Everyday, FTCR attorneys battle insurance companies in the courts and before the California Department of Insurance to stop illegal overcharges, excessive rate hikes, and other abusive insurance practices that are prohibited under insurance reform Proposition 103. FTCR attorneys and experts defend and enforce 103 in the courts, and testify before the Department of Insurance to secure stronger regulations to enforce Proposition 103’s reforms.
Below you can read about some of our recent victories and ongoing cases brought against insurers and other actions we are taking to protect your rights as an auto or homeowner insurance policyholder. If you have a complaint about an insurance company that you’d like us to know about, please submit it here.
Use the links below to jump to the case or issue that interests you:
- Insurers Overcharge Drivers Who Did Not Have Prior Insurance (various cases)
- Department of Insurance Bans ZIP Code-based auto insurance premiums (state regulation)
- The Fight for Tougher Consumer Protection Rules (state regulations)
- Farmers Insurance Overcharges Certain Homeowners
- Mercury Insurance’s Illegal Broker Fees
- Challenging Excessive Insurance Rates (various companies)
- FTCR Has Saved Policyholders More than $800 Million Since 2003 By Blocking Insurance Rate Hikes
FTCR Seeks Refunds of Illegal Overcharges on Drivers Who Had a Lapse in Coverage or Did Not Previously Have Insurance
Insurance reform Proposition 103 bars insurance companies from charging higher rates or denying coverage to motorists just because they previously had a lapse in coverage, or did not have insurance. FTCR has continued its battle in the courts against insurance companies that violated the law. Most companies have changed their practices as a result of FTCR’s push for stronger regulations that conform to Proposition 103.
Safeco Tries to Block Overcharge Suit (Proposition 103 Enforcement Project v. Safeco, Case No. BC266219)
FTCR sued Safeco Insurance Company for overcharging motorists who did not have prior insurance. For example, Safeco’s web site quoted a higher premium if a motorist answered NO to the question of whether he had prior insurance. If they answered YES, the premium was lower. In one instance, the difference was a 57% overcharge!
Review the two online quotes here.
You can read about how you can help FTCR get Safeco policyholders’ money back here.
The suit, brought in 2001, seeks to stop this practice and seek refunds. You can read the complaint here. The overcharges continued through at least 2003. Safeco’s lawyers have done everything possible to block the lawsuit.
In 2006, a state Court of Appeal ignored the requirements of voter-approved Proposition 103 and ruled that FTCR itself could not bring a lawsuit on behalf of the public against Safeco for violation of this provision of Proposition 103. The court ruled that consumers must use California’s general consumer protection law to bring such suits, known as the “Unfair Competition Law” (Business and Professions Code section 17200).
As a result of a recent change to that law, sponsored by insurance and other companies, a person who has actually been overcharged by Safeco, and FTCR, act as the plaintiff to get relief on behalf of others who were harmed by Safeco’s practices. FTCR’s attorneys have asked the Los Angeles Superior Court to order Safeco to identify customers who were overcharged. Safeco is fighting this request and has asked the judge to throw out the case. FTCR is seeking the assistance of current and former Safeco customers in this lawsuit. You may contact us here. Safeco did not disclose the extra charges based on a lack of prior insurance, so it is nearly impossible for those Safeco customers to know whether they were overcharged by the company.
FTCR Wins Favorable Decision From Department of Insurance Auto Club on Overcharges
(Proposition 103 Enforcement Project v. Interinsurance Exchange of the Auto Club, Case No. BC266218)
In 2001, FTCR sued the insurance company run by the Automobile Club of Southern California for surcharging motorists who did not have prior insurance. The suit was filed in Los Angeles Superior Court.
Read the complaint here.
FTCR’s attorneys also filed a companion class action lawsuit. In response to the lawsuits, the Auto Club argued that the Department of Insurance had authorized it to surcharge individuals, even though such surcharges violate the law. In response, the court asked the Department of Insurance to review the Auto Club’s argument. After an agency hearing that took one year to complete, the Department ruled that the Commissioner had not approved the Auto Club’s actions. Auto Club then tried to challenge the Department’s decision in a different court, located in Sacramento. FTCR’s attorneys successfully blocked that tactic and had the Auto Club’s challenge transferred back to the Los Angeles Superior Court, which dismissed it.
The case is now proceeding to trial in Superior Court in Los Angeles.
FTCR Settles Case With GEICO (Proposition 103 Enforcement Project v. GEICO, Case No. BC266220)
On April 3, 2006, GEICO and FTCR announced a settlement of FTCR’s suit challenging the practice of disallowing discounts for drivers who could not demonstrate proof of prior insurance.
Read the Press Release.
FTCR Protects Public and Voters in Enormous Battle over Overcharges by Mercury Insurance Company
For nearly ten years, Los Angeles-based Mercury Insurance Company also overcharged customers who did not have prior insurance, or who had a lapse in coverage. Mercury’s effort to evade having to repay the overcharges is unprecedented, consuming six years and countless taxpayer resources.
It began with a lawsuit brought in 2001 by one of the people Mercury overcharged. Donabedian v. Mercury (Case No. BC249019). That case was thrown out by a Los Angeles Superior Court based upon Mercury’s argument that insurance companies cannot be sued in the courts when they overcharge the public. The case went to the Court of Appeal, where numerous insurance companies joined in defense of Mercury’s position.
FTCR filed an extensive fifty-page “friend of the court” brief, defending the right of consumers to go to court under Proposition 103. Adopting many of the arguments set forth in FTCR’s brief, the Court of Appeal upheld consumers’ right to enforce Proposition 103. (Donabedian v. Mercury Insurance Company (2004) 116 Cal.App.4th 968)
Read the news release and decision.
Read FTCR’s amicus brief.
FTCR also got involved in an identical appeal in a State Farm overcharge case:
Read FTCR’s brief in Poirer v. State Farm and the Court of Appeal decision also upholding Proposition 103’s protections.
FTCR had also asked the Insurance Commissioner to issue regulations requiring companies to cease such surcharges in accordance with the voter-approved statute. The Commissioner issued the regulations in 2002.
But that did not stop Mercury. The company went to the Legislature and shoveled $895,000 into the campaign coffers of legislators and then Governor Gray Davis between 2002 and 2003. Sacramento legislators then passed, and Governor Davis signed, a bill to override Proposition 103’s protections and legalize Mercury’s overcharges.
However, the California Constitution forbids the Legislature from undermining voter-approved measures. FTCR teamed up with Consumers Union, and other citizens’ organizations represented by Public Advocates, in a lawsuit to block Mercury’s legislation from taking effect. (FTCR v. Garamendi) Mercury intervened in the case, claiming the lawsuit violated its constitutional rights. The Los Angeles Superior Court agreed with FTCR and ruled in early January, 2004 that the legislation was void. The court also ordered Mercury to pay a penalty for making the frivolous argument that FTCR’s suit violated its constitutional rights. Mercury and the insurance lobby appealed the case, but the Court of Appeal sided with FTCR. On September 27, 2005, it upheld the Superior Court’s decisions, ruling that the legislation was an invalid attempt to amend Proposition 103, and rejected Mercury’s appeal of the lower court’s decision awarding the consumer groups’ fees for fighting a frivolous motion by Mercury.
Read Press Release.
Read Published Court of Appeal Decision.
The Court also affirmed that Mercury was required to pay the consumer groups’ attorneys fees to fight Mercury’s frivolous motion.
Read Court of Appeal Decision.
The fight to protect Proposition 103 from the Legislature’s attempt to override it took two years. Mercury finally stopped the illegal surcharges late in 2005.
In October, 2006, attorneys for Mercury and the plaintiff in the Donabedian v. Mercury case announced a settlement of their lawsuit. However, FTCR objected to the proposed settlement as inadequate. The Los Angeles Superior Court rejected the proposal. FTCR also opposed a second settlement proposal, and it was again rejected by the court. Further efforts to resolve the case are underway.
Read FTCR’s Objections to the First Rejected Settlement.
Read FTCR’s Objections to Second “Coupon” Settlement, and its press release.
Read FTCR’s Response to Third Settlement.
FTCR Secures New Rules to End Automobile Insurance Zip Code Rating
Proposition 103 requires auto insurers to base their rates primarily on three mandatory factors: driving record, miles driven, and years of driving experience.
At the end of his first term in office, in 1994, Insurance Commissioner John Garamendi concluded that insurance companies were not complying with this requirement of Proposition 103. However, his successor, Insurance Commissioner Quackenbush, sabotaged regulations needed to properly implement the law. The Quackenbush regulations allowed insurance companies to continue to use discriminatory ZIP code-based auto insurance rating,
In Spanish Speaking Citizens Foundation v. Quackenbush, brought in 1997 by FTCR and other groups, the Alameda County Superior Court held that the Quackenbush regulations did not comply with Proposition 103. The insurance companies appealed, and the Court of Appeal upheld the Quackenbush regulation as lawful. However, the appellate court recognized that a future Insurance Commissioner could enact the rules sought by consumer groups to properly enforce the law.
In a renewed attack on the Quackenbush-era regulations, FTCR and other citizen groups filed a rulemaking petition in May 2003 calling on Insurance Commissioner John Garamendi, elected for a second term in 2002, to correctly implement the law. Read the Petition.
In response to the petition, Commissioner Garamendi announced public workshops and hearings that would lead to a new regulation. Over the next two years, FTCR’s attorneys, advocates and experts participated in the workshops and hearings, traveling around the state to meetings convened by the Commissioner to discuss the proposal, helping angry citizens in county after county attack the huge rate disparities that occur between neighboring ZIP codes. FTCR also exposed a flawed study by insurers who claimed that implementing the proposed regulations would cause rural counties to see huge jumps in premiums and participated in technical workshops.
In December 2005, Commissioner Garamendi announced that he agreed with the FTCR petition and issued new rules, proposed by the consumer groups, which require insurers to obey the law as the voters intended. As insurers sought modification or repeal of the proposed regulations, FTCR’s attorneys filed detailed comments and expert declarations. When the regulations were finalized, the substance of FTCR’s proposed regulation was adopted and the insurers were required to begin complying with the new rules in August 2006.
Read Press Release.
Seeking to block the new regulations, insurance companies filed suit in Sacramento Superior Court in July 2006 (American Insurance Association, et. al. v. Garamendi and Cal. Farm Bureau Association v. Garamendi, Case Nos. 06AS03053 and 06AS03036). FTCR and attorneys for other public interest organizations successfully opposed the industry’s request to block the regulations by securing a decision from the trial court upholding the Garamendi regulations on February 15, 2007.
Read Press Release.
Read trial court decision.
The regulations are now in effect, and they require insurance companies to fully phase in the new system by 2008. Meanwhile, the insurance industry has appealed the decision.
FTCR Shapes Other important Proposition 103 Regulations Adopted by the Insurance Commissioner, including the following:
* Regulations that spell out what information automobile insurance companies may ask for to verify the number of miles driven annually by applicants and policyholders in order to more accurately calculate their premiums.
* Under Proposition 103, insurers must obtain approval of their rates from the Insurance Commissioner prior to their charging the new rates. Newly revised regulations effective April 3, 2007 provide the parameters used by the CDI and consumer groups to ensure that rates filed by insurers are not excessive under the prior approval requirements of
Proposition 103. FTCR supported most of the changes to the regulations made by Insurance Commissioner Garamendi, but objected to the provisions that allow companies to pass through certain unregulated costs to consumers for earthquake and medical malpractice insurance and to charge higher rates by asking for “variances” from the defined rules. FTCR participated in a workshop in April 2007 at which it called on the CDI to strictly enforce the new rate regulations and not allow the companies to use requests for “variances” from the new rules to hike their rates.
Read FTCR’s letter to the CDI.
Petitioning for regulations that took effect on January 28, 2007 that make clear that consumer groups will be properly compensated when they substantially contribute to the outcome in rate and other CDI proceedings that are settled or resolved without a formal hearing.
FTCR Successfully Intervenes in Enforcement Action Against Farmers to Stop Unfair Homeowners Premiums and Practices
In 2003, the California Department of Insurance initiated an investigation and “non-compliance” administrative proceeding against Farmers Insurance, charging that the company had been misapplying its own rating guidelines to overcharge certain homeowners policyholders based on the number of claims they made or how far they live from a fire hydrant. FTCR’s Litigation Project intervened in the proceeding in 2005, particularly to defend the Commissioner’s authority to enforce Proposition 103’s rate protections for homeowners insurance.
The CDI and FTCR reached a settlement with Farmers that was approved by the Commissioner in August 2007. According to the settlement Farmers refunded its policyholders $1.4 million for the overcharges, will pay a $2 million penalty to the CDI, will use rating practices that comply with the law, will review their computer data to find and refund any other policyholders that were overcharged, and will be subject to another review of its practices in 2008.
Read the Settlement here.
FTCR Petitions to Intervene in Enforcement Action Against Mercury Insurance Company for Charging Illegal Broker Fees
In a 2004 court decision, Krumme v. Mercury, the California Court of Appeal in San Francisco determined that:
* Mercury agents were illegally charging auto insurance customers broker fees in addition to standard agent commissions; and
* Mercury ran a deceptive advertising campaign that hid the true costs of Mercury insurance.
Mercury’s marketing material urged prospective customers to compare Mercury’s rates with those charged by other insurers, such as State Farm, but did not disclose the extra “broker” fees that customers would face if they chose Mercury over another insurer that did not allow such fees. This practice was found to be deceptive and illegal and was barred by the court.
Read Krumme v. Mercury decision.
Read Press Release regarding failed attempt by Mercury to overturn court’s decision through legislation.
Based on the court’s findings in Krumme, Mercury could be forced to pay hundreds of millions in fines to the state in an action brought by the Department of Insurance based on allegations that its practices violate provisions of Proposition 103 that require companies to obtain the approval of the Commissioner for the rates and premiums they charge consumers, and that prohibit unfairly discriminatory charges.
Read CDI Notice of Noncompliance.
FTCR filed a petition to intervene in the Department’s action, which was granted in May 2007.
Read FTCR’s petition.
A hearing is scheduled before an administrative judge in September 2007.
FTCR Seeks to Block Homeowners Insurance Rate Increase Sought by Allstate and Lower the Company’s Auto Insurance Rates
While other companies are lowering rates, Allstate continues to push for unwarranted homeowners rate hikes. FTCR has challenged Allstate’s requested 12% increase, and the Commissioner has ordered a hearing to look not only at whether Allstate’s rates should be lowered, but also to determine whether the insurance giant should issue refunds for its current excessive rates. If FTCR prevails, Allstate policyholders could save as much as $426 on average for a 12-month policy. A hearing on Allstate’s homeowners rates is scheduled for September 2007.
Read FTCR’s petition.
FTCR has also intervened in a hearing to challenge Allstate’s auto insurance rates as excessive.
Read FTCR’s petition to intervene.
A hearing on Allstate’s auto rates is scheduled for September 2007.
FTCR Challenges Earthquake Insurance Rate Hikes Sought by GeoVera and Fireman’s Fund
In its review of GeoVera’s recent request for a 6.8% rate hike, FTCR discovered that about 50% of the premiums that the company wants to charge its earthquake insurance policyholders are made up of unregulated “reinsurance” costs. These are costs that it pays to another company to cover excess losses beyond what GeoVera itself has set aside to pay claims. Regulations recently passed by the Department of Insurance that took effect on April 3, 2007, allow companies to include only a reasonable amount of these costs in their rates, and require a hearing if these costs exceed 30% of the requested rates. FTCR has challenged the rate application, also alleging that GeoVera has overstated its expected future losses and expenses.
Read FTCR’s challenge to GeoVera’s rates.
FTCR has also challenged a proposed 25% increase in Fireman’s Fund’s earthquake insurance rates, which could save each of the company’s earthquake policyholders $356 a year.
Read FTCR’s challenge to Fireman’s Fund’s earthquake rates.
The Insurance Commissioner has ordered public hearings to be held on both companies’ earthquake rates and on Fireman’s Fund’s homeowners insurance rates in response to another FTCR petition.
Read press release.
Read FTCR’s challenge to Fireman’s Fund’s homeowners rates.
FTCR Intervenes In Hearing to Block Explorer’s Proposed 17.5% Auto Insurance Rate Hike
FTCR seeks to block Explorer’s requested auto insurance hike in a hearing set to begin in October 2007.
Read FTCR’s petition.
FTCR Has Saved Policyholders More than $800 Million Since 2003 By Blocking Insurance Rate Hikes
Here are some highlights of those challenges:
State Farm Cuts Homeowners Insurance Rates by $230 Million After Prodding by FTCR
The largest homeowners insurer in the nation has agreed to reduce its California rates by 20% in 2007, about $266 million, after FTCR challenged an initial plan to cut prices by 10.6%.
FTCR Plays Key Role in Pushing Farmers and Safeco to Slash Homeowners Insurance Rates, Saving Consumers $210 Million
In 2006, FTCR intervened in actions brought by the Commissioner against Farmers and Safeco that led those companies to file for decreases of 18% and 20%, respectively — a combined savings of $210 million.
Safeco 2003-2005 Homeowners and Earthquake Insurance Rate Challenges
As a direct result of FTCR’s petition that led to an 18-month proceeding on Safeco’s 2004 earthquake insurance rate application, during which nine witnesses testified and were examined over seven days, the Commissioner rejected Safeco’s proposed 29.8% rate hike as excessive to allow less than half that amount. This reduction amounts to a savings of approximately $5.3 million to Safeco earthquake policyholders per year prospectively – an average of $101 savings per policyholder per year.
In July 2003, Safeco, the sixth largest homeowners’ insurer in the state, withdrew a plan to hike homeowners’ insurance rates by 19.7% after FTCR challenged the proposed increase. The cancelled hike would have increased Safeco policyholders’ premiums by $132 annually, on average. Safeco turned around and filed the same 19.7% rate hike request a month later, which FTCR succeeded in having slashed to a 6.9% increase, after the CDI reviewed FTCR’s second petition for hearing and expert comments.
FTCR Wins Huge Cut in California’s Second Largest Medical Malpractice Company’s Requested Rate Hikes
In September 2003, the California Insurance Commissioner ordered the state’s second largest medical malpractice insurer, SCPIE Indemnity, to slash its proposed rate increase for doctors by 36% after an eight-month regulatory proceeding initiated by FTCR. The case was the first-ever consumer group challenge to a medical malpractice insurance rate hike request and resulted in the Commissioner designating key portions of the decision as precedential.
The net impact was $16 million in savings for the insurer’s 9,000 physicians in 2003 and an additional $7.2 million of savings in next year’s premiums. In November 2003, SCPIE sought another rate hike of 8.9%, but later withdrew its application after the CDI agreed with FTCR that no increase was warranted.
FTCR’s Challenge Leads to 70% Cut in State’s No. 1 Medical Malpractice Carrier’s Proposed Rate Hike
FTCR’s October 2003 challenge to Norcal Insurance Mutual Company’s proposed medical malpractice insurance rate hike, and the ensuing scrutiny by California Department of Insurance regulators, led the state’s largest malpractice insurance company to slash its rate request by 70%, resulting in $11.6 million in savings to Norcal-insured doctors. The agreement reached on Norcal’s rates reflected key findings in September’s precedent-setting decision by the California Insurance Commissioner to cut the rates of SCPIE Indemnity.
Settlement Agreement Saves Doctors $4 Million
FTCR challenged a 29.2% rate increase requested by California’s ninth largest medical malpractice insurer, Medical Protective Company. FTCR entered into a settlement agreement with the company in June 2004, which cut the company’s requested rate hike by nearly two-thirds. FTCR’s advocacy efforts will save California doctors insured by Medical Protective an estimated $3.9 million in premium hikes.