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CA Department of Insurance

Mercury loses argument to charge consumers for tennis sponsorship

News: 2017 Press Release

For Release: May 12, 2017
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Game-Set-Match - Mercury loses argument to charge consumers for tennis sponsorship
Court decision prohibits Mercury from passing brand-advertising costs to consumers
SACRAMENTO, Calif. — The California Supreme Court rejected Mercury Insurance and a coalition of insurance industry groups' latest volley in their repeated and coordinated attempts to undermine the consumer protection ground rules established by Proposition 103—approved by California voters in 1988.

The case stems from the commissioner's 2013 rate-reduction order that included prohibiting Mercury from passing on $2,806,152 in brand advertising costs to consumers because the advertising did not give policyholders meaningful information about the insurance products. Insurers spend millions of dollars on advertising their brands including purchasing naming rights for sports stadiums and sporting event sponsorships.

"Once again we have successfully defended consumers against the insurance industry's ongoing crusade to undermine our consumer protection laws," said Insurance Commissioner Dave Jones. "In this most recent victory, the courts rejected the insurers' claim that they have a First Amendment right to charge policyholders for the cost of the Mercury Insurance Tennis Open or flying a blimp over the Super Bowl with the insurer's name on the side. Consumers should not have to pay for brand advertising that only benefits the insurance company and provides no meaningful information to consumers."

The commissioner strongly defended in court his 2013 order requiring Mercury to reduce homeowner insurance rates by 5.4 percent, which saved policyholders $11,745,102. In challenging the order, the insurers argued unsuccessfully that they have the right to determine their own profit with each rate proceeding rather than use the commissioner's rate formula approved by the California Supreme Court in 1994.

In a published decision, the court of appeal expressed its frustration with the groundless arguments the insurers used to challenge the already-approved formula to determine rates by referring to their arguments as "smoke, mirrors" and "hocus pocus." Commissioner Jones opposed Mercury's petition to the California Supreme Court seeking review of the appellate court decision. The California Supreme Court rejected Mercury's petition for review so the court of appeal's decision upholding the commissioner's order is the final decision.

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Media Notes:

  • Mercury v. Jones Supreme Court Ruling
  • Mercury v. Jones Appeal Court Ruling
  • Based upon Mercury's proposal to charge brand advertising to consumers, and its desired profit, Mercury had applied for a 3.9 percent rate increase, which would have raised consumers' rates by $8,418,455, instead the Commissioner ordered their rates reduced by 5.4 percent.
  • This is the third major case in which an appellate court decided for Commissioner Jones against insurers challenging his authority. The Commissioner also won ACIC v. Jones and ACLHIC v. Jones.   

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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