State Insurance Commissioner Dave Jones has ordered Mercury Insurance to pay a $27.6 million fine in connection with unapproved “broker fees” charged to California consumers buying auto policies.

The California Department of Insurance said Monday that the Los Angeles-based insurer did not obtain the commissioner’s approval for the fees, resulting in consumers paying more than the rates approved by the commissioner.

From 1999 through 2004, Mercury insurance agents charged and collected unapproved “broker fees” on more than 180,000 policy transactions, according to the CDI. It said this was done “despite being advised against doing so by the Department of Insurance.”

CDI said brokers are allowed to charge fees, but those identified as brokers in this case “were actually functioning as agents, and therefore, their fees had to be filed as part of Mercury’s rate filing and approved by the commissioner, which Mercury failed to do.”

In a statement responding to the fine, Mercury officials said, “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.”

Proposition 103, passed by voters in 1988, prevents auto insurers from charging excessive rates and requires that rates be approved by the commissioner, the CDI noted in its 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,” said Jones in a statement.

CDI said the commissioner’s decision was handed down after a process that included an evidentiary hearing conducted by an administrative law judge.