Mercury Insurance has been fined $27.5 million for collecting illegal auto insurance fees from consumers, according to the state's insurance regulator.

Between 1999 and 2004, the company's insurance agents charged unapproved fees on more than 180,000 transactions, in violation of the voter-approved Proposition 103, which requires auto insurers to get the approval of the insurance commissioner on all rates, the California Department of Insurance said in a statement released Monday.

"Mercury auto insurance consumers paid $27.5 million in unapproved fees," said Insurance Commissioner Dave Jones in the statement. "While the $27.5 million fine against Mercury is significant, it is commensurate with the amount of money that was unlawfully collected from Mercury policyholders."

Advocacy group Consumer Watchdog, which had filed an administrative complaint against Mercury, on Monday called the fine the largest penalty the insurer has ever assessed against a property and casualty insurer.

"For ten years, Mercury enabled and promoted a system to avoid Proposition 103’s prohibition against illegal agent fees and bilk consumers out of millions of dollars," Harvey Rosenfield, the author of Proposition 103 and counsel for Consumer Watchdog, said in a statement. "The $27.5 million fine shows that justice has finally been served against Mercury for years of flagrant violations of the law."

By law, brokers are allowed to charge fees, but those who were identified as brokers were actually functioning as agents of the company, and Mercury failed to file the fees for approval with the commissioner, according to the statement from CDI.

Mercury issued the following statement to KPCC in response to the commissioner's decision:

"We are highly disappointed and strongly disagree with the Commissioner's determination that Mercury had violated California's rate laws and his decision to impose a penalty. We strongly believe that this decision is contrary to California's rate laws, due process, and basic notions of fairness. We intend to vigorously litigate this matter of law and we intend to ultimately prevail on the merits in a court of law."

You can read the full text of the decision below: