George Joseph (Mercury Insurance)

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How One Rich Insurance CEO Uses His Money to Escape the Law, Undermine Democracy, And Benefit Himself

George Joseph, the Chairman and CEO of Los Angeles-based Mercury Insurance, a $2.4 billion auto insurance company, has never let democracy get in the way of enriching his company and himself. Since 1990, Joseph has spent $1,259,790 in an equal-opportunity effort to influence state officials of both political parties and promote legislation that would enrich his company by overriding voter-approved Proposition 103. As efforts by Mercury and other insurers to block the initiative from implementation failed, and the law began to take effect, Joseph began a legislative push to repeal provisions of 103 that his company violates. Most of the laws Mercury has flouted are designed to protect the poor against abusive insurance practices and enable the uninsured to buy auto insurance.

Now Joseph’s at it again, this time sponsoring legislation to authorize Mercury‘s illegal practice of forcing good drivers who are uninsured to pay more so his company can reap a competitive advantage.

A Legacy of Fighting Voters, Consumers and the Poor:

‘ 1988-1993 — Blocking Prop. 103

Joseph began his campaign to rewrite voter-approved 103 virtually from the day it passed. Failing to defeat the measure at the ballot box and in the courts, Joseph enlisted legislators in his quest to limit the ability of the state Department of Insurance to scrutinize rate increase requests under 103’s prior approval system. Conversations recorded by the FBI between then chair of the Senate Insurance Committee, Democrat Senator Alan Robbins, and insurance industry lobbyist Clay Jackson (both of whom went to jail on bribery charges) are replete with references to Joseph’s efforts to erode 103’s protections; at one point, Jackson told Robbins he hoped to get Joseph to come up with $50,000 of the $250,000 Jackson promised to funnel to Robbins in exchange for various legislative actions. Ultimately, Joseph was successful: in 1993, the Legislature approved one of Joseph’s early attacks on Prop 103 — SB 871 — which limited the CDI‘s time for rate reviews.

‘ 1993 — Repeal 103’s 20% Good Driver Discount.

In 1993, Joseph also fought to repeal the Prop. 103 requirement that good drivers receive a 20% discount. That bill, SB 957 (Johnson) was unsuccessful.

‘ 1995-1996 — Joseph Tries to Legalize His Violation of 103 Reform of Territorial Rating.

In 1995, Joseph sponsored an end-of-session legislative attack, carried by Republican Assembly Member David Knowles with strong support from Democrat Assembly Member Cruz Bustamante, to repeal 103’s requirement that rates be based on a motorists’ driving safety record rather than zip code. This bill would have dramatically increased rates for good drivers in California’s low-income communities. After that bill, AB 341, was defeated, Mercury sponsored SB 1433 (Peace) in 1996 to do essentially the same thing. After Senate Democrats refused to support the bill, Joseph gave the Republican Party $500,000.

His legislative defeats notwithstanding, and in a brazen violation of Prop 103, Mercury launched a statewide advertising campaign in 1996 that casually detailed the company’s practice of arbitrarily –and illegally — overcharging certain neighborhoods. According to the ad, hypothetical policyholders saw their premiums vary as much as 36% simply based on where they live. Mercury‘s violations of Prop 103‘s territorial rating provisions angered community activists in Los Angeles so much that they considered launching a boycott of the company and establishing a municipal insurance service as an alternative.

‘ 1996 — Limit Insurance Payments to Low Income Car Accident Victims.

Joseph was one of the main sponsors of Proposition 213, Chuck Quackenbush‘s initiative to allow insurance companies to avoid paying claims to innocent victims of car accidents. Prop 213 saved insurance companies money by taking away the rights of uninsured (typically, poor) drivers to collect pain and suffering damages if they are the innocent victims of auto accidents. Joseph gave the Quackenbush initiative campaign $252,500 in 1995 and 1996. The initiative passed.

‘ 2000 — Mercury Buys Its Way Out of CDI Investigation.

When Mercury‘s insurance brokers were accused, in 2000, of improperly charging consumers excessive fees for basic auto policies — policies that generally serve low-income consumers — Joseph went straight to then-Commissioner Quackenbush to have the fines frozen. Two weeks after the meeting (and the freezing of the fines) Mercury contributed $50,000 to Quackenbush. Mercury (along with George Joseph and his wife personally) had previously contributed $64,000 to Quackenbush‘s campaigns in addition to the $252,500 to Quackenbush-run Prop 213.

‘ 2002 — Joseph Wants to Undermine the Insurance Commissioner‘s Judgment and Legalize Mercury‘s Violation of the Good Driver Law.

Mercury has been sued for violating section 1861.02(c) of Prop. 103, which bans insurers from surcharging applicants simply because they were previously uninsured. The courts have referred such cases to the insurance commissioner, who has announced new regulations to prevent such violations by insurance companies. Joseph’s response: AB 1488 (Chavez) was gutted in the Senate and amended to place a new surcharge on previously uninsured, good drivers seeking to enter the insurance market, again in violation of voter-approved Proposition 103. The bill is opposed by Insurance Commissioner Harry Low, Consumers Union, Public Advocates, Southern Christian Leadership Conference and FTCR because it create an unfair burden on low-income drivers, maintain high uninsured motorist premiums for all drivers and undermine the regulatory authority provided by law to the Department of Insurance.

Paving (Paying) the Way for Mercury‘s Misdeeds

In recent years, Mercury has lavished campaign contributions on the leadership of the Democratic Party of California, including $102,500 to Governor Davis, $100,000 to the Senate Majority Fund and $75,000 to the Assembly Democratic Leadership Committee. Joseph has combined that with targeted contributions aimed at the passage of his bills.

In 2002, more than 50% of Mercury‘s contributions to lawmakers went to members to the Senate Insurance Committee, the lynchpin for AB 1488. In fact, less than a week before the legislation was gutted and amended to rewrite Proposition 103, Joseph donated to three of the members of that committee, including a whopping $25,000 to Senator Perata. The contribution was allowed to surpass the $3,000 limit using an obscure campaign finance loophole that allows some legislators to receive unlimited contributions.

Consumer Watchdog
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