City News Service
LOS ANGELES — A Los Angeles judge stopped implementation of a law allowing discounts to drivers who have maintained insurance coverage, granting a request of a consumer rights group which called it discriminatory.
Senate Bill 841, written at the behest of Mercury Insurance Co., would have authorized insurance companies to impose a surcharge on motorists with lapses in coverage or on those applying for coverage for the first time.
Los Angeles Superior Court Judge Dzintra Janavs agreed with the Foundation for Taxpayer and Consumer Rights — which filed suit to prevent the measure’s implementation — that SB 841 should be invalidated because it unlawfully amends Proposition 103, a package of insurance reforms voters passed in 1988.
California Insurance Commissioner John Garamendi has called the aim of SB 841 a violation.
Mercury CEO George Joseph was unavailable for comment today, but previously said the allegations were based on the longstanding dispute over the use of “persistency,” which when used as a rating criterion for auto insurance premiums, rewards customers who maintain policies as the law requires.
Joseph said SB 841 would add “portability” for motorists, allowing them to get a discount from any insurer, regardless of whom they had coverage with previously.
Jerry Davies of the Personal Insurance Federation of California, a Sacramento-based trade group that represents carriers that sell nearly half of the state’s auto coverage, said the organization took no position on SB 841.
The FTCR and other groups such as Consumers Union, Public Advocates, Southern Christian Leadership Conference and National Council of La Raza (The People) have called SB 841 “unfair and discriminatory.”
They claimed then-Gov. Gray Davis signed SB 841 into law as a payoff for Mercury‘s $175,000 contribution to Davis’ campaign against the recall.
Harvey Rosenfield, the author of Prop. 103, said Janavs’ decision “protected the rights of the voters to pass laws without hostile meddling by the same politicians whose intransigence forced the voters to the ballot box in the first place.”
The FTCR claims that if the law had been allowed to remain in effect, drivers buying insurance for the first time would have faced surcharges as high as $500.
The FTCR also said Janavs rejected Mercury Insurance’s claim that the lawsuit against SB 841 was infringing on the company’s First Amendment right to make campaign contributions to lawmakers.
Janavs also ordered Mercury to pay attorneys fees for the FTCR and the other plaintiffs.