Court upholds Department of Insurance $27.5 million fine against Mercury Insurance for overcharging for auto insurance -- largest in the Department’s history
News: 2019 Press Release
SACRAMENTO, Calif. — Today the California Court of Appeal upheld a $27.5 million fine the Department of Insurance issued against Mercury Insurance Company for charging illegal fees that should have been disclosed as premiums, a violation of Proposition 103. The fine is the largest in the Department’s history against a property and casualty insurer.
In 2015, the Commissioner fined Mercury $27.5 million for charging consumers unapproved and unfairly discriminatory rates. Despite being advised by the Department of Insurance 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.
“Today’s decision is unequivocal: insurers cannot avoid the Department’s scrutiny by charging ‘fees’ on top of the rates already approved by the Commissioner,” said Insurance Commissioner Ricardo Lara. “Our efforts to maintain fair rates depend on insurers playing fair by disclosing the full cost of their insurance, which Mercury did not do.”
Under Mercury’s scheme, it illegally labeled its agents as brokers and allowed them to charge and collect unapproved fees on more than 180,000 transactions from 1999 to 2004, improperly collecting at least $27,593,562 from consumers.
Today the Court of Appeal ruled that the fees charged by Mercury’s agents were premium and should have been approved by the Commissioner. In its decision, the Court upheld “CDI’s well-established position that fees charged by agents acting within the scope of their agency, including Mercury’s ‘brokers,’ are premium.”
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Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at www.insurance.ca.gov via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.