looked to New Mexico for approval because California was taking too much time to approve the deal, according to published reports.
Nonetheless, getting the thumbs up from California was still required, said the state’s department of insurance.
Reuters reported that Applied did not immediately respond to requests for comment, and told The Wall Street Journal that “it was considering its options.” This isn’t the first time that Applied’s business dealings have been met with regulatory concerns. The company encountered issues that concerned workers’ compensation policies and, in 2017, settled with California over supposed “bait and switch” marketing methods.
A California state judge approved the conservatorship in San Mateo County on November 04, the Reuters report states. This prevents California Insurance from canceling existing policies and necessitates written state approval for the issuance of any new policies.
California’s insurance department commented on Tuesday that it acted “in response to the company’s willful violation of state law and established pattern of continually flouting California’s regulatory processes.”