This story is reprinted with permission from FC&&S Legal, the industry's only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe.
W.R. Berkley Corporation entities and operating units have reached a $12 million settlement with the California Department of Insurance (CDI).
Admiral Insurance Company, Admiral Risk Insurance Services, Inc. n/k/a/ BXM Insurance Services, Inc., and other entities agreed to settle allegations of licensing violations and unlawfully transacting surplus line insurance in California.
|Consumer protection laws
"Businesses and individual consumers should have confidence that companies selling insurance in California are doing so in compliance with our consumer protection laws," said Dave Jones, the commissioner of the CDI. "Our enforcement action has resulted in Admiral and W.R. Berkley Corporation paying a substantial monetary settlement for their licensing violations and ensures that they are now complying with all of California's insurance laws and regulations. Failure to continue compliance will result in additional automatic penalties and sanctions."
The case came to the CDI as a referral from the Surplus Line Association of California. The original parties involved Admiral Insurance Company, an operating unit of W.R. Berkley Corporation; Admiral Risk Insurance Services, Inc.; and three of Admiral Risk's now-former employees.
|Investigation began in 2011
The CDI said that it began its investigation in 2011 and found that Admiral Risk and its employees had transacted surplus line insurance without holding requisite surplus line broker licenses from approximately November 2003 through June 2011. Further, according to the CDI, Admiral Risk had impermissibly acted as a managing general agent for affiliated company Admiral Insurance Company, an insurer not admitted to transact business in California.
The CDI said that after it began its investigation, Admiral Risk and its employees obtained the necessary licensing. W.R. Berkley Corporation later hired outside counsel to conduct an independent review of its operations, and self-disclosed compliance issues to the CDI.
|'Taken the right steps'
"As California's largest consumer protection agency, we must ensure that consumer protections laws are followed," added Commissioner Jones. "The department's duties also include helping companies come into compliance. W.R. Berkley Corporation has taken the right steps toward remediating its former practices."
The settlement agreement specified that Admiral Risk Insurance Services, Inc. n/k/a/ BXM Insurance Services, Inc., in lieu of license suspension, would pay a monetary settlement of $1.5 million and also pay a cost recovery fee of $42,500 to reimburse the CDI for expenses incurred. Admiral Insurance Company would pay the same monetary settlement and cost recovery fees.
|$6 million suspended for self-reporting & remedial action
W.R. Berkley Corporation also agreed to pay a $9 million settlement and $15,000 for cost recovery. In recognition of the self-reporting and remedial actions already implemented by W.R. Berkley Corporation, the settlement provided that $6 million of the settlement was suspended.
The $12 million settlement was one of the largest penalties for licensing violations ever assessed in the CDI's history.
Steven A. Meyerowitz, Esq., is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. Email him at [email protected].
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