Workers' Comp Agents Punished In California
NU Online News Service, Jan. 25, 9:44 p.m. EST?California has hit two firms and their agents with fines, reimbursement demands and license restrictions over their marketing of illegal workers' compensation insurance, Insurance Commissioner John Garamendi announced.
His office said his action was intended to alert consumers to the potential dangers of purchasing insurance products marketed by Indian tribal enterprises that are not approved by the state.
California authorities said the case involved an employee staffing product offered by Mainstay Business Solutions, owned by the Blue Lake Rancheria, an American Indian tribe. The agents introduced the product to a potential customer as workers' comp coverage, even though Mainstay is not authorized to provide workers' comp coverage in California.
According to the California Insurance Department John David Evans, an agent of Hall-Schenk, Inc. in Camarillo, and Christian Oliver Muller, an agent of Barlocker Insurance Agency, Inc., in Salinas, attempted to sell Mainstay's product to a potential customer, offering it to her as workers' compensation insurance. Once the customer determined that the product was tribal-based, she declined to purchase it.
The department said Mr. Evans, of Camarillo, had his license revoked by the Department of Insurance and was issued a one-year restricted license. His employer, Hall-Schenk Inc., agreed to pay a $4,000 penalty and $6,000 in cost reimbursements. The company and Mr. Evans agreed not to sell, market or solicit any PEO products that do not provide coverage from a California admitted insurer.
Mr. Muller of Woodland Hills, the Barlocker agent, agreed to a $4,000 penalty and is also prohibited from selling non-admitted products. Barlocker Insurance paid a cost reimbursement of $5,000 and agreed not to sell non-admitted products.
"I took this action to protect injured workers and the businesses that employ them," said Commissioner Garamendi. "The Mainstay product is not authorized and puts everyone involved at risk. Under this product injured employees don't have the full protection of California insurance law, and business owners face enormous fines and even closure."
The California Labor Code requires that every employer secure workers' compensation coverage through an authorized insurer, or provide proof to the state Department of Industrial Relations of the employer's ability to self-insure. Businesses that have purchased the Mainstay product in lieu of authorized workers' compensation coverage face potential criminal liability, penalties up to $100,000, and civil lawsuits from employees, the insurance department warned.
According to the department several American Indian tribal entities have established employee leasing companies, temporary staffing agencies, and/or professional employer organizations offering "alternative" workers' comp coverage. The department explained that this unauthorized "alternative" is often just one component of a bundle of services that may include human resources management, payroll services, tax filing, and insurance administration.
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