The California Department of Insurance says it has a range of options for sanctioning brokers that place clients in an illegal or unlicensed workers’ comp program. The question arose after a purported workers’ comp program that CDI says is and has been operating illegally lost yet another court battle.
“Action taken by the department can range from issuing a warning to revoking the agent’s license,” says CDI’s Allison Castro. “The department can also fine the agent, restrict the agent’s license, or suspend the agent’s license.”
Castro notes that Insurance Code section 1668 includes sanction provisions for a host of actions that it could use for placing business into an unlicensed or illegal program. Those include “incompetency or untrustworthiness” in actions that exposed their client to loss, that the broker is “lacking in integrity,” or that the broker has conducted business “in a dishonest manner.”
The questions surround the business placed into the CompOneUSA program that was operated by the American Labor Alliance and its Omega Community Labor Association alter ego. A Fresno Superior Court recently upheld CDI’s cease and desist orders to shut down the program for operating without a certificate of authority.
Brokers who placed business into the program are easy to identify because the Department and FBI already have the records from CompOne, and certificates exist.
Lead by founder Marcus Asay, the illegal program claims that the federal Employee Retirement Income Security Act (ERISA) laws preempt CDI’s oversight. Those claims were wholly and entirely rejected by the court (for past coverage, see Court Orders…).
CDI’s Castro says the agency has not yet taken any action against brokers for placing business in the programs. Castro notes that “there are criminal and administrative investigations into ALA/Omega that are still open.”
Federal prosecutors are pursuing conspiracy, mail fraud, and money laundering charges against Asay, as well as Antonio Gastelum, who oversees finances. Prosecutors have told the courts that they are preparing additional federal criminal charges, but as of deadline, these additional charges have not been formally filed.
Next, the question becomes one of why DSLE – California’s Division of Labor Standards Enforcement has not shut down or at least warned businesses operating under the ALA scheme, therefore without workers’ comp to obtain it as it is statutorily required to do.
For all of Workers’ Comp Executive past coverage of ALA/Omega and the numerous court and administrative actions against it, please see our investigations section by clicking here.