Consumer Watchdog Challenges Recidivist Mercury Insurance for Policyholder Price-Gouging, Discrimination and Deception

LOS ANGELES, Oct. 11, 2023 /PRNewswire/ -- Consumer Watchdog today filed a Petition to Intervene in an enforcement action brought by the California Department of Insurance (CDI) against Mercury Insurance Group for overcharging, misleading and discriminating against California homeowners and motorists. 

Read Consumer Watchdog's Petition to Intervene in the Noncompliance Action here.

Consumer Watchdog said its participation in the matter would focus on the company's violations of Proposition 103, the 1988 insurance reform initiative. CDI has charged Mercury with 29 different violations of that law, including: overcharging Good Drivers and other motorists, penalizing motorists for not previously carrying insurance, charging unauthorized rates, and charging discriminatory rates. Consumer Watchdog noted that 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.

In the current action, Consumer Watchdog will make the case for CDI to issue the highest penalty because of Mercury's recidivism - license suspension or revocation - if the allegations are proven true at trial.

Current CDI Action Follows Investigation Into Ongoing Wrongdoing by Mercury

In July 2014, CDI began a Market Conduct Examination of 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 the Department are many the company has committed to ending after previous CDI penalties. They include: 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. (Ins. Code § 1858.07.) 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. (Insurance Code section 1861.10.)

Mercury is the state's 3^rd largest auto insurer and 6th largest home insurer.

Documents Regarding Current Mercury Noncompliance Action

Read CDI's September 9, 2021 Notice of Noncompliance here and its August 1, 2022 Press Release. 

Read Consumer Watchdog's August 1, 2022 news release discussing CDI's announcement and Mercury's decades-long defiance of just one of the laws at issue in the current case.

Prior Noncompliance Actions

Read investigative documents released by CDI in 2010 concerning Mercury's then-ongoing violations of state law.

Read about two prior CDI noncompliance actions resulting in civil penalties here:
https://consumerwatchdog.org/in-the-news/mercury-insurance-must-pay-275-million-fines-calif-appeals-court-rules/

https://www.insurance.ca.gov/0400-news/0100-press-releases/archives/release025-15.cfm

Background on Proposition 103

Voter-approved Proposition 103 requires that insurers open their books and prove they need to raise rates in a process subject to full transparency, in which consumer representatives have the right to review and challenge improper rates and practices. Insurance companies must publicly disclose all the data necessary to support their rate requests. The Commissioner must then decide whether to approve or reject such rate applications before they take effect. Proposition 103 also requires the Commissioner to protect the solvency of the insurance companies when considering rate increases. The initiative applied the state's consumer protection, civil rights, and antitrust laws to insurance for the first time and authorizes consumers to challenge violations of the law in the courts or at the Department of Insurance, requiring insurance companies to pay consumers' attorney's fees for such challenges. In addition to regulating rates, Proposition 103 made the Insurance Commissioner's office an elected position that is accountable to the voters.

In February 2019, the Consumer Federation of America reported that Prop 103 had saved California motorists over $154 billion since 1989.

For more information about Proposition 103 visit: https://consumerwatchdog.org/prop-103/

Consumer Watchdog is a non-profit, non-partisan citizen organization founded in 1985. It is the state's leading defender of Proposition 103. The organization has saved California consumers over $4.6 billion over the last 21 years by challenging excessive and unfair auto, home, business and medical malpractice rates.

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SOURCE Consumer Watchdog