Mercury Insurance Loses Part Of Challenge Over Homeowner Rates

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Huge insurer Mercury Insurance Group has lost part of its ongoing legal challenge over homeowners insurance rates.

Sacramento Superior Court rejected Mercury's petition to delay implementing a rate decrease ordered by state regulators.

As a result, about 270,000 Californians who insure their homes through Mercury will save more than $16.5 million, according to a California Department of Insurance news release.

As the Business Journal reported last week, Mercury asked the state's insurance commissioner in 2009 for permission to increase its homeowners insurance rates.

In February, Commissioner Dave Jones gave his stamp of approval to an administrative law judge's decision that the insurer actually needed to decrease rates. Mercury's homeowners rates were excessive, the regulators determined.

In this latest step in the battle, the Superior Court on Tuesday ordered Mercury to go ahead and reduce those rates even while Mercury's lawsuit challenging the commissioner's order continues. Mercury and insurance trade groups are challenging regulators' interpretation of their authority under California's Proposition 103, a 1988 insurance reform ballot measure that, among other things, prohibits excessive insurance rates and requires insurers to get rate approvals from the commissioner.

They question whether insurers, under Proposition 103, are entitled to the opportunity to earn a fair and reasonable rate of return and whether certain advertising expenses can be considered in insurers' rate calculations.

"While we are disappointed with the court's decision pertaining to the stay, we are pleased the judge recognized Mercury's 'compelling arguments' as they relate to the merits of the rate filing," Mercury officials said in email statement. "Once the Superior Court reviews the evidence, we believe it will reverse the ,commissioner's decision and allow Mercury to implement rates that allow a fair rate of return."

The trade associations contend that "constitutionally insurers should be subject to a fair and reasonable rate of return standard," the groups said in a news release last week prior to the court ruling.

"We vigorously opposed Mercury's effort to deny consumers the benefit of a rate reduction while Mercury continues its meritless effort to challenge the insurance commissioner's established authority to reject excessive rate hikes," Jones said in his own news release after the court ruling. "The court made the right decision in rejecting Mercury's petition to stay the rate reduction. We will continue to fight against Mercury and the insurance industry associations' efforts to challenge the long settled consumer protections in Proposition 103."

"This is a significant legal victory in our fight to ensure insurance rates are not excessive," Jones added. "The 8.18 percent rate reduction in my original order provides much-needed financial relief for homeowners and helps consumers keep more of their hard-earned dollars in today's tight economy."

Consumer Watchdog, a Santa Monica-based nonprofit, had challenged the original rate increase proposal, calling it excessive.

The court decision is good news for homeowners, Doug Heller, the nonprofit's consumer advocate, said in a phone message.

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