Santa Monica, CA – Mercury Insurance, which provides homeowners insurance for about 270,000 Californians, has refused to implement an 8% rate decrease ordered by California Insurance Commissioner Dave Jones and filed a lawsuit to challenge the decision. Last month, Jones approved a decision by state Administrative Law Judge Kristin L. Rosi to enact the price cut after she conducted an extensive hearing in 2012 initiated by Consumer Watchdog, a nonprofit organization that had challenged Mercury’s original proposal for an overall 8.8% rate increase as excessive and improper.
As a result of the suit, the $16 million savings due to Mercury homeowners policyholders will be delayed, and customers of the company will be overpaying for insurance as long as the case is outstanding. Consumer Watchdog will ask the Court to require Mercury to pay refunds with interest to policyholders forced to pay the too-high premiums.
“Mercury Insurance was given ample opportunity to justify its requested rate hike, but at the end of the day, the Commissioner properly ordered a decrease in accordance with the law and the weight of the evidence,” said Consumer Watchdog’s Litigation Director Pamela Pressley.
The 2012 administrative hearing to investigate Mercury’s rate hike proposal was conducted under the rules of Proposition 103, the 1988 voter initiative that requires insurance companies to get Insurance Commissioner approval for rate changes before implementing them.
In a thorough, 144-page written opinion that was extremely critical of the company’s request as well as its litigation practices, Judge Rosi faulted Mercury for submitting incomplete and inconsistent information, noting that some of Mercury’s data were of “questionable accuracy” and its admissions were “evidence of its substandard recordkeeping and careless supervision” and a violation of state regulations. The judge’s decision also noted that in their legal briefs, Mercury’s lawyers “repeatedly misquote” California Supreme Court decisions in “what can only be interpreted as a desperate attempt to support [their arguments]”.
Contrary to the rosy picture Mercury routinely paints for Wall Street analysts, Mercury had insisted it was in “deep financial hardship” and entitled to a special exemption from the state formula that limits excessive profits and expenses. But this was contrary to the evidence, which showed that in 2009 and 2010 alone, Mercury Casualty Company and its affiliated companies reported net income of $339 Million, while from 2006 to 2010, Mercury paid shareholder dividends totaling almost one billion dollars. The judge also found that Mercury had tried to make its customers pay for nearly a million dollars worth of political contributions to Mercury’s ballot propositions (including over $300,000 in 2010 to its failed Prop. 17 campaign) and payments to Sacramento lobbyists, plus $83 million in general advertising of the Mercury logo, including its sponsorship of a Mercury Open tennis tournament – all of which under state law are the responsibility of Mercury’s stockholders, not customers.
“In filing suit against the Commissioner, Mercury Insurance has proven once again that it would rather spend its money trying to sidestep the regulations than on providing California homeowners who buy insurance from Mercury much needed relief,” said Daniel Y. Zohar, with the Zohar Law Firm, P.C. of Los Angeles, California, lead outside counsel for Consumer Watchdog at the Mercury hearings.
Mercury has a troubled history of repeated defiance of regulatory authority. Prosecutors at the Department of Insurance have stated:
“Mercury's lengthy history of serious misconduct, and its attitude - contempt towards and/or abuse of its customers, the Commissioner, its competition, and the Superior Court - are all relevant to determining the penalty needed to best ensure the protection of the public from future violations and wrongdoing . . . Among Department [of Insurance] staff, consumer attorneys, and consumer victims of its bad faith, Mercury has a deserved reputation for abusing its customers and intentionally violating the law with arrogance and indifference." [Department's Opposition to Respondents' Motion In Limine, February 20, 2009 OAH Case No. 2006040185]
For a history of Mercury’s misconduct, read more here: http://www.consumerwatchdog.org/legal/mercury-insurance-company-losing-its-war-against-consumers
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