Court Upholds California Department of Insurance $27.5 M Fine Against Mercury

May 8, 2019

A California Court of Appeal upheld a $27.5 million fine the California Department of Insurance issued against Mercury Insurance Co. for charging illegal fees that should have been disclosed as premiums, a violation of Proposition 103.

The fine is reportedly the largest in the CDI’s history against a property/casualty insurer.

The Court of Appeal ruled on Tuesday that the fees being charged by Mercury’s agents were considered premium and should have been approved by the commissioner.

The insurance commissioner fined Mercury $27.5 million in 2015 for charging consumers unapproved and unfairly discriminatory rates. Despite being advised against doing so by the CDI, Mercury continued to allow its auto insurance agents to charge consumers $50 to $150 in fees on top of the premium the CDI approved.

Prop 103, passed by 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,” Insurance Commissioner Ricardo Lara said in a statement. “Our efforts to maintain fair rates depend on insurers playing fair by disclosing the full cost of their insurance, which Mercury did not do.”

Mercury 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 $27.5 million from consumers, according to the CDI.

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