The battle over an automobile insurance persistency initiative is heating up, with the latest volley over a radio advertisement targeting a military audience that opponents are calling on to be removed following the tragedy in Libya where Libyan Ambassador Christopher Stevens was killed on Tuesday along with three others during an attack on a U.S. Consulate in Benghazi.

Proposition 33 came under attack again on Thursday from Consumer Watchdog, a Santa Monica, Calif.-based consumer group, for an ad that states the initiative will protect auto insurance rates for those serving overseas. The ad also notes the proposition has broad military support.

“They are spitting in the eyes of foreign service officers and other heroes,” said Jamie Court, a spokesman for Consumer Watchdog, referring to the the Prop. 33 ads.

Conversely Prop. 33 proponents characterized Consumer Watchdog’s attack on the ads following the killings in Libya as “unconscionable.”

Consumer Watchdog, which also cited a Los Angeles Times editorial published on Wednesday that opposes the initiative, sent a letter to Prop. 33 backer Mercury Chairman Joseph on Thursday stating: “Out of respect for military officers and foreign service employees, who face life-threatening circumstances at our embassies abroad, we call upon you to immediately withdraw your deceptive and disrespectful radio advertising campaign in favor of Proposition 33.”

Joseph has personally spent more than $8 million on the campaign. He has stated the initiative is consumer friendly and will encourage competition for customers among insurers by allowing insureds to take their discount for their driving history with them to other insurers.

He said on Thursday that he couldn’t believe Consumer Watchdog was tying in the Prop. 33 ads with the incident in Libya.

“It’s unbelievable,” he said. “We have nothing to do with Libya. That sounds so far out I don’t know how to comment on that. We’ve had the support of the military from day one.”

Today members of the military who have a break insurance if they are deployed lose their loyalty discount, but “what (Prop.) 33 does is make previsions to excuse that lapse,” Joseph said. “The military believes that it does. USAA believes that it does. There are no exceptions in the present regulation or the statues for the military.”

He noted that Prop. 33  is only a one-page document, and that “if you read it you see it doesn’t matter whether you move to another insurance company or not.”

Consumer Watchdog and Prop. 33 propoents have been at war for years over auto persistency, and this year the groups even went to battle over language in the initiative.

The initiative is similar in some respects to Proposition 17, an initiative on the California ballot in 2010 that was narrowly defeated. However, proponents of the initiative say that unlike the 2010 initiative, Prop. 33 includes those serving overseas and domestically in the portable persistency discount. It also takes into consideration people who have been unemployed, or have lacked coverage for any reason for 18 months, for a persistency discount.

However, according to Consumer Watchdog, under Prop. 33 drivers who have stopped driving for legitimate reasons, such as serving abroad, would be hit with large surcharges if they decided to drive again and buy insurance in California.

The L.A. Times opinion piece argues the persistency discounts customers would get under Prop. 33 are “available only to people who leave one company for another, putting themselves in a different rate structure and, most likely, paying a different price.”

Consumer Watchdog characterized the Prop. 33 ads, which began airing on Wednesday, as an affront to those who serve in the military or in any capacity in areas like Libya, and the group called on the Prop. 33 campaign to “immediately withdraw new radio advertisements that mischaracterize the impact of the initiative on foreign service and military personnel in the wake of attacks on US embassies abroad.”

Prop. 33 campaign spokesman Terry McHale characterized the Consumer Watchdog attack as “unconscionable.”

“Consumer Watchdog prides themselves on throwing bombs, but even this goes beyond decency,” McHale said. “It’s a hyperbole that’s unconscionable. We’re not going to stoop to talk about auto persistency and the tragedy in Libya. It’s beyond decency, it’s beyond pail, and it has nothing to do with the discussion. And it’s a reflection of the kind of people they are.”

The Prop. 33 campaign purchased ad space last week on radio stations, McHale noted, adding that “we stand by the ad. Prop. 33 is supported by every major military association in California.”

Recently Veterans of Foreign Wars, and the American Legion issued statements in support of the initiative. It’s also being supported by the Vietnam Veterans of American, American GI Forum of California and insurer USAA, which serves a large number of military families.

McHale noted that as California law is currently structured military personnel returning from service will lose their persistency discount, but under Prop 33 active military no matter if they are deployed aboard or domestically will the persistency discount.

“We disagree with the L.A. Times,” McHale said. “We think their report was wrong.”

Consumer Watchdog’s Court also noted that foreign services officers like Stevens would not be included in the persistency discount.

“They’re lying about soldiers keeping discounts that they now lose,” Court said. “It’s an outright lie while soldiers are on high alert. And this would penalize foreign services officers who are not exempted from the surcharges.”

Court called the timing of the campaign particularly disrespectful, as said he believes the ads were timed to take advantage of strong sentiment for those in the service that often increases around the time of the Sept. 2011, terrorist attacks.

“The campaign is clearly trying to take advantage of the Sept. 11, post 9/11 feelings of patriotism,” Court said. “What we’re saying is in the wake of the Libya attacks it’s imperative that we have the upmost respect for the foreign services officers and the military who are under siege. To lie is wrong, it’s quadrupley wrong in this moment in history.”

McHale said the campaign my reconsider how it spends on ads based on the Consumer Watchdog response and the group’s seizing of the tragedy to get its message across.

“We may reconsider what we are going to do,” he said, adding that “we knew Consumer Watchdog has trouble with the truth.”

But, he added, “We are not going to remove that ad.”

Since the passage of Proposition 103 in 1988 it has been illegal to use drivers’ history of insurance coverage as a rating factor.

In the case Donabedian v. Mercury, a California Court of Appeal cited the Insurance Commissioner’s brief when it rejected Mercury’s claim that this factor was allowed:

“The Department is aware that that some insurance companies have interpreted ‘persistency’ broadly; to authorize a credit to persons who have switched insurance carriers, but have been continuously insured.  Such a definition necessarily requires [an insurance] company to consider a consumer’s prior insurance, or lack thereof.  In the Commissioner’s opinion, this type of stretched interpretation of ‘persistency’ would violate Insurance Code section 1861.02, subdivision (c).”

Prop. 33 proponents however counter the initiative is consumer friendly, and will encourage completion from insurance companies by allowing auto insurance customers to take their persistency discount with them and shop it around to other insurers.

Bottom-line for consumers, McHale said, is “It gives them options.”