Warning about purchasing workers’ comp insurance

Berkshire Hathaway Inc. sued for allegedly cheating employers who bought workers’ comp insurance.

Reuters has a story about Berkshire Hathaway Inc. getting sued for allegedly cheating employers who purchased workers’ comp policies. Described as a “reverse Ponzi scheme,” employers were sold affordable policies that were actually “reinsurance” requiring them to cover each other’s losses. This created imminent financial risk for policyholders and left taxpayers on the hook for shortfalls. It has also been claimed that illegal shell companies diverted premium money to unlicensed out-of-state insurers.

“Breakaway thought it was purchasing a workers’ comp policy with a profit-sharing component if its losses were low,” Raymond Dowd, its lawyer, said in an interview. “Instead it purchased a complex derivative swap labeled misleadingly as a ‘reinsurance participation agreement’ that put all the risk on Breakaway.

We find this lawsuit fascinating and it serves as a warning of the problems that led to the 2007-2008 financial crises. An excellent overview was depicted in the Oscar winning movie “The Big Short” and is a must watch. Making sure employers and insurance companies play by the rules is an integral part of the workers’ comp system.

Michigan law

Workers’ comp is a type of insurance that employers are required to purchase in Michigan. It is intended to protect both employers and employees in the event of a workplace accident. Benefits are paid regardless of fault but are generally limited to wage loss and medical.

Employers who fail to obtain required insurance are still responsible for payment of workers’ comp benefits. Officers and directors of the company can be found personally liable. Penalties include a $1,000 fine and imprisonment up to 6 months as a criminal misdemeanor.

Michigan Workers Comp Lawyers never charges a fee to evaluate a potential case. Our law firm has represented injured and disabled workers exclusively for more than 35 years. Call (855) 221-2667 for a free consultation today.

Related information:

Does my business need workers compensation insurance in Michigan?

Photo courtesy of Creative Commons, by thethreesisters.

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