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CA Department of Insurance

Mercury Insurance ordered to pay $27.5 million fine

News: 2015 Press Release

For Release: January 12, 2015
Media Calls Only: 916-492-3566
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Mercury Insurance ordered to pay $27.5 million fine
Consumers were charged unapproved “broker fees” in 180,000 sales of Mercury auto policies

SACRAMENTO, Calif. - Insurance Commissioner Dave Jones ordered Mercury Insurance to pay a fine of $27,593,562 million because Mercury auto insurance consumers were charged unapproved "broker fees." Mercury did not obtain the commissioner's approval for the "broker fees" and so consumers paid more than the rates approved by the commissioner. Proposition 103, passed by the voters in 1988, prevents auto insurers from charging excessive rates and requires that rates be approved by the commissioner.

Despite being advised against doing so by the Department of Insurance, from 1999 through 2004, Mercury's insurance agents charged and collected unapproved "broker fees" on more than 180,000 transactions, improperly collecting $27,593,562 million from consumers.

"Mercury auto insurance consumers paid $27.5 million in unapproved fees," said Commissioner Jones. "While the $27.5 million fine against Mercury is significant, it is commensurate with the amount of money that was unlawfully collected from Mercury policyholders."

The commissioner's decision comes after an exhaustive process that included a full evidentiary hearing conducted by an administrative law judge. The hearing included 15 days of testimony, extensive exhibits and legal briefs. The administrative law judge found that there were at least 180,000 transactions in which Mercury auto policyholders were charged fees that had not been approved. After all of the evidence and legal arguments were considered, the administrative law judge recommended the commissioner impose the $27.5 million fine on Mercury.

Media Notes: "broker fees": Brokers are allowed to charge fees. But in this case, those who were identified as brokers were actually functioning as agents, and therefore, their fees had to be filed as part of Mercury's rate filing and approved by the commissioner, which Mercury failed to do.

The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

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