Applied Underwriters’ nor its EquityComp program is licensed in New York state. It is in litigation with multiple clients over its EquityComp program. As a result, it has to post nearly $15 million in bonds as a security deposit in order to defend itself in three different lawsuits. A New York state court took the action after determining that state law required unlicensed entities such as the Berkshire Hathaway (NYSE: BRK.A) subsidiary to either get licensed in New York as an insurance business or post a bond before the court will even consider its responses to the lawsuits.
And the bonds must be purchased from unaffiliated entities.
The court ordered Applied to post bonds of $11 million, $2.8 million and nearly $900,000 in cases alleging that its workers’ comp programs are “reverse Ponzi schemes” that promise savings on workers’ comp coverage but actually shift the risk back onto the employer.
Plaintiffs Current Lighting and Electric, Alternative Fuels Transportation, and Breakaway Courier Corp. have been seeking bonds in excess of $62.4 million, but the court trimmed the bond amounts to what the plaintiffs have actually paid into the workers’ comp programs.
The plaintiffs in the three lawsuits are being represented by the same attorney. Combined, the three cases are seeking nearly $200 million in damages.
It is expected that the Berkshire Hathaway subsidiary will soon pursue a single, consolidated motion to dismiss all three cases on the basis that the court lacks jurisdiction to hear the complaints. It is not an atypical first response from Applied Underwriters’.
Applied is in litigation with clients in many states around the country and has taken positions in opposition to its arguments in some cases. Multiple states have ordered it to cease and desist offering the program.