By Jonathan Stempel

By Jonathan Stempel

(Reuters) - California’s insurance commissioner on Tuesday said two Berkshire Hathaway Inc <BRKa.N> insurance units have agreed to stop selling some workers' compensation policies that could prove unexpectedly costly for small businesses, unless he first grants approval.

Commissioner Dave Jones said Applied Underwriters Inc and California Insurance Co agreed to submit to a cease and desist order preventing them from selling or renewing unapproved "EquityComp" policies in the most populous U.S. state.

Both insurers denied wrongdoing, according to the order, which they signed.


Jones found in June that the units issued the nontraditional EquityComp policies without first getting his required approval, evading a state law meant to protect employers against unexpected workers' compensation costs.

Workers' compensation insurance typically covers lost wages and medical costs for employees injured on the job.

Tuesday’s agreement also provided what Jones called "substantial relief" that could reduce costs for existing policyholders.

The filing requirements help "protect businesses from insurers seeking to take advantage of their market power," Jones said in a statement.

Applied Underwriters and its outside lawyer did not immediately respond to requests for comment.

Berkshire, which is run by billionaire investor Warren Buffett and is based in Omaha, Nebraska, has said that EquityComp policies carried a profit-sharing component, but Jones has said they also created a higher risk of claims that could boost employers’ costs.

The case arose from the sale of an EquityComp policy to Shasta Linen Supply Inc of Sacramento. Jones has said that sale subjected Shasta Linen, a family-owned employer of 63, to hundreds of thousands of dollars of extra costs.

(Reporting by Jonathan Stempel in New York; Editing by Leslie Adler)

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