Warren Buffett-Owned WC Insurer Agrees to Pay $3 Million Fine

Nancy Grover

New York, NY (WorkersCompnstion.com) – Applied Underwriters has agreed to pay $3 million for what New York’s Department of Financial Services calls an unlicensed workers’ compensation insurance business. The subsidiary of Berkshire Hathaway has not admitted wrongdoing.

The DFS said the insurer sold workers’ compensation products with required side agreements that had not been filed with, or approved by the department. The formula used to calculate costs was “complex” and “misleading.”

“Under the formula, policy fees could rise rapidly with the first few claims to levels substantially higher than what would have been paid under a typical linear retrospective model,” the DFS said in a statement. “Many New York employers paid more for coverage than they would have paid under the workers’ compensation policies alone, with many paying significantly more.”

The policies, sold from 2010 to 2016, were offered through Continental Indemnity Co., a subsidiary of AU, and sold under various names, according to the DFS statement.

The DFS said its investigation found that AU’s offering “required employers to wait three years, or in some cases up to seven years, for advertised ‘profit distributions'” and “often resulted in fees that were higher than the rates in the filed and approved insurance policy.”

The DFS consent order says AU has ceased selling the bundled product in New York, will no longer offer any equivalent side agreements, and will seek approval from the department for any future products.

In a company statement, AU expressed general satisfaction with the agreement but denied there was any wrongdoing. Attorney Jeffrey Silver was quoted in various news media as saying the program amounted to a captive insurance program which he said was overseen in the state by a separate captive insurer law.

Berkshire Hathaway bought AU in 2016. According to news reports, it recently agreed to sell its stake in AU to United Insurance Co.

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