Illinois Department of Insurance
fines former Berkshire Hathaway companies 250-thousand dollars for
selling unapproved workers’ comp policies to small businesses
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[November 21, 2020]
The Illinois Department of Insurance (IDOI) fined Continental
Indemnity Company and Applied Underwriters, Inc. for overcharging
some Illinois small businesses for workers’ compensation insurance.
The Department conducted a market conduct examination in 2019 and
found that the companies marketed and sold unapproved workers’
compensation policies, packaged with side agreements, in violation
of the law.
Continental Indemnity Company and Applied Underwriters Inc., both
subsidiaries of Berkshire Hathaway at the time of the investigation,
were selling a workers’ comp product with an unlawful side agreement
that changed the obligations of the employer under the policy. The
companies sold Reinsurance Participation Agreements (RPAs) as part
of its workers comp insurance to small businesses without approval
from IDOI. The Department found that the companies’ packaging of
RPAs with workers’ comp insurance mislead policyholders into
assuming all of the risk, effectively insuring themselves, and
resulted in policyholders paying more for the reinsurance part of
the package than for the workers comp policy itself.
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Furthermore, the RPAs lacked standard information about premium
amounts, used complex and confusing calculations for costs,
including deposits and premiums due, charged penalties for
cancellations and required arbitration for policyholders to free
themselves from the agreement.
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The exam also cited an instance of Continental Indemnity Company’s failure to
follow underwriting guidelines with a standard workers’ comp policy which
resulted in a premium overcharge of $8,310.09.
“Small business owners who follow the rules and purchase workers’ comp insurance
to protect their employees should not be overcharged in a complex scheme that
mislabels a side agreement as insurance” said IDOI Director Robert Muriel.
“Continental Indemnity and Applied Underwriters sought to side-step regulatory
oversight, and this fine serves as notice to companies that we’re here to
protect Illinois’ small businesses and properly regulate insurance products sold
in this state.”
![](http://archives.lincolndailynews.com/2020/Nov/21/images/ads/current/burtonview_coop_sdadaily_FFARM_2020.png)
Continental Indemnity Company and Applied Underwriters, Inc. are no longer
selling the RPAs in Illinois, and as part of the settlement the companies agreed
to file any new insurance products and rates with IDOI. The companies also paid
fines for selling similar products in other states, including California, New
Jersey and New York.
The Market Conduct Exam for Continental Indemnity Company can be found here:
https://insurance.illinois.
gov/MarketConductExam/market
ConductExamLH.html
[Illinois Office of Communication and
Information] |