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​​​​​​​US Supreme Court Refuses to Hear Mercury Insurance Challenge to Prop 103 Insurance Rules that Saved California Motorists Over $100 Billion

Tue, 02/20/2018 - 21:55
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But 30 Years Later, Industry Continues Other Attacks on Prop 103 in Courts

SANTA MONICA, CA - The U.S. Supreme Court today rejected a challenge brought by Mercury Insurance, State Farm and other insurance companies across the United States to insurance reform Proposition 103. That California law has saved motorists over $100 billion since 1988 by regulating insurance companies to limit price gouging, profiteering, inflated executive salaries and other unjustified expenses. (Mercury Casualty Company v. Jones (17-537) Order here.)

The nation’s highest court refused a request by Mercury Insurance and lobbyists representing State Farm and other insurance companies to review a 2013 decision rejecting Mercury’s request for an 8% increase in its homeowners insurance rates and ordering the company instead to lower its rates by 8%. The insurance companies argued that Proposition 103’s rate setting rules violate their constitutional right to earn a fair profit.

Opposed by Consumer Watchdog and the California Insurance Commissioner, Mercury’s lawsuit was rejected in Sacramento Superior Court in 2015, and by the California Court of Appeal in 2017. The Court of Appeal called Mercury’s arguments “hocus pocus” and “smoke and mirrors.” The California Supreme Court subsequently refused to hear the case. That Court unanimously upheld Prop 103 in 1989, and in 1994 unanimously upheld as constitutional the regulations that Mercury challenged in the suit rejected today.

Consumer Watchdog hailed the latest victory but noted that the insurance industry continues to attack Proposition 103 in the courts.

“Insurance companies like Mercury and State Farm have not stopped attacking Proposition 103 since the voters passed it nearly three decades ago,” said Pamela Pressley, Consumer Watchdog’s lead attorney on the Mercury case. “Today’s action by the United States Supreme Court makes clear that the insurance industry has no constitutional right to rip us off.”

Consumer Watchdog founder Harvey Rosenfield, who wrote and led the campaign for Proposition 103’s passage, said, “Thirty years later, Proposition 103 continues to protect California consumers and businesses against insurance industry overcharges and other unlawful practices, saving motorists alone over $100 billion on their auto insurance, according to the Consumer Federation of America.”

In addition to Consumer Watchdog lawyers Pamela Pressley, Jon Phenix, and Rosenfield, Consumer Watchdog was represented by Scott Nelson, of the Public Citizen Litigation Group, the Washington, D.C. based non-profit consumer organization founded by Ralph Nader. “For California consumers, this is an important case, but from the standpoint of the Supreme Court, there was really nothing to see here: The insurance industry’s claim that California has violated its constitutional rights by applying standard principles of fair ratemaking is baseless.”

Insurance Companies Campaign in Courts to Undo Proposition 103

Today’s defeat for the industry comes amid a renewed attack by insurance companies against Prop 103 in the courts.

Los Angeles-based Mercury Insurance is also fighting before the California Court of Appeal in Orange County to escape a $27 million penalty for overcharging motorists for their auto insurance 183,957 times over a decade, in violation of Proposition 103.

Meanwhile, State Farm, the nation’s largest insurance company with over $168 billion in assets, filed suit in San Diego Superior Court in 2016 to block $250 million in rate reductions and refunds, claiming it can’t afford to lower its homeowners insurance premiums, which the Insurance Commissioner determined were excessive. A column in the Los Angeles Times last Sunday discusses that case, which is expected to go to trial next month.

Farmers Insurance was in two courts at the same time – Los Angeles Superior Court and the Court of Appeal – to stop state regulators from holding a public hearing on charges that the company is using algorithms to overcharge motorists in violation of Proposition 103. After losing its motion to block the California Department of Insurance from investigating Farmers, the company is dropping its litigation.

“Insurance companies are trying to win from the judicial branch what they lost at the ballot box thirty years ago: the right to rip us off. The insurance industry’s frivolous lawsuits are wasting scarce taxpayer and court resources. We are fully engaged in the battle to protect Californians’ insurance reforms and with the public’s help we are confident in victory,” Rosenfield said.

Consumer Watchdog is a non-profit, non-partisan citizen organization. The organization has saved California consumers $3.4 billion over the last fifteen years by challenging excessive and unfair auto, home, business and medical malpractice rates.

Read Consumer Watchdog’s legal brief urging the U.S. Supreme Court to deny review of the Mercury case.

Read background on the Mercury case here.

Read more about Mercury’s long history of violating California’s insurance laws at Read results of investigation by state regulators revealing widespread violations of the law by Mercury here.

Read the Los Angeles Times article about State Farm’s lawsuit to stop $250 million in refunds and rate reductions, and Consumer Watchdog’s brief opposing State Farm’s lawsuit. 

Read more about the State Farm case here.

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