SACRAMENTO CA, June 30, 2016  - California Insurance Company (CIC) and Applied Underwriters Captive Risk Assurance Company, Inc. (AUCRA), two Berkshire Hathaway companies, were issued a cease and desist order from the California Department of Insurance.

Editor’s Note: This is a verbatim CDI press release published June 29, 2016.

 

 

The decision follows Commissioner Jones' decision in the Shasta Linen case that CIC used unapproved rates in a complex insurance scheme that circumvented regulatory review. The order requires CIC and AUCRA to cease and desist from issuing or renewing any workers' compensation policy that uses an unfiled and unapproved ancillary or collateral agreement consistent with the decision.

Commissioner Jones last week announced that under an elaborate scheme, CIC has been selling an insurance product called "EquityComp" that essentially left a California small family-owned business self-insured. Commissioner Jones ruled that this complex insurance scheme circumvented regulatory review and found it to be void as a matter of law.

"My cease and desist order requires California Insurance Company and Applied Underwriters Captive Risk Assurance Company, Inc. to stop selling unfiled insurance policies, and stop renewing policies that have not been filed with the Department," Insurance Commissioner Dave Jones said in his press release. "The precedential Shasta Linen decision and order found that California Insurance Company was circumventing regulatory oversight by imposing unfiled rates and terms on a small family owned business, including terms requiring the small business to pay hundreds of thousands of dollars more and to resolve any disputes with the insurer in the British Virgin Islands."

"Insurance companies are required to file rates and terms so we can make sure they are complying with the law," said Jones. "These filing requirements were put in place to protect businesses from insurers seeking to take advantage of their market power - Shasta Linen is an example of why it's critically important to require insurers to file all their rate and terms."

Insurance brokers licensed by the California Department of Insurance could face license suspension or non-renewal if they are found to knowingly misrepresent the terms or effect of an insurance policy to their clients. Brokers that continue to sell or renew these policies and represent them as lawful workers' compensation policies are violating their responsibility to their clients and are not in compliance with the Insurance Code.

Download the CDI Cease and Desist Order.

Download the CDI order in the Shasta Linen Supply case, designating it as a “legal precedent.”

 

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