Consumer Groups Fight Insurance Surcharge Law Sponsored by Mercury Insurance

Santa Monica, CA — The Court of Appeal in Los Angeles will convene a hearing on Wednesday to decide whether legislation, sponsored by Los Angeles-based Mercury Insurance Company, violates the California Constitution by improperly amending Proposition 103, the voter-approved insurance reform measure. State law requires drivers to have automobile insurance, and Proposition 103 bars insurance companies from discriminating against customers or charging them higher premiums simply because they did not have prior insurance.

Faced with the prospect of sanctions for imposing such unlawful surcharges, Mercury Insurance pressed for state legislation to legalize its conduct. The bill, SB 841, was signed by then-Governor Gray Davis in 2003.

Five consumer organizations — Consumers Union, National Council of La Raza, Southern Christian Leadership Conference of Greater Los Angeles, Public Advocates and the Foundation for Taxpayer and Consumer Rights – are leading the fight against SB 841 in a protracted court battle.

“Mercury Insurance has picked a fight with the People of California who approved Proposition 103,” said Harvey Rosenfield, one of the public interest lawyers in the case and the author of Proposition 103. “To make insurance more affordable and to reduce the number of uninsured motorists, the voters prohibited insurance companies from surcharging somebody just because they previously did not have insurance. Mercury Insurance ignored the law and got caught. But instead of stopping its unlawful practices, Mercury sponsored legislation to effectively repeal this key protection for California’s drivers and showered lawmakers and the governor with nearly one million dollars in campaign contributions. However, the California Constitution prohibits such amendments to Proposition 103 without the voters’ approval, and we expect the Court of Appeal will uphold the ruling of the superior court invalidating the legislation. In our democracy, the voters have the last word, and their exercise of the initiative process must be protected against the special interests and willing allies in Sacramento.”

Wednesday Hearing:
Court of Appeal, 300 South Spring St., North Tower, 2nd Floor
June 29, 2005 @1:00 PM

– 30 –