Mercury Insurance Initiative – Prop 17 – Will Legalize Unlawful Surcharges Uncovered by State Investigators
Santa Monica, CA -- Newly released internal government reports show that Mercury Insurance Company, the sponsor of Proposition 17 on California's June ballot, has a history of discrimination against members of the U.S. military, the unemployed, the disabled, small businesspeople and unmarried adults living together. Consumer Watchdog pointed out that these and other Californians are now targeted for massive surcharges by Mercury’s ballot measure.
Official reports prepared by California Department of Insurance (CDI) investigators, obtained by Consumer Watchdog, show that Mercury used a variety of internal company rules – many unwritten – to overcharge or refuse to sell insurance to many Californians it deemed "unacceptable." One of the illegal techniques used by Mercury – surcharging drivers who didn't have insurance at some point in the past – would be legalized by Prop 17 on the June ballot, which Mercury is sponsoring.
A detailed summary of the reports and the original documents are available at:
Consumer Watchdog called on national and state military leaders and consumers to rebuke Mercury, in light of the reports. The group forwarded the new information in a letter to the Chairman of the Joint Chiefs of Staff, Admiral Mike Mullen, and requested that the military investigate and act upon nationwide discrimination against servicemen and women by Mercury Insurance. Mercury is already surcharging soldiers in other states while it attempts to lift the current ban in California through Prop 17. A copy of the letter to Admiral Mullen is available at: http://www.consumerwatchdog.org/resources/AdmMullen020810.pdf
According to the CDI reports, Mercury repeatedly overcharged, cancelled, refused to sell insurance, or made insurance more difficult for people to buy, based on customers' military status, occupation, health, marital status, employment status, prior accidents that were not the driver's fault, prior insurance coverage and other criteria.
“It is unfathomable that a company would discriminate against our men and women in uniform, but that is exactly what Mercury got caught red-handed doing, and is attempting to do again through its deceptive Proposition 17,” said Harvey Rosenfield, the author of voter-approved Proposition 103 and founder of Consumer Watchdog. “Mercury’s pattern of discrimination spared no one - Californians putting their lives on the line in the military; people who work at home, those who had health conditions or were unemployed; people who decided to live together. Mercury charged people for accidents when they were not at-fault and refused to give policyholders the full discounts to which they were entitled. Some of the abuses go all the way back to the 1990s. Prop 17 is just the latest way for Mercury to continue punishing many of those already suffering from a tough economy by pricing soldiers, the unemployed, and the self-employed out of a policy. We encourage anyone shopping for insurance to beware of Mercury. If you're already a Mercury customer, shop for an insurance company that respects California consumers and drop Mercury."
Mercury’s practices appeared to violate at least thirty California laws, including a state law prohibiting discrimination against active duty service members, the 1988 insurance reform law Proposition 103, and other state civil rights and consumer protection statutes. Several of the most egregious violations are listed below.
In numerous instances, the violations uncovered by CDI were noted in prior investigations by the agency, and Mercury had promised the Department that it would correct its practices – but continued to violate the law anyhow. In other cases, Mercury simply refused to stop the practice, claiming that it was not against the law or that the Department had no authority to bar the conduct.
Mercury's Prop 17 Would Allow Illegal Surcharges Identified In Reports
Department investigators determined that Mercury was surcharging people who were not previously insured –a violation of current law (Proposition 103). Those unlawful surcharges raised hundreds of thousands of Californians' premiums by 34% to 57% until Mercury was forced to stop the surcharge by the courts in 2005, according to evidence collected by the nonpartisan Consumer Watchdog.
Prop. 17, Mercury’s initiative on the June ballot, would give Mercury and other insurance companies the power to impose dramatic surcharges on consumers once again – including troops serving stateside, the unemployed, and those temporarily unable to drive because of illness.
"Here we have Mercury Insurance, an insurance company that broke the law, trying to use the People’s initiative process to pass a deceptive proposition that will legalize penalties against soldiers, the unemployed and others who the insurer was caught illegally overcharging. This kind of twisted cynicism – financed with policyholders’ money – is reason enough for Californians to Vote No on 17, the Mercury Insurance scam."
According to reports filed with the Secretary of State, Mercury has spent more than $3.5 million on Prop. 17 through December 31, 2009.
Insurance Commissioner Poizner Authorizes Release of Documents
The reports, totaling 275 pages and covering Mercury’s conduct from the early 1990s through 2004, were prepared by the Field Underwriting and Reporting Bureau of the California Department of Insurance. They were made public at the direction of Insurance Commissioner Steve Poizner, acting pursuant to state law.
Mercury has sought to block the documents from being used as evidence in an administrative case the Department is presently prosecuting against Mercury for violations of Proposition 103 and false advertising. In that case, the Department stated:
“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…. 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.”
Consumer Watchdog hailed the Commissioner for making the information on Mercury available to the public. “This is important information for consumers in the insurance marketplace as well as voters. Californians are entitled to know of the practices of a company that wants to change state law in its favor.”
Wide-Ranging Discriminatory Practices
Among the allegations of illegal activity revealed by the documents (which can be downloaded in searchable format at http://www.consumerwatchdog.org/resources/MCE-Scanned01272009.pdf ):
• Mercury discriminated against members of the military. [See pages 87, 96-97.] Note: page numbers refer to the pdf-document page, not the page numbers on the original reports.
• Mercury refused to sell insurance to people in certain jobs, including people in the entertainment industry, artists, longshoreman, “domestics” and other “unacceptable” occupations, or adopted rules that made it more difficult for people in those jobs to buy insurance. [See pages 87, 96.]
• Mercury illegally surcharged people who did not previously have auto insurance, a practice that Proposition 17, if passed, would allow. [See page 20.]
• Mercury had a “physically-impaired” rule, under which the company required some diabetics, cardiovascular patients, and people “who suffer[ed] from some other medical condition” to provide Mercury with a medical examination report, or else be denied auto or umbrella coverage. [See pages 88-89, 101-102.]
• Mercury also discriminated against “people who work out of their homes and have one source of income” and “people who are self-employed and working out of their homes.” [See pages 87, 100.]
• Mercury “declined to write a homeowners policy for two unrelated men who were co-owners of a dwelling.” Mercury also refused to sell a renters policy to unmarried people living together. [See pages 81-82.]
• Mercury increased its prices above the amounts its agents quoted to applicants. Mercury also collected more money in premiums than it was authorized to. [See pages 116-117.]
• Mercury requested information on an applicant’s national origin, information that could have been illegally used by underwriters. [See page 101.]
• Mercury refused to provide immediate coverage under an umbrella policy to people who were unemployed. [See page 87.]
• Mercury discriminated against students from other countries. [See pages 100-101, 104, 182, 183.]
• Mercury would surcharge people for accidents even though they were not at fault, or for traffic violations when the customer had not been convicted. [See pages 19-20.]
• Mercury maintained an incentive program that encouraged its underwriters to deviate from company rules in order to reject applications. [See pages 123-127.]
• Mercury overcharged policyholders by denying them discounts they were entitled to. [See pages 2, 18, 52-53.]
A detailed summary of the reports and the documents associated with the investigation are available at http://www.consumerwatchdog.org/insurance/articles/?storyId=32615
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Consumer Watchdog, formerly The Foundation for Taxpayer and Consumer Rights, is a nonpartisan, nonprofit organization.