Company to pay $75,000 in crop-insurance violations

Farm Forum

PIERRE – An insurance company based in California agreed to pay $75,000 penalty for improper activities in South Dakota.

The amount is the largest penalty levied by the state Division of Insurance in recent years and might be one of the biggest ever in a South Dakota insurance case.

The Climate Insurance Agency LLC is a subsidiary of The Climate Corporation of San Francisco, Calif. The company sold an unapproved product called Total Weather Insurance in South Dakota. State regulators put the product in the category of casualty insurance, which require rate and form filings. The company considered the product a type of inland marine insurance that didn’t need the filings.

According to a statement from state regulators, “Climate LLC’s advertisements and agent training were misleading and misrepresented the nature of the product.”

Specifically, the product and insurance contract were “based on various weather metrics such as temperature and rainfall at pre-determined gathering stations. The product was sold and marketed using materials which discussed yields, bushels and profits.”

Along with the financial penalty, the company must have the division’s approval of the advertising and training materials that will be used starting this year and must file copies of those materials with the division for three years.

State regulators also found fault with other company practices, such as use of representatives that weren’t licensed in South Dakota, failing to register the company as a managing general agent, having cancellation timeframes that didn’t meet South Dakota standards and failing to report an administrative action taken against the company in Missouri.

“The monetary penalty was in line with the various violations and their severity and served to protect the important industry of agriculture in the state of South Dakota,” Merle Scheiber, the director for the state Division of Insurance, said in a written statement.

The company agreed to the $75,000 and the related requirements in a consent order. In return, Scheiber agreed he wouldn’t take the case to a hearing.

State law would have allowed revocation or suspension of the company’s certificate to conduct business in South Dakota.

The agreement was signed by Scheiber and Kara Ricci, an associate general counsel for the company.