Eleventh Hour Bill To Surcharge Uninsured Motorists Passes Assembly Committee

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Sponsor Mercury Insurance Gave Legislators $1,077,550 Since 2000

Last minute gut-and-amend legislation allowing insurers to charge good drivers extra if they had been previously uninsured for more than ninety days passed the Assembly Insurance Committee tonight after an impromptu hearing convened after most reporters’ deadlines. Democrats representing areas with high uninsured motorists rates joined with Republicans to assure passage of SB 689, sponsored by Mercury Insurance, one of the capital’s most prolific givers.

State records show that Los Angeles-based Mercury Insurance, led by CEO George Joseph, has spent $1,077,550 million to state lawmakers and candidates since 2000, when it first began its assault on Section 1861.02(c) of the Insurance Code. That law forbids insurance companies from surcharging motorists who are buying insurance for the first time or have suffered a lapse in coverage. Mercury and other insurers are being sued for systematically violating this law, which was enacted as part of voter-approved Proposition 103, and the Insurance Commissioner has issued new rules to prevent insurers from future violations. To avoid civil liability and potential fines, Mercury is sponsoring SB 689 to effectively repeal 1861.02(c) and legalize its current practices. Mercury‘s first attempt went nowhere last year.

‘This is eleventh hour class warfare against uninsured drivers on behalf of an insurance company that has contributed to two-thirds of legislators,” said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights, who noted no savings were guaranteed in the bill for any driver. “An insurance company that could not have its way with the voters, the courts or the insurance commissioner is now seeking a payoff from its bribe to the legislature. The tragic irony is that middle class drivers will pay more too for their uninsured motorist premiums because more motorists will stay uninsured with the illegal surcharge.”

Using Senator Don Perata (Oakland) as its campaign leader, less than a week after contributing $25,000 to him, Mercury tried to gut and amend a bill in the Senate Insurance Committee on June 20, but this effort failed as well. The bill was defeated after the Insurance Commissioner‘s office testified that the bill had no actuarial validity. Desperate, Mercury/Perata have now hijacked another Perata bill, this one before the Assembly, in the hope of avoiding the Senate Insurance Committee.

Data from the Secretary of State’s office shows that:

In an unprecedented attempt to win its campaign, Mercury has donated to 25 Senators and 56 Assembly Members –two-thirds of the California legislature; 45 Democrats and 36 Republicans were recipients of Mercury‘s largesse.

Sen. Don Perata himself got $25,000 on June 14, just six days before his failed effort to ramrod the bill through Senate Insurance.

Fundraising committees run by Democratic leaders of the Assembly (the Assembly Democratic Leadership, Assembly Democratic Leadership Committee 2000, Assembly Democrats Voter Registration 2002) received $85,000.

Republican committees received $26,000.

In all, Mercury has given $651,800 to California legislators and their PACs–$509,000 to Democrats, $142,800 to Republicans.

Hoping for a signature on the bill, Mercury has given Governor Gray Davis $102,500.

Former commissioner candidate and Assembly Insurance Committee Chair Tom Calderon received $174,000.

The Senate Majority Fund received $100,000.

Mercury‘s Credo: ‘Lube it or Lose it.’

“This is a disgraceful portrait of one company’s systematic attempt to corrupt the democratic process, overturn a voter-approved ballot measure and buy its way out of judicial and regulatory accountability,” said Harvey Rosenfield of FTCR. “Mercury‘s strategy is ‘lube it or lose it.’ CEO Joseph knows that he’s got to ‘lube’ the Legislature or he’s going to ‘lose’ before the courts and the insurance commissioner. Lawmakers should vote against a bill that increases insurance premiums and the number of uninsured motorists. But if they for some reason wish to vote for it, they should first return every penny they got from Mercury to show their constituents they cannot be bought.”

Lawmakers are forbidden to amend a voter-approved initiative unless the amendments “further the purposes” of the initiative. The Assembly Insurance Committee analysis states that “it is questionable as to whether this bill would in fact further” the purpose of 1861.02(c), concluding, “it is arguable that this bill directly contradicts Prop 103.”


Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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