The California Insurance Code requires the submission of workers’ compensation insurance policy forms and endorsements to the Department and to the Workers’ Compensation Insurance Rating Bureau of California, for review, to ensure they comply with California law. The large deductible agreements issued by the Zurich companies contain fundamental policy terms regarding payment, expenses, collateral, default, arbitration, choice of law and other matters. Despite having key terms, the Zurich companies did not submit the agreements for review. California law provides that policies that are not submitted shall not be issued. The Department’s action seeks an order requiring the Zurich companies to immediately cease issuing agreements that have not been filed for review. If the Zurich companies violate such an order, they could be suspended or barred from transacting further business in California.
Further, the action seeks an order that large deductible agreements that the Zurich companies issued in disregard of the Insurance Code may not be enforced by Zurich.
“Whatever the insurers’ motive, the effect of evading the Department’s review is that Zurich will not be permitted to enforce the agreements,” said the Department’s General Counsel, Adam Cole. “Workers’ compensation policies are critical to California employers and employees, and the Department will not permit insurers to issue policies or endorsements that we have not assured are in compliance with California law.”