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CA Department of Insurance

Court rejects insurance industry challenge to Proposition 103 protections

News: 2015 Press Release

For Release: January 21, 2015
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Court rejects insurance industry challenge to Proposition 103 protections
Insurance commissioner’s regulations preventing insurers  from passing on costs of brand advertising upheld

SACRAMENTO, Calif. - The Sacramento Superior Court issued a decision rejecting an insurance industry attack on the insurance commissioner's regulations under Proposition 103 that limit the amount of advertising costs insurers may pass on to consumers through insurance premiums.

The ruling in Mercury v. Jones is an important win for California consumers against attempts by the insurance industry to overturn important consumer protections in Proposition 103. Proposition 103, enacted by California voters more than 25 years ago, has provided consumers with valuable protections against excessive and unreasonable insurance rates.

"The insurance industry joined Mercury Casualty Company in a lawsuit to challenge not only the order I issued lowering Mercury's rates, but to challenge also an important regulation that prevents insurers from passing on to consumers the cost of certain advertising," said Insurance Commissioner Dave Jones. "We contested the insurance industry lawsuit and defended the regulation, in order to protect California consumers. The court's ruling upholding the regulations and my original order requiring Mercury Casualty Company to lower its homeowner rates is an important victory for consumers and the principles of Proposition 103."

Proposition 103 requires that insurers justify their rates and prohibits excessive rates for property and casualty insurance, such as auto and homeowners insurance. Since its enactment by voters, Proposition 103 has saved Californians more than $102 billion, according to the Consumer Federation of America.

The commissioner's regulation prohibits insurers from saddling consumers with the cost of insurers' generalized or brand advertising for such things as corporate sponsorships of sporting events, purchases of luxury boxes, and insurer name branding on stadiums and arenas. The case began when Mercury Casualty Company sued Commissioner Jones to challenge an order reducing Mercury homeowner insurance rates. The major insurance industry trade associations, including the American Insurance Association, National Association of Mutual Insurance Companies, Pacific Association of Domestic Insurance Companies, the Personal Insurance Federation of California, and the Property Casualty Insurers Association of America (DBA-Association of California Insurance Companies) then joined the unsuccessful lawsuit against Commissioner Jones to challenge the commissioner's regulations under Proposition 103.

Media Notes:

A copy of the Mercury Casualty final ruling is available to the public.

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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