This is at least the third time since 2004 the California Department of Insurance has charged Mercury with violations of Proposition 103's consumer protections.
Consumer Watchdog on Oct. 11 filed a petition to intervene in action brought by the California Department of Insurance (CDI) against Mercury Insurance Group for overcharging, misleading and discriminating against California homeowners and motorists.
Ultimately, the nonprofit organization thinks Mercury---the state's third-largest auto insurer and sixth-largest home insurer---should get the highest penalty because of its recidivism---license suspension or revocation---if the current allegations are proven true at trial.
Consumer Watchdog said its participation would focus on the company's violations of Proposition 103, the 1988 insurance reform initiative. CDI has charged Mercury with 29 violations of that law, including overcharging drivers, penalizing drivers for not previously carrying insurance, charging unauthorized rates and charging discriminatory rates.
Consumer Watchdog noted Mercury had previously promised CDI it would stop many of these practices, which are unlawful under Proposition 103, but nevertheless continued to violate the law.
"Mercury has consistently refused to obey the rules California voters put in place with Proposition 103 to stop price-gouging and practices that discriminate against those who can least afford it," said Benjamin Powell, Consumer Watchdog staff attorney. "Previous investigations and multi-million-dollar penalties have clearly failed to deter the company from wrongdoing. Mercury, as a repeat offender, must pay a steep price or no insurer will bother to obey the law.
"Consumer Watchdog looks forward to working with CDI prosecutors to bring Mercury to justice---which we believe means barring Mercury from doing business in the state."
This is at least the third time since 2004 that CDI has charged Mercury with violations of Proposition 103's consumer protections and other state laws dating back to 1995. The charges in the current actions are, in many instances, for the same illegal conduct as uncovered in prior examinations by the CDI.
Consumer Watchdog played a key role in a 2004 CDI noncompliance action against the insurer. That led to Mercury paying a record $41 million in penalties and interest. CDI filed another noncompliance action against Mercury in 2014 and issued a $1 million fine in that action.
Current CDI Action Follows Investigation Into Ongoing Wrongdoing by Mercury
In July 2014, CDI began investigating Mercury's insurance rates and underwriting practices. Completed in 2019, the 43-page report found in total 34 violations of California law. In September 2021, CDI's Legal Division issued a notice of noncompliance, the first step in an administrative proceeding seeking penalties against the company.
Among the violations uncovered by CDI are many the company has committed to ending after previous penalties, including forcing consumers to meet unapproved requirements, like interior home inspections, to get insurance; failing to give all consumers with good driving records the Prop 103-mandated 20% discount; denying drivers insurance based on their previous insurance history; and denying insurance policies for consumers who previously had their driver's license suspended for unpaid child support.
The insurance commissioner is authorized to impose civil penalties of $5,000 for each single instance that Mercury violated a law, or $10,000 if the violation is found to be willful. Proposition 103's Public Participation reforms authorize consumers to initiate or intervene in any administrative or judicial proceeding to enforce its protections, such as this matter.
