Legislature Did Not Have Power To Give Boon To Mercury Insurance

Los Angeles, CA — A Los Angeles Superior Court invalidated legislation allowing insurance companies to charge drivers without prior auto insurance, or with lapses in coverage, hundreds of dollars more as a violation of insurance reform Proposition 103. Judge Dzintra Janavs agreed with consumer and civil rights groups that SB 841 (Perata, D-Oakland), backed by big campaign contributor Mercury Insurance, violated Proposition 103‘s prohibition against surcharging drivers who previously lacked insurance.

Prop 103 precluded amendments that do not further its purposes. Consumers Union, Public Advocates, Southern Christian Leadership Conference, National Council of La Raza and The Foundation for Taxpayer and Consumer Rights — filed suit against the law in October. Gray Davis signed the law in August. Mercury Insurance had contributed approximately $895,000 to politicians and their campaigns as this issue was debated in Sacramento, including $175,000 to Gray Davis‘ campaign against the recall.

“We are gratified that the court has protected the right 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,” said Harvey Rosenfield, the author of Proposition 103. “However, it is too bad that one company’s arrogant desire to evade the law and the will of the people, with its henchmen in Sacramento, forced scarce judicial and taxpayer resources to be expended in this litigation.”

If the law had been allowed to remain in effect, drivers who were trying to buy insurance for the first time would face surcharges as high as $500, according to consumer groups. The groups said that these surcharges would force many drivers to forego insurance, raising premiums for all consumers.

The Court also rejected, as frivolous, Mercury‘s anti-SLAPP motion, which claimed that the consumer advocates’ suit against SB 841 was an attempt to prevent Mercury from exercising it’s First Amendment right to make campaign contributions to lawmakers. Because the court viewed Mercury‘s litigation tactic as frivolous, the court said it would order Mercury to pay attorneys’ fees to the consumer groups for having to respond to Mercury‘s bogus suit.

“California voters called for fair insurance practices in 1988 and this ruling protects motorists from the arbitrary schemes that the insurance industry and politicians like Gray Davis and State Senator Don Perata tried to perpetrate on consumers,” concluded Rosenfield.