Shasta Linen Wins Workers’ Comp Appeal

Posted January 29, 2016 at 12:52 pm

Farmer Smith & Lane LLP recently announced a ruling in favor of its client, Shasta Linen Supply Inc., Sacramento, CA, in a workers' compensation insurance administrative appeal before the California Department of Insurance.

Shasta Linen Supply’s attorney Craig Farmer argued that the “EquityComp” workers’ compensation insurance program violated the California Insurance Code and Regulatory provisions by unlawfully using a Reinsurance Participation Agreement (RPA) to control workers’ compensation rates without first having the agreement filed and approved by the Department of Insurance as required by law.

EquityComp is marketed and sold by Applied Underwriters Inc., California Insurance Co. and other affiliated entities wholly owned by Berkshire Hathaway Inc., according to a news release. Ruling in favor of Shasta Linen Supply in a decision adopted by the Insurance Commissioner of the State of California, Administrative Law Judge Kristin L. Rosi found the RPA to be illegal, void and unenforceable as a matter of law. Judge Rosi further found that the provisions of the RPA, “penalize California employers who chose to switch insurance carriers” constituting an “unfair business practice” that is “coercive and illegal.”

“This is a victory for Shasta Linen Supply and any other employers that entered into Applied’s EquityComp program only to face onerous terms and conditions required by the unlawful, unfiled RPA,” Farmer said. “We’ve argued from day one that the RPA absolutely affected the insurance rates of our client, and that any such agreement is only enforceable when filed and approved by the state. Applied did not follow the law, did not have the RPA approved and therefore can’t enforce its terms against Shasta to demand excessive payments.”

Farmer has filed a federal class action lawsuit in the Eastern District of California against Applied Underwriters and its affiliate entities. The complaint alleges on behalf of Shasta Linen Supply and all those similarly situated that the EquityComp program engaged in fraud and unfair, deceptive and unlawful business practices in violation of California’s unfair competition law, Business & Professions Code section 17200, etc. Farmer seeks damages, including punitive damages, as well as restitution of all monetary sums collected by EquityComp as a result.