FTCR to Davis: Return $25K Sept. 12 Check from Mercury Insurance

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Bill to Raise Auto Premiums for Returning Soldiers, Others With Lapses in Coverage on Davis’s Desk

Mercury Insurance gave Gov. Davis $25,000 on September 12, just a few days after a bill sponsored by the company to increase auto insurance premiums for returning soldiers and others arrived on Davis’s desk. FTCR, which opposed the legislation, urged the Governor to veto the bill, return the money and renounce any further donations from the company, in a letter sent today (the letter follows). Davis has received $220,000 from Mercury Insurance since becoming Governor.

“It is inconceivable that the Governor would sign a bill that will penalize Californians when they return home after doing their duty for our country. If he signs the bill, that donation will be a check that will live in infamy; it will never be forgotten by those who will pay the bill for Mr. Joseph’s generosity,” said FTCR President Harvey Rosenfield.

SB 689, authored by Oakland Senator Don Perata, authorizes insurers to surcharge uninsured motorists and those with a lapse in coverage, such as military reservists now serving overseas in the war. Such surcharges are specifically prohibited by voter-approved Prop. 103, and, responding to lawsuits and complaints, Insurance Commissioner Harry Low (who was appointed by Davis) has developed regulations to ban Mercury and other insurers from imposing the surcharges. SB 689 would override both Prop.103 and Commissioner Low.

The bill blew through the legislature in the final hours of the legislative session after a Senator Perata bill on prostate health was gutted and amended. According to state reports, Mercury contributed over $1 million to more than 62% of the legislature and politicians’ causes, such as Prop. 45, the term limits extension initiative. In its effort to undo other provisions on Prop. 103, Mercury has given millions to politicians over the years. In 1996, Joseph donated $500,000 to the Calif. Republican party after failing to get another bill to repeal Prop. 103 through the Democrat-controlled legislature, a message politicians have not forgotten, according to FTCR.

Mercury also gave $100,000 to Attorney General Bill Lockyer’s campaign on August 29th. The Department of Justice will be responsible for defending the legislation if the governor signs it. FTCR has promised to sue to invalidate the measure for unconstitutionally amending Proposition 103.

In the letter to Davis urging him to veto the legislation, FTCR said, “You have the opportunity to strike a blow for clean government and lower insurance rates by vetoing SB 689 — and by refusing any and all contributions from George Joseph, including the latest donation of $25,000 made on September 12.”

Noting that the Governor reported receiving the check on September 12, one day after the anniversary of the attack on America, FTCR called the donation an “appalling affront to basic principles of democracy and raised questions of when it was issued.”

“While American men and women are overseas fighting on behalf of democracy, companies like Mercury Insurance are busy subverting it here at home: first, by sponsoring legislation to legalize a practice banned by the voters through the exercise of democracy, ballot initiative 103. Then, the company gave the Governor $25,000 — a shameless attempt at political bribery — just before he has to decide whether to sign or veto the bill. Worse, the bill will allow insurers to surcharge soldiers returning from war if they let their insurance lapse for more than 90 days,” said Rosenfield.

“In another example of the corporate greed that has infested our democratic process, Mercury Insurance CEO George Joseph is trying to buy his way out of trouble by legalizing his own violations of a voter-approved law,” said Harvey Rosenfield. “It is incumbent upon the Governor to protect consumers, the voters and the integrity of the office of Governor by vetoing this bill and rejecting all campaign money from Joseph or any other insurers supporting the bill.”

Campaign reports show that National Association of Independent Insurers donated $15,000 to the Governor’s campaign, also on September 12.


September 18, 2002

The Honorable Gray Davis
State of California
State Capitol
Sacramento, CA 95814

Re: SB 689 — Insurance Surcharges

Dear Governor Davis:

You have the opportunity to strike a blow for clean government and lower insurance premiums by vetoing SB 689 (Perata), and by refusing any and all contributions from the bill’s sponsor, Mercury Insurance, including the latest donation of $25,000 made on September 12.

SB 689 would allow insurance companies to levy a surcharge on previously uninsured motorists — many of whom are poor — as well as those who have a lapse in insurance coverage, such as Californians now serving overseas in the war on terror. This is a shameless effort by Mercury and its CEO, George Joseph, to purchase support for a bill opposed by the Insurance Commissioner you appointed, consumer groups and civil rights groups.

The bill overturns Insurance Code sec. 1861.02(c) of voter-approved Proposition 103, which specifically forbids surcharges on previously uninsured motorists. Under disgraced Insurance Commissioner Quackenbush, numerous insurance companies began violating this provision of Proposition 103; as a result, Mercury and other insurers have been sued in the courts, and Insurance Commissioner Low has issued regulations to prevent insurers from levying such surcharges.

Rather than be held accountable for its violation of §1861.02(c), Mercury Insurance’s Joseph chose to sponsor legislation to repeal the law and legalize his company’s misconduct. Mercury greased SB 689’s passage through the legislature with over $1.1 million in campaign contributions since 2000. Much like California’s disastrous deregulation law, this bill rocketed through the Assembly and Senate in the final days of the legislative session with little public oversight and very limited awareness by lawmakers of its true impact.

The attached memorandum discusses in detail how SB 689 will put more uninsured motorists on the road, raise insurance premiums, and is unconstitutional under Article 2 section 10 (c) of the California Constitution because it illegally repeals a provision of voter approved Proposition 103. (See our landmark victory in Amwest v. Wilson, 11 Cal. 4th 1243).

Vetoing this legislation will not only protect consumers, particularly the poor and our armed forces, and help keep rates low for all motorists, it will send a reassuring message to the public that powerful special interests will not be allowed to benefit from a brazen attempt to corrupt the democratic process and to override the will of the voters expressed at the ballot box.

We urge you to veto this bill. Thank you for your consideration of our views.


Harvey Rosenfield Douglas Heller

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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