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Wednesday, 28 August 2019 14:19

California’s $27.6M Fine Against Mercury Insurance Remains

Written by Staff, Insurance Journal


California regulators say a ruling by the state’s highest court means a $27.6 million fine imposed against Mercury Insurance Co. for improperly tacking fees onto auto insurance policies will stand.


The California Department of Insurance reported on Aug. 15 that the California Supreme Court has denied a petition for review by Mercury Insurance, thereby keeping in place a $27.6 million fine the department imposed on Mercury for charging illegal fees in violation of Proposition 103.


In 2015, Mercury was fined $27.6 million for charging consumers unapproved and unfairly discriminatory rates. Despite being advised for years by the insurance department not to do so, Mercury continued to allow its auto insurance agents to charge consumers $50 to $150 in illegal fees on top of the premium the department approved.


Proposition 103, passed by the voters in 1988, prevents auto insurers from charging excessive rates and requires that rates be approved by the commissioner.


“Since Proposition 103 was enacted, Mercury has looked for ways to evade the Insurance Commissioner’s regulation of its rates,” Insurance Commissioner Ricardo Lara said in a media release. “The Department repeatedly told Mercury to stop this scheme, where Mercury implied its agents were brokers working for the consumers, but Mercury refused to do so.”


Mercury issued the following statement:


“We are disappointed that the California Supreme Court declined our petition to hear our appeal of the appellate court’s reversal of the trial court’s decision. We believe the appellate court erred in overruling the trial court, as the trial court’s ruling was based upon the merits of the case. It found that Mercury didn’t benefit from the fees in question because they were never collected by Mercury.”


In the statement, Mercury notes the fees were charged and collected by independent brokers for the services they provided to their customers, and that the fees were disclosed upfront and customers agreed to pay those fees.


“However, for more than a decade, Mercury has prohibited anyone who sells our products from charging broker fees,” the statement continues. “This is still our policy today and we continue to focus on providing our customers with high-quality service and products at competitive rates.”

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