Is Your Workers Compensation Program Unlawful?

A popular workers compensation insurance program offered by Berkshire Hathaway subsidiaries Applied Underwriters Captive Risk Assurance Company (Applied Underwriters) and California Insurance Company may be in trouble. On January 21, 2016, the California Insurance Commissioner adopted an administrative decision finding that a critical piece of the program had not been submitted for approval and was therefore void. Any company now insured under this program should carefully monitor developments and consider alternative options for workers compensation insurance.

The Applied Underwriters EquityComp program is unusual. It consists of a normal “guaranteed cost” policy (the premium is not sensitive to loss history) issued by California Insurance Company. The insured in addition signs a “reinsurance participation agreement” (RPA) with Applied Underwriters, billed as a “profit-sharing” plan. The RPA actually controls what the insured pays under the program and results in workers compensation insurance that is loss-sensitive.

Shasta Linen Supply complained to the Insurance Commissioner that Applied Underwriters shouldn’t be allowed to enforce the RPA because it had never been approved for use in California. The Commissioner agreed. Both sides asked for reconsideration of that decision and it’s now been withdrawn because of the appeal. But the Commissioner is expected to issue a final decision sometime this summer, probably confirming that the RPA is “void.”

Read the full blog post: Is Your Workers Compensation Program Unlawful?