Berkshire Hathaway faces probe after regulator ruling
Berkshire Hathaway companies and other workers’ compensation insurers now face a probe, following a decision made by the California insurance commissioner Dave Jones.
Jones recently ruled that a Berkshire Hathaway owned workers' compensation insurer used a “complex insurance scheme to circumvent regulatory review of its rates and policy terms”, resulting in higher costs for small family business Shasta Linen.
California Insurance Company filed one set of rates and insurance policies with the Department of Insurance, which it then sold to Shasta Linen.
It also had another Berkshire Hathaway company, Applied Underwriters Captive Risk Assurance (AUCRA), sell Shasta Linen a second insurance policy with different rates and terms that had never been submitted to the department for review as the law requires.
“The lure for small businesses like Shasta Linen was seemingly attractive lower workers' compensation premiums, but that attractiveness evaporated when the small business owner realized they were on the hook to pay the cost of workers' compensation claims which eclipsed its original premium savings,” said the California Insurance Department.
Jones commented: "This is a case of if it sounds too good to be true, it probably is. The evidence showed that California Insurance Company filed one set of rates and policies, sold it to a California business, and then had one of its affiliates sell the same business an insurance policy with another set of rates and terms which had not been filed with the department."
The probe, which will be undertaken by the insurance department, will determine whether other unfiled insurance policies and rates are being sold by other Berkshire Hathaway companies and other workers' compensation insurers.
The outcome of the evaluation will determine what action the commissioner takes next, ranging from market conduct examinations, financial examination, and enforcement actions with potential penalties.
