Applied Underwriters’, Inc is facing another major lawsuit. This time, it’s a $100 million class-action. The Berkshire Hathaway (NYSE: BRK.A) subsidiary stands accused of using deceptive sales and marketing tactics and saddling employers with unconscionable contracts. But business lawyers familiar with Applied Underwriters cases say a class isn’t the way to go and project it likely won’t get certified.
The class action is one of a growing number of lawsuits by businesses aggrieved by Applied Underwirters’ EquityComp program. The class action focuses on the terms of the program’s unfiled reinsurance participation agreement (RPA) that multiple states have found to be illegal. An action to this effect is on-going in California.
But Carmel-based Attorney and Applied Underwriters’ expert and leading lawyer Larry Lichtenegger tells Workers’ Comp Executive that a class is unlikely to be certified. He says “Applied files individual claims against insured’s who refuse to continue in the program and does it in Nebraska. In addition,” he continues, “insured’s demands for relief can differ wildly depending upon the individual facts. This class action appears to desire relief for a class of insured when only a small portion of that class would either fit or desire the relief sought.”
The class plaintiff says it joined the EquityComp program in 2009 and completed its three-year commitment, but says it ended up paying more than advertised for its level of workers’ comp claims. During the three-year active term, the business experienced actual losses and reserves on open claims totaling just under $725,000. At this level, it says its premiums should have been $1.2 million based on Applied Underwriters program summary chart. Pet Food, however, says it paid nearly $1.6 million and has yet to see a refund of its promised share of the profits.
“This class action appears to desire relief for a class of insured when only a small portion of that class would either fit or desire the relief sought.”
The business is asking the court to declare the RPA illegal and void as a matter of law in California and for it to rescind all workers’ comp policies written under the EquityComp program. The RPA has been declared illegal in California proceedings.
The plaintiffs are also asking the court to award $100 million in punitive damages plus fees and costs. Applied is seeking to have the case removed from state court to the Federal District Court.
Lichtenegger says “Other insureds’ desire relief not only based upon the illegality of the program but also based upon the fraudulent presentation. Such fraud claims are not amenable to a class action and the facts vary wildly and would need to be tried individually. Besides,” he adds, “$100 million might not be enough to cover the damages.”
Note: Applied Underwriters’ has sued Worker’ Comp Executive, its executives and lawyer Larry Lichtenegger for trademark violation asserting we can’t use its name to describe a webcast specifically about them. A motion to dismiss is pending.
Applied Underwriters was once but is no longer an affiliate of Berkshire Hathaway. Applied’s management bought it. Berkshire Hathaway bears no responsibility for any of the events which have transpired involving Applied Underwriters’ or its subsidiaries including California Insurance Company.